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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1998
REGISTRATION NO. 333-57925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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)
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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)
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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
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.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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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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
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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 June 30, 1998, the Issuer had no indebtedness outstanding other than its
obligations under the Notes and the Issuer's subsidiaries had $183.0 million of
total liabilities outstanding, including $145.1 million of indebtedness, $15.1
million of which was secured. However, all borrowings under the Credit Facility
(as defined) are secured by a first priority Lien (as defined) on substantially
all of the significant assets of the Company. As of June 30, 1998, $7.5 million
in borrowings and $2.4 million of letters of credit were outstanding under the
Credit Facility, which has a maximum borrowing capacity of $50 million. The
Issuer has no significant assets other than its direct and indirect equity
interests in its subsidiaries.
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THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
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FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH 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.
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The date of this Prospectus is August , 1998
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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
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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.
Selling broker-dealers may be deemed to be underwriters within the meaning of
the Securities Act. 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."
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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." 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 June 30, 1998, the Company operated 138 full-service restaurants and
franchised 348 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, Company net loss and
Company EBITDA (as defined) were $711.0 million, $271.2 million, $0.3 million
and $36.0 million, respectively. Company-operated restaurants have achieved
comparable restaurant sales increases in each of the last 27 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
("Friendly's"). The airplane is used to transport employees of Perkins and
Friendly's on their respective company's business including visiting current and
potential restaurant sites.
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 $9.29
for lunch and $5.99 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 June 30, 1998, the Company had 112
franchisees which operate 348 full-service restaurants in 32 states and five
Canadian provinces, representing over 71% 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
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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 June 30, 1998,
approximately 89% 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. These systems are 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
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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.
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 Entertainment, Inc. ("Harrah's")
entered into an agreement whereby the Issuer redeemed 100% of Harrah's interest
in the Issuer (the "Reorganization"). The closing of the Reorganization occurred
on May 18, 1998. 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."
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Set forth below is a diagram of the organizational structure of the Issuer
and its subsidiaries.
[GRAPH]
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THE EXCHANGE OFFER
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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 July 2, 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 September 15,
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 other trading activities) without further
compliance with
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
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,
commercial bank, trust company or other nominee are
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
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 Exchange
Offer because the Exchange Offer is not
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
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 September 15, 1998 (or any other Registration Default (as
defined) has occurred), subject to certain exceptions, with respect to the first
90-day period immediately
9
<PAGE>
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
June 30, 1998, the Issuer had no indebtedness
outstanding other than its obligations under the
Notes and the Issuer's subsidiaries had $183.0
million of total liabilities outstanding, including
$145.1 million of indebtedness, $15.1 million of
which was secured. However, all borrowings under
the Credit Facility are secured by a first priority
Lien on substantially all of the significant assets
of the Company. As of June 30, 1998, $7.5 million
in borrowings and $2.4 million of letters of credit
were outstanding under the Credit Facility, which
has a maximum borrowing capacity of $50 million.
The Issuer has no significant assets other than its
direct and indirect equity interests in its
subsidiaries. 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."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 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 June 30, 1998 and for the six months ended June 30, 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 six months ended June 30, 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>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------
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 $ 118,669 $ 131,182
Franchise revenues and
other................... 16,032 17,322 19,275 20,092 21,005 10,169 10,640
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues.......... 213,122 222,997 247,534 254,256 271,198 128,838 141,822
Depreciation and
amortization.............. 11,909 12,119 14,410 15,752 16,031 7,898 9,678
Income from continuing
operations before net
interest, income taxes and
extraordinary item(1)..... $ 9,107 $ 9,302 $ 9,363 $ 11,477 $ 12,145 $ 5,357 $ 8,666
Net income (loss)(9)........ $ (14,530) $ 3,205 $ 3,530 $ 5,021 $ (291) $ 1,869 $ 675
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1998 (5)
--------------------
<S> <C>
(DOLLARS IN
THOUSANDS)
BALANCE SHEET DATA:
Property and equipment, net............................................................... $ 129,930
Total assets.............................................................................. 198,486
Total long-term debt and capital lease obligations........................................ 162,157
Total stockholders' deficit............................................................... (4,538)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OTHER FINANCIAL DATA:
EBITDA(2)................... $ 31,677 $ 29,420 $ 31,118 $ 34,180 $ 36,043 $ 17,116 $ 19,139
EBITDA margin(2)(3)......... 14.9% 13.2% 12.6% 13.4% 13.3% 13.3% 13.5%
Net cash provided by
operating activities...... $ 28,113 $ 22,985 $ 25,102 $ 23,133 $ 33,100 $ 10,178 $ 9,349
Capital expenditures:
Maintenance............... $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 3,453 $ 1,312 $ 1,546
Renovation................ 4,401 4,118 8,431 4,064 2,790 1,748 2,491
New restaurant
development............. 9,851 20,908 12,626 1,947 6,193 1,240 5,817
Manufacturing and other... 3,793 3,643 4,439 2,863 2,666 1,121 1,952
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total capital
expenditures.......... $ 20,068 $ 30,799 $ 28,931 $ 11,861 $ 15,102 $ 5,421 $ 11,806
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest expense........ $ 3,898 $ 4,380 $ 5,270 $ 5,269 $ 5,176 $ 2,524 $ 7,638
Ratio of EBITDA to net
interest expense(2)....... 8.1x 6.7x 5.9x 6.5x 7.0x 6.8x 2.5x
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA DATA:(4)
Net interest expense........................................... $ 17,152 $ 8,519 $ 8,432
Net cash interest expense...................................... 14,117 7,032 6,818
Ratio of EBITDA to net interest expense(2)..................... 2.1x 2.1x 2.3x
Ratio of EBITDA to net cash interest expense(2)................ 2.6x 2.5x 2.8x
Ratio of long-term debt and capital lease obligations to EBITDA(2)(8)................
4.2x
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------
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 $ 108,221 $ 118,857
Franchised.............. 404,339 425,812 440,446 465,172 485,476 235,231 251,531
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 587,755 $ 613,523 $ 648,503 $ 677,959 $ 710,962 $ 343,452 $ 370,388
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Restaurants open (at
period end)(6)
Company-operated........ 127 132 139 134 136 134 138
Franchised.............. 298 300 317 329 337 332 348
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total................. 425 432 456 463 473 466 486
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Company-operated
restaurant data:
Average sales per
restaurant(6)......... $ 1,478 $ 1,535 $ 1,535 $ 1,576 $ 1,682 $ 810 $ 878
Percentage change over
prior period........ 4.2% 3.9% 0.0% 2.7% 6.7% 5.0% 8.4%
Comparable restaurant
sales increase(7)..... 2.5% 0.8% 0.9% 2.6% 6.6% 4.9% 9.0%
Average check(6)........ $ 5.04 $ 5.16 $ 5.29 $ 5.36 $ 5.56 $ 5.50 $ 5.73
Franchised restaurant
data:
Average royalties per
restaurant............ $ 51.6 $ 53.3 $ 55.0 $ 55.2 $ 56.7 $ 27.5 $ 28.3
Average sales per
restaurant............ $ 1,381 $ 1,418 $ 1,441 $ 1,431 $ 1,466 $ 711 $ 735
</TABLE>
- ------------------------
(1) Includes unusual items as follows: year ended December 31, 1993--provision
for disposition of assets ($4.3 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); six months ended June 30, 1997--tax related reorganization
costs ($0.7 million); and six months ended June 30, 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
expense, (ii) depreciation and amortization, (iii) income taxes, (iv)
provision for disposition of assets, (v) asset write-downs (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) Because the Offering and the Reorganization took place prior to June 30,
1998, no pro forma adjustments are necessary for balance sheet data.
(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 June 30, 1998.
(9) Includes unusual and extraordinary items as follows: year ended December 31,
1993--provision for disposition of assets ($4.3 million) and cumulative
effect of change in accounting principle ($17.1 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); six months ended
June 30, 1997--tax related reorganization costs ($0.7 million); and six
months ended June 30, 1998--asset write-down (SFAS No. 121) ($0.5 million)
and provision for disposition of assets ($0.3 million).
16
<PAGE>
RISK FACTORS
Holders of the Old Notes and other prospective investors should consider
carefully the risk factors set forth below as well as the other information set
forth in this Prospectus before making any investment decisions respecting Old
Notes or New Notes. 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,
17
<PAGE>
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 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 June 30, 1998 the Issuer had total
consolidated indebtedness of approximately $163.4 million (of which
approximately $18 million consisted of the Notes) and a stockholders' deficit of
approximately $4.5 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."
RESTRICTIONS ON DISTRIBUTIONS
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. Subject to certain
exceptions discussed below under "Description of Other Indebtedness," the Credit
Agreement prohibits PFR 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 holders of its equity interests.
Subject to certain exceptions discussed below under "Description of Other
Indebtedness," 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). 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).
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
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
19
<PAGE>
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 June 30, 1998, such subsidiaries had
approximately $183.0 million of total liabilities, including approximately
$145.1 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. 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
20
<PAGE>
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 June 30, 1998, the Company franchised 348 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 40 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 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 June 30, 1998, the franchisee was delinquent in its royalty obligations in
the amount of approximately $533,000, 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"
21
<PAGE>
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 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 9.6% 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
22
<PAGE>
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 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.
23
<PAGE>
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."
24
<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 June 30,
1998. Because consummation of the Exchange Offer will have no effect on these
balances, no "as adjusted" amounts are shown.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
Cash and cash equivalents............................................................................. $ 3,956
-----------
-----------
Short-term debt:
Current maturities of long-term debt................................................................ $ --
Current maturities of capital lease obligations of PFR.............................................. 1,223
-----------
Total short-term debt............................................................................. 1,223
Long-term debt, less current maturities:
Credit Facility of PFR(1)........................................................................... 7,500
10 1/8% Senior Notes due 2007 of PFR................................................................ 130,000
11 1/4% Senior Discount Notes due 2008.............................................................. 18,268
Capital lease obligations of PFR.................................................................... 6,389
-----------
Total long-term debt.............................................................................. 162,157
Total stockholders' deficit........................................................................... (4,538)
-----------
Total capitalization.............................................................................. $ 158,842
-----------
-----------
</TABLE>
- ------------------------
(1) As of June 30, 1998, approximately $2.4 million of letters of credit were
outstanding under the Credit Facility, and approximately $40.1 million was
available for future borrowings and letters of credit.
25
<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 June 30, 1998 and for the six months ended June 30, 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 six months ended June 30, 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>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -------------------
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 $118,669 $131,182
Franchise revenues and other... 16,032 17,322 19,275 20,092 21,005 10,169 10,640
--------- --------- --------- --------- --------- -------- --------
Total revenues............... 213,122 222,997 247,534 254,256 271,198 128,838 141,822
Cost of sales.................... 163,290 171,703 192,798 195,710 207,231 98,948 109,469
General and administrative
expenses....................... 18,155 22,953 23,428 24,366 27,274 12,774 13,214
Depreciation and amortization.... 11,909 12,119 14,410 15,752 16,031 7,898 9,678
Asset write-down (SFAS No.
121)........................... -- -- 1,900 -- -- -- 500
Provisions for disposition of
assets......................... 4,338 800 609 -- -- -- 295
Other, net....................... -- -- -- -- 650 650 --
Minority interest in net earnings
of subsidiary.................. 6,323 6,120 5,026 6,951 7,867 3,211 --
--------- --------- --------- --------- --------- -------- --------
Income from continuing operations
before net interest, income
taxes and extraordinary item... 9,107 9,302 9,363 11,477 12,145 5,357 8,666
Net interest expense............. 3,898 4,380 5,270 5,269 5,176 2,524 7,638
Income taxes..................... 2,835 1,359 1,249 1,693 2,333 1,057 353
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) $ 1,869 $ 675
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 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 $129,930 $129,930
Total assets................ 136,795 155,862 167,520 162,849 208,062 198,486 198,486
Total long-term debt and
capital lease
obligations............... 46,306 50,737 67,713 62,317 136,999 162,157 162,157
Total stockholders'
investment (deficit)...... 698 3,903 7,338 12,359 12,068 (4,538) (4,538)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges (4).................... 2.7x 2.5x 2.1x 2.7x 2.9x 2.6x 1.1x
EBITDA (2)....................... $ 31,677 $ 29,420 $ 31,118 $ 34,180 $ 36,043 $ 17,116 $ 19,139
EBITDA margin (2)(3)............. 14.9% 13.2% 12.6% 13.4% 13.3% 13.3% 13.5%
Net cash provided by (used in)
operating activities........... $ 28,113 $ 22,985 $ 25,102 $ 23,133 $ 33,100 $ 10,178 $ 9,349
Capital expenditures:
Maintenance.................... $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 3,453 $ 1,312 $ 1,546
Renovation..................... 4,401 4,118 8,431 4,064 2,790 1,748 2,491
New restaurant development..... 9,851 20,908 12,626 1,947 6,193 1,240 5,817
Manufacturing and other........ 3,793 3,643 4,439 2,863 2,666 1,121 1,952
--------- --------- --------- --------- --------- -------- --------
Total capital expenditures... $ 20,068 $ 30,799 $ 28,931 $ 11,861 $ 15,102 $ 5,421 $ 11,806
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
Ratio of EBITDA to net interest
expense (2).................... 8.1x 6.7x 5.9x 6.5x 7.0x 6.8x 2.5x
PRO FORMA DATA: (5)
Ratio of earnings to fixed charges (4).......................................... 1.3x 1.0x 1.0x
Net income (loss) from continuing operations before extraordinary item.......... $ 768 $ (204) $ 199
Net interest expense............................................................ 17,152 8,519 8,432
Net cash interest expense....................................................... 14,117 7,032 6,818
Ratio of EBITDA to net interest expense (2)..................................... 2.1x 2.1x 2.3x
Ratio of EBITDA to net cash interest expense (2)................................ 2.6x 2.5x 2.8x
Ratio of long-term debt and capital lease obligations to EBITDA (2)(7)................................. 4.2x
</TABLE>
- ------------------------------
(1) Includes unusual and extraordinary items as follows: year ended December 31,
1993--provision for disposition of assets ($4.3 million) and cumulative
effect of change in accounting principle ($17.1 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); six months ended
June 30, 1997--tax related reorganization costs ($0.7 million); and six
months ended June 30, 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
expense, (ii) depreciation and amortization, (iii) income taxes, (iv)
provision for disposition of assets, (v) asset write-downs (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) Because the Offering and the Reorganization took place prior to June 30,
1998 no pro forma adjustments are necessary for balance sheet data.
(7) For the purposes of this ratio, EBITDA represents EBITDA for the twelve
months ended June 30, 1998.
27
<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 June 30,
1998, the Company owned and operated 138 full-service restaurants, franchised
348 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.
28
<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 June 30, 1998, approximately 89% 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 June 30, 1998, there were approximately $3.5 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. Net income has
decreased approximately 22.4% from $6.7 million to $5.2 million over the same
period, excluding a provision for disposition of assets of $4.3 million,
cumulative effect of change in accounting principle of $17.1 million and
discontinued operations of $0.2 million during 1993 and excluding tax related
reorganization costs of $0.7 million, discontinued operations of $0.9 million
and extraordinary item, net of income taxes, of $5.0 million during 1997. 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 27 quarters.
29
<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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1997 1996 1995 1998 1997
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Food sales............................ 92.3% 92.1% 92.2% 92.5% 92.1%
Franchise revenues and other.......... 7.7 7.9 7.8 7.5 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 26.3 26.3
Labor and benefits.................. 31.0 31.1 31.9 32.0 31.4
Operating expenses.................. 18.7 19.0 19.3 18.8 19.1
General and administrative............ 10.3 9.6 9.5 9.3 9.9
Depreciation and amortization......... 5.9 6.2 5.8 6.8 6.1
Interest expense, net................. 1.9 2.1 2.1 5.4 2.0
Asset write-down (SFAS No. 121)....... -- -- 0.8 0.4 --
Provision for disposition of assets... -- -- 0.2 0.2 --
Other, net............................ -- -- -- -- 0.5
------- ------ ------ ------ ------
Total costs and expenses................ 94.5 94.8 96.3 99.2 95.3
------- ------ ------ ------ ------
5.5 5.2 3.7 0.8 4.7
Minority interest in net earnings of
subsidiaries.......................... (2.9) (2.7) (2.0) -- (2.5)
Income from continuing operations before
income taxes and extraordinary item... 2.6 2.4 1.7 0.8 2.2
Provision for income taxes.............. (0.9) (0.7) (0.5) (0.3) (0.8)
------- ------ ------ ------ ------
Income (loss) from continuing operations
before extraordinary item............. 1.7 1.8 1.1 0.5 1.4
Income from operations of discontinued
division.............................. -- 0.2 0.3 -- 0.1
------- ------ ------ ------ ------
Income (loss) before extraordinary
item.................................. 1.7 2.0 1.4 0.5 1.5
Extraordinary item...................... (1.9) -- -- -- --
------- ------ ------ ------ ------
Net income (loss)....................... (0.1)% 2.0% 1.4% 0.5% 1.5%
------- ------ ------ ------ ------
------- ------ ------ ------ ------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUES
Total revenues for the first six months of 1998 increased approximately
10.1% over the same period last year due primarily to higher comparable
restaurant sales and increased Foxtail sales. Same store comparable sales
increased approximately 9.1% over the first six months 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. The opening of five new Company-operated
restaurants since June 30, 1997 contributed to the increase in restaurant food
sales during the six months ended June 30, 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.
30
<PAGE>
Revenues from Foxtail increased approximately 15.6% over the six months
ended June 30, 1997, and constituted approximately 8.3% of the Company's
revenues year-to-date. The increase in sales is primarily due to growth in the
number of stores in the Perkins system.
Franchise revenues, which consist primarily of franchise royalties and sales
fees, increased 9.7% over the first six months of 1997. This increase is due
primarily to the opening of 23 new franchised restaurants and the sale of one
Company-operated restaurant to a franchisee since June 30, 1997. The increase is
partially offset by the closing of eight underperforming franchised restaurants
during the same period.
COSTS AND EXPENSES
FOOD COST
For the six months ended June 30, 1998, food costs, in terms of total
revenues, were the same as the prior year. Food costs as a percentage of food
sales decreased 0.1 percentage points primarily due to menu price increases
which offset the impact of increases in certain commodity costs.
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, increased 0.6
percentage points for the six months ended June 30, 1998. Hourly labor costs,
primarily cook, server and host 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 workers' compensation costs.
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 from the Federal minimum wage rate
increasing from $4.25 per hour to $4.75 on October 1, 1996 and to $5.15 per hour
as of September 1, 1997. 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 continue to 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, decreased
0.3 percentage points for the six months ended June 30, 1998. This decrease is
primarily due to lower utilities expense and lower franchise service fees.
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 the opening of 10 additional franchise restaurants
year-to-date compared to the same period in 1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 3.4% over the six months ended
June 30, 1997. This increase is primarily due to higher restaurant development
costs, field and office administration costs and human resources costs. In
addition, payroll expense for home office staff has increased over the prior
year. These were planned increases deemed necessary as the Company continues to
increase the number of franchise and Company-operated restaurants.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the six months ended June 30, 1998,
increased approximately 22.5% over the same period last year due primarily to
increases in fixed assets and intangibles resulting from "push-down" 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.
31
<PAGE>
INTEREST NET
Interest expense for the six months ended June 30, 1998, increased 202.6%
over the same period last year due to debt incurred in December 1997 and May
1998 which was used to consummate the Going Private Transaction and the
Reorganization. Interest expense associated with capital lease obligations has
decreased.
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.
OTHER
Results of operations for the six months ended June 30, 1998, reflect a
$500,000 non-cash charge 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 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.
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
32
<PAGE>
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 from the Federal
minimum wage rate increasing from $4.25 per hour to $4.75 on October 1, 1996 and
to $5.15 per hour as of September 1, 1997. 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
continue to 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.
INTEREST, NET
Interest expense was approximately 1.8% lower than 1996 due to lower average
debt balances and decreased capital lease obligations.
33
<PAGE>
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.
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.
34
<PAGE>
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 six months ended June 30, 1998, were the
purchase of publicly owned Units, purchase of Harrah's interest in the Company,
payment of the Going Private Transaction and Reorganization expenses and capital
expenditures. Capital expenditures consisted primarily of costs related to
equipment purchases for new Company-operated restaurants and remodels of
existing restaurants. Three new restaurants were opened in the first six months
of 1998 and nine were under development. Remodels and unit upgrades, new
restaurant development and equipment upgrades at Foxtail constituted more than
75% of the capital expenditures during the first six months of 1998. The
Company's primary sources of funding were cash provided by operations, proceeds
from 10 1/8% Senior Notes issued in December 1997 (see below), proceeds from the
Notes issued May 1998 and revolving credit borrowings.
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The following table summarizes capital expenditures for each of the years in
the three-year period ended December 31, 1997 and the six months ended June 30,
1998 and 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Maintenance............................ $ 3,453 $ 2,987 $ 3,435 $ 1,546 $ 1,312
Renovation............................. 2,790 4,064 8,431 2,491 1,748
New restaurant development............. 6,193 1,947 12,626 5,817 1,240
Manufacturing.......................... 714 651 859 609 171
Other.................................. 1,952 2,212 3,580 1,343 950
--------- --------- --------- --------- ---------
Total Capital Expenditures............. $ 15,102 $ 11,861 $ 28,931 $ 11,806 $ 5,421
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The Company's capital budget for 1998 has been increased from $21.4 million
to $26.3 million. The primary source of funding for these projects is expected
to be cash provided by operations and borrowings under the Company's revolving
credit facility.
During 1998, the Company has opened two new full-service Company-operated
restaurants and a Perkins Cafe Bakery, which is an embellishment of the core
concept with significant enhancements to menu, decor, service and exterior and
interior building design. The capital budget has been increased to cover the
cost of prototype development for the Perkins Cafe Bakery, purchasing rather
than leasing restaurant sites, upgrading restaurant smallwares in all
Company-operated restaurants and acquiring restaurant sites for development in
1999. Based on this new capital plan, the Company anticipates opening six new
Company-operated restaurants in 1998. Funds not used to build new restaurants
will be primarily applied to the acquisition of restaurant sites to be developed
in 1999, remodels of existing restaurants, and restaurant maintenance.
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. Fund generated by cash sales in
excess of those needed to service short term obligations are used by the Company
to reduce debt and acquire capital assets. At June 30, 1998, this working
capital deficit was $13.1 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
June 30, 1998, $7.5 million of borrowings and approximately $2.4 million of
letters of credit were outstanding under the Credit Facility. See "Description
of Other Indebtedness."
On May 18, 1998, TRC issued $31,100,000 of 11.25% Senior Discount Notes (the
"TRC Notes") maturing on May 15, 2008. The TRC Notes were issued at a discount
to their principal amount at maturity and generated gross proceeds to TRC of
approximately $18,009,000. The proceeds were used to purchase the shares of TRC
owned by Harrah's and pay expenses relative to the Reorganization.
Cash interest will not accrue or be payable on the TRC Notes prior to May
15, 2003, provided that on any semi-annual accrual date prior to May 15, 2003,
TRC may elect to begin accruing cash interest on the TRC Notes (the "Cash
Interest Election"). Cash interest on the TRC Notes will accrue at a rate of
11.25% 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 thereafter on each May 15 and November 15.
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<PAGE>
Prior to the earlier of May 15, 2003 or the semi-annual accrual date with
respect to which the Cash Interest Election is made, interest on the TRC Notes
will accrue at a rate of 11.25% per annum on each semi-annual accrual date and
the principal amount of each TRC Note will accrete up by the amount of such
accrued interest (the "Accreted Value"). On May 15, 2003, TRC will be required
to pay all accrued but unpaid interest on the TRC Notes by redeeming an amount
per note equal to the Accreted value of such TRC Note on May 15, 2003, less the
issue price of such TRC Note at a redemption price of 105.625% of the amount
redeemed. Assuming TRC does not make the Cash Interest Election, the aggregate
Accreted Value of the TRC Notes on May 15, 2003 will be $31,100,000 and the
amount required to be redeemed will be approximately $13,091,000.
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 Notes and the Credit Facility restrict the ability of PFR to pay
dividends or distributions to its equity holders. If no default or event of
default exists, these restrictions generally allow PFR to make distributions.
1. sufficient to pay its equity holders' estimated federal, state and local
income taxes on the holders' share of the taxable income of PFR (Tax
Distributions).
2. in an aggregate amount after December 22, 1997 equal to 50% of positive net
income, after Tax Distributions, from January 1, 1998 through the end of the
most recently ended fiscal quarter.
3. up to an aggregate of $5 million after December 22, 1997.
In the six months ended June 30, 1998, PFR made Tax Distributions totaling
approximately $431,000 to its equity holders, all of whom are direct or indirect
wholly-owned subsidiaries of TRC. Under the above restrictions, other than Tax
Distributions, PFR was unrestricted in its ability to make distributions to its
equity holders up to approximately $5,515,000 as of June 30, 1998.
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 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. 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.
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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
June 30, 1998, the Company had unamortized preopening costs of approximately
$500,000.
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.
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 year 2000 presents a critical business issue due to the possibility that
many computerized systems will not be able to process information including
dates beginning in the Year 2000. The Company has established a plan to assess
its readiness for the Year 2000. A review of computer systems and software,
including non-information technology systems, has been substantially completed.
No material costs associated with achieving Year 2000 compliance internally are
anticipated based on this review. The Company has initiated communications with
major suppliers and customers, including franchisees, to determine the extent to
which the Company may be vulnerable to such third parties' failure to remediate
their own issues related to the Year 2000. At the present time, the Company has
not received adequate information from these third parties to appropriately
evaluate their possible impact on operations of the Company. As such, management
cannot reasonably predict what impact, if any, the Year 2000 issue will have on
the Company. At this time, the Company has not begun developing a contingency
plan; however, management expects to complete an appropriate contingency plan in
1999.
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<PAGE>
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 June 30, 1998, the Company operated 138 full-service restaurants and
franchised 348 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 27 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 June 30, 1998, entrees served in
Company-operated restaurants ranged in price from $3.09 to $9.29 for breakfast,
$4.49 to $9.29 for lunch and $5.99 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 112 franchisees which operate 348
full service restaurants in 33 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 June 30, 1998, approximately 89% 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. These systems are 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 $9.29. 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 $5.99 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 introduced 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 June 30, 1998, the Company had 348 franchised restaurants (excluding
alternative formats) operated by 112 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 145 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 June 30, 1998, the Company's three largest franchisees operated a
total of 90 restaurants. The respective distribution of restaurants operated by
such franchisees was: 40 restaurants primarily in upstate New York; 30
restaurants in Pennsylvania, Ohio and New York; and 20 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."
43
<PAGE>
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 June 30, 1998, there were approximately $3.5 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-teaching
whenever possible and to gain maximum guest impact from time spent on training.
Training is provided for all restaurant positions.
44
<PAGE>
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 which have reserved exclusive territorial rights 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. Three of such agreements are currently
in effect. Of these, one expires upon the death of the beneficiary, one expires
in the year 2075 and the remaining agreement remains in effect as long as the
Company operates Perkins Family Restaurants in certain states.
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
45
<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 June 30, 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............................................................................ 21 20 41
Georgia............................................................................ -- 1 1
Idaho.............................................................................. -- 9 9
Illinois........................................................................... 8 1 9
Indiana............................................................................ -- 6 6
Iowa............................................................................... 16 1 17
Kansas............................................................................. 4 3 7
Kentucky........................................................................... -- 3 3
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 43 50
South Carolina..................................................................... -- 2 2
South Dakota....................................................................... -- 10 10
Tennessee.......................................................................... 1 12 13
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
COMPANY-
OPERATED FRANCHISED TOTAL
------------- ------------- -----
<S> <C> <C> <C>
Virginia........................................................................... -- 1 1
Washington......................................................................... -- 7 7
Wisconsin.......................................................................... 14 15 29
Wyoming............................................................................ -- 4 4
Canada............................................................................. -- 14 14
--- --- ---
Total.............................................................................. 138 348 486
--- --- ---
--- --- ---
</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 June 30, 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 82 138
Alternative Concepts (4)................................................................. -- 3 3
</TABLE>
- ------------------------
(1) In addition, the Company leases 22 properties, 19 of which are subleased to
others (seven of which are subleased to franchisees), two of which are
vacant, and one of which is 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 3 properties which are operating as Perkins Cafe and
Bakeries. The average term of the leases is 9 years, excluding renewal
options. The longest lease term is 17 years and the shortest lease term will
mature in approximately 5 years, assuming the exercise of all renewal
options.
EMPLOYEES
As of June 30, 1998, 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.
47
<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.
48
<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............................. 40 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
49
<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 August 1998, Mr. Ledsinger has served as President and Chief Executive
Officer of Choice Hotels International. From February 1998 until August 1998,
Mr. Ledsinger 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.
50
<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.
51
<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.
52
<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.
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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 from the Issuer to Mr. Smith of $1,500,000, with interest at the
prime rate. The weighted average interest rate during 1997 was 8.43%. 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 June 30,
1998, there was $985,000 outstanding under this agreement.
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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>
BY MAIL: OVERNIGHT COURIER:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
BY HAND: IN NEW YORK (AS DROP AGENT) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway 15th Floor Two International Plaza
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
</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 June 30, 1998, the Issuer had no indebtedness other than its
obligations under the Notes and the Issuer's Subsidiaries had $183.0 million of
total liabilities, including $145.1 million of indebtedness, $15.1 million of
which was secured. However, all borrowings under the Credit Facility are secured
by a first priority Lien on substantially all of the significant assets of the
Company. As of June 30, 1998, $7.5 million in borrowings and $2.4 million of
letters of credit were outstanding under the Credit Facility, which has a
maximum borrowing capacity of $50 million. The Issuer has no significant assets
other than its direct and indirect equity interests in its subsidiaries.
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
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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, 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.
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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 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
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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
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
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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
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
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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
(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
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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 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
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under Credit Facilities after giving effect to such incurrence does not
exceed an amount equal to $50.0 million;
(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
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(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.
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
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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 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
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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 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.
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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 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
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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 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
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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 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).
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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 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
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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 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
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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).
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
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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."
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.
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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."
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
</TABLE>
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<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ------------------------------------------------------------------------------- -------------
<S> <C>
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 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
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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, 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
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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, 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.
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"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 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.
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"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 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
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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 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
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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 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";
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(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, 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
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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.
"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
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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 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.
100
<PAGE>
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.
101
<PAGE>
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 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.
102
<PAGE>
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 June 30, 1998
(unaudited)........................................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and
1995 and the six months ended June 30, 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 six months ended June 30, 1998 and 1997 (unaudited)................... F-6
Notes to Consolidated Financial Statements........................................... F-7
Unaudited Consolidated Pro Forma Financial Statements................................ F-24
Unaudited Consolidated Pro Forma Statement of Operations for the year ended December
31, 1997........................................................................... F-25
Unaudited Consolidated Pro Forma Statement of Operations for the six months ended
June 30, 1998...................................................................... F-26
Notes to Unaudited Consolidated Pro Forma Financial Statements....................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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,
August 24, 1998.
F-2
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1997 1996 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 16,027 $ 3,870 $ 3,956
Receivables, less allowance for doubtful accounts of $846, $430 and
$546.................................................................... 9,482 7,389 8,215
Inventories, at the lower of first-in, first-out cost or market........... 4,236 4,240 4,647
Prepaid expenses and other current assets................................. 2,047 2,183 2,123
Deferred income taxes..................................................... 470 526 470
---------- ---------- -----------
Total current assets.................................................. 32,262 18,208 19,411
---------- ---------- -----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and
amortization.............................................................. 127,410 115,089 129,930
NET ASSETS OF DISCONTINUED OPERATIONS -- 3,322 --
INTANGIBLE ASSETS AND DEFERRED CHARGES, net of accumulated amortization of
$27,591, $26,451 and $29,030.............................................. 47,303 24,958 45,365
OTHER ASSETS................................................................ 1,087 1,272 3,780
---------- ---------- -----------
$ 208,062 $ 162,849 $ 198,486
---------- ---------- -----------
---------- ---------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt...................................... $ -- $ 5,408 $ --
Current maturities of capital lease obligations........................... 1,301 1,683 1,223
Accounts payable.......................................................... 11,415 10,536 11,474
Accrued expenses.......................................................... 36,302 15,473 19,860
Distributions payable..................................................... -- 1,771 --
---------- ---------- -----------
Total current liabilities............................................. 49,018 34,871 32,557
---------- ---------- -----------
CAPITAL LEASE OBLIGATIONS, less current maturities.......................... 6,999 8,573 6,389
LONG-TERM DEBT, less current maturities..................................... 130,000 53,744 155,768
DEFERRED INCOME TAXES AND OTHER............................................. 9,977 21,336 8,310
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 11,640 issued and outstanding....................................... 1 1 1
Additional paid-in capital................................................ 18,252 18,252 969
Accumulated deficit....................................................... (6,185) (5,894) (5,508)
---------- ---------- -----------
12,068 12,359 (4,538)
---------- ---------- -----------
$ 208,062 $ 162,849 $ 198,486
---------- ---------- -----------
---------- ---------- -----------
</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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Food sales.................................................. $ 250,193 $ 234,164 $ 228,259 $ 131,182 $ 118,669
Franchise revenues and other................................ 21,005 20,092 19,275 10,640 10,169
--------- --------- --------- --------- ---------
271,198 254,256 247,534 141,822 128,838
--------- --------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales:
Food cost................................................. 72,559 68,456 66,204 37,356 33,934
Labor and benefits........................................ 84,027 78,970 78,916 45,421 40,445
Operating expenses........................................ 50,645 48,284 47,678 26,692 24,569
General and administrative.................................. 27,274 24,366 23,428 13,214 12,774
Depreciation and amortization............................... 16,031 15,752 14,410 9,678 7,898
Interest expense, net....................................... 5,176 5,269 5,270 7,638 2,524
Asset writedown (SFAS No. 121).............................. -- -- 1,900 500 --
Provision for disposition of assets......................... -- -- 609 295 --
Other, net.................................................. 650 -- -- -- 650
--------- --------- --------- --------- ---------
256,362 241,097 238,415 140,794 122,794
--------- --------- --------- --------- ---------
14,836 13,159 9,119 1,028 6,044
MINORITY INTEREST IN NET EARNINGS OF SUBSIDIARIES............. (7,867) (6,951) (5,026) -- (3,211)
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.......................................... 6,969 6,208 4,093 1,028 2,833
PROVISION FOR INCOME TAXES.................................... (2,333) (1,693) (1,249) (353) (1,057)
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM... 4,636 4,515 2,844 675 1,776
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 BEFORE EXTRAORDINARY ITEM.............................. 4,729 5,021 3,530 675 1,869
EXTRAORDINARY ITEM, Going Private Transaction, net of income
tax benefit of $2,180....................................... (5,020) -- -- -- --
--------- --------- --------- --------- ---------
NET INCOME (LOSS)............................................. $ (291) $ 5,021 $ 3,530 $ 675 $ 1,869
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</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>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ----------------------
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 $ 675 $ 1,869
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization..................... 16,031 15,752 14,410 9,678 7,898
Extraordinary item................................ 5,020 -- -- -- --
Minority interest in net earnings of
subsidiaries.................................... 7,867 6,951 5,026 -- 3,211
Other noncash income and expense items, net....... 3,154 (9,117) 1,152 (369) 647
Earnings from discontinued operations............. (93) (506) (686) -- (93)
Net changes in other operating assets and
liabilities..................................... 1,412 5,032 (839) (1,430) (3,354)
Asset writedown (SFAS No. 121).................... -- -- 1,900 500 --
Provision for disposition of assets............... -- -- 609 295 --
---------- --------- --------- ----------- ---------
Total adjustments..................................... 33,391 18,112 21,572 8,674 8,309
---------- --------- --------- ----------- ---------
Net cash provided by operating activities............. 33,100 23,133 25,102 9,349 10,178
---------- --------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment.................. (15,102) (11,861) (28,931) (11,806) (5,421)
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 99 731
---------- --------- --------- ----------- ---------
Net cash used in investing activities................. (11,055) (9,533) (27,319) (11,695) (2,390)
---------- --------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.......................... 194,800 21,750 59,125 47,559 30,200
Principal payments on long-term debt.................. (123,952) (25,282) (48,836) (22,050) (36,402)
Principal payments under capital lease obligations.... (1,956) (2,074) (1,981) (688) (988)
Distributions to unitholders of Perkins Family
Restaurants, L.P.................................... (7,040) (7,080) (7,038) -- (3,537)
Purchase of limited partnership units................. -- -- -- (16,241) --
Deferred financing costs.............................. (5,474) -- -- (1,023) --
Purchase of minority interest......................... (66,266) -- -- (17,282) --
---------- --------- --------- ----------- ---------
Net cash (used in) provided by financing activities... (9,888) (12,686) 1,270 (9,725) (10,727)
---------- --------- --------- ----------- ---------
Increase (decrease) in cash and cash equivalents...... 12,157 914 (947) (12,071) (2,939)
---------- --------- --------- ----------- ---------
CASH AND CASH EQUIVALENTS:
Balance, beginning of period.......................... 3,870 2,956 3,903 16,027 3,870
---------- --------- --------- ----------- ---------
Balance, end of period................................ $ 16,027 $ 3,870 $ 2,956 $ 3,956 $ 931
---------- --------- --------- ----------- ---------
---------- --------- --------- ----------- ---------
</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 the
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)
INTERIM FINANCIAL STATEMENTS--
In the opinion of management, the unaudited financial statements as of June
30, 1998 and for the six months ended June 30, 1998 and 1997 reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods.
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 the 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. In the event an impairment exists, a loss is
recognized based on the amount by which the carrying value exceeds the fair
value of the asset.
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 the years ended
December 31, 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 actual 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 SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(Increase) decrease in:
Receivables........................... $ (3,359) $ 1,547 $ (894) $ (874) $ (950)
Inventories........................... 4 110 (243) (411) (1)
Prepaid expenses and other current
assets.............................. (126) (971) (1,113) (386) 169
Other assets.......................... (427) (368) (43) (103) (1,043)
Increase (decrease) in:
Accounts payable...................... 2,063 1,015 471 65 (515)
Accrued expenses...................... 3,461 3,091 (350) (312) (705)
Other liabilities..................... (204) 608 1,333 591 (309)
--------- --------- --------- --------- ---------
$ 1,412 $ 5,032 $ (839) $ (1,430) $ (3,354)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Other supplemental cash flow information was as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for interest...................... $ 5,294 $ 5,637 $ 5,621 $ 6,689 $ 2,685
Income taxes paid........................... 2,159 14,173 329 865 1,421
Income tax refunds received................. 354 2,230 364 690 70
</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.
In the event an impairment exists, a loss is recognized based on the amount by
which the carrying value exceeds the fair value of the asset.
(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.
The Notes and the Credit Facility restrict the ability of PFR to pay
dividends or distributions to its equity holders. If no default or event of
default exists, these restrictions generally allow PFR to make distributions:
1. sufficient to pay its equity holders' estimated federal, state and local
income taxes on the holders' share of the taxable income of PFR (Tax
Distributions).
2. in an aggregate amount after December 22, 1997 equal to 50% of positive
net income, after Tax Distributions, from January 1, 1998 through the end
of the most recently ended fiscal quarter.
3. up to an aggregate of $5 million after December 22, 1997.
As of December 31, 1997, PFR had made no distributions to its equity holders
under the above restrictions. Accordingly, PFR was unrestricted in its ability
to make distributions to its equity holders, all of whom are direct or indirect
wholly-owned subsidiaries of TRC, up to $5,000,000.
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, TRC includes its allocable share of PFR's taxable
income in its income tax return, which was 100% after December 22, 1997.
F-17
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) INCOME TAXES: (CONTINUED)
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>
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>
F-18
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) INCOME TAXES: (CONTINUED)
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, as amended,
provides for a maximum loan of $1,500,000, 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. 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.
F-19
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) COMMITMENTS AND CONTINGENCIES: (CONTINUED)
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 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
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
F-20
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) UNIT PLAN: (CONTINUED)
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.
(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
F-21
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) ASSET WRITE-DOWN (SFAS NO. 121): (CONTINUED)
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.
(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.
F-22
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) SUBSEQUENT EVENTS:
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"). The closing of the Reorganization occurred on May 18, 1998.
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.
The Company has filed a registration statement offering to exchange its
11.25% Series B Senior Discount Notes due 2008 for its 11.25% Series A Senior
Discount Notes due 2008. That registration statement discloses several risk
factors (see pages 17-24 therein), to include: consequences of exchange and
failure to exchange, that the Company is highly leveraged, restrictions on
distributions, and the absence of any assurance as to liquidity for the Notes,
among several others.
F-23
<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 six months ending June 30, 1998, have been prepared as
if the Transactions had occurred as of the beginning of 1997.
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
would have been had the Transactions occurred as of the assumed dates indicated
above or to project the Company's results of operations in any future period.
F-24
<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............ 27,274 (720)(a) 26,554
Depreciation and amortization......... 16,031 2,349(b) 18,380
Interest, net......................... 5,176 11,976(c) 17,152
Other, net............................ 650 -- 650
---------- ------------- ---------
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-25
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- -----------
<S> <C> <C> <C>
REVENUES:
Food sales............................................................. $ 131,182 $ -- $ 131,182
Franchise and other.................................................... 10,640 -- 10,640
---------- ----- -----------
141,822 -- 141,822
COST AND EXPENSES:
Cost of sales:
Food cost............................................................ 37,356 -- 37,356
Labor and benefits................................................... 45,421 -- 45,421
Operating expenses................................................... 26,692 -- 26,692
General and administrative............................................. 13,214 -- 13,214
Depreciation and amortization.......................................... 9,678 -- 9,678
Interest, net.......................................................... 7,638 794(d) 8,432
Loss on/Provision for disposition of assets............................ 295 -- 295
Asset write-down (SFAS No. 121)........................................ 500 -- 500
---------- ----- -----------
140,794 794 141,588
---------- ----- -----------
INCOME BEFORE INCOME TAXES............................................. 1,028 (794) 234
PROVISION FOR INCOME TAXES............................................. (353) 318(f) (35)
---------- ----- -----------
NET INCOME............................................................. $ 675 $ (476) $ 199
---------- ----- -----------
---------- ----- -----------
</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
$4,222 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 $1,130 ($18,009 @ 11.25% and $2,083 @
11.25%), accretion of 5.625% mandatory redemption premium of $55 and
amortization of debt financing costs of $50, less $441 of interest,
accretion of mandatory redemption premium and amortization of debt financing
costs recorded from May 18 through June 30.
(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.
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..................... 25
Capitalization...................... 25
Selected Historical and Pro Forma
Financial and Other Data.......... 26
Management's Discussion and Analysis
of Results of Operations and
Financial Condition............... 28
Business............................ 39
Management.......................... 49
Certain Transactions................ 54
Description of Other Indebtedness... 55
The Exchange Offer.................. 59
Description of Notes................ 69
Certain U.S. Tax Consequences to
Holders........................... 98
Plan of Distribution................ 101
Legal Matters....................... 101
Independent Public Accountants...... 101
Available Information............... 102
Index to Financial Statements....... F-1
</TABLE>
The Restaurant Company
11 1/4% Series B Senior Discount Notes
Due 2008
---------------------
PROSPECTUS
AUGUST , 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) (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
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.
(c) 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
II-3
<PAGE>
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.
(d) 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.
(e) 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 AUGUST 25, 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 AUGUST 25, 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 Revolving Loan Note made by Donald N. Smith payable to the order of The Restaurant
Company dated July 20, 1998, providing for a loan of up to $1,500,000..............
12 Ratio of Earnings to Fixed Charges...................................................
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>
- ------------------------
* Previously filed.
<PAGE>
EXHIBIT 5
August 25, 1998
The Restaurant Company
1 Pierce Place
Suite 100 East
Itasca, Illinois 60341
Re: 11 1/4% SERIES B SENIOR DISCOUNT NOTES DUE 2008
Ladies and Gentlemen:
We have acted as counsel to The Restaurant Company (the "Issuer"), in
connection with the preparation of a registration statement on Form S-4 (the
"Registration Statement") to register under the Securities Act of 1933, as
amended (the "Act"), an offer to exchange (the "Exchange Offer")
Series B 11 1/4% Senior Discount Notes due 2008 (the "New Notes") for a like
principal amount of Series A 11 1/4% Senior Discount Notes due 2007
(the "Old Notes"). The Old Notes were issued under an indenture
(the "Indenture") between the Issuer and State Street Bank and Trust Company,
as trustee. In this connection, we have examined such corporate and other
records, instruments, certificates and documents as considered necessary to
enable us to express this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Exchange Offer, the New Notes will have been duly authorized for issuance
and, when the New Note are duly executed, authenticated, issued and
delivered, such New Notes will constitute valid and legally binding
obligations of the Issuer and will be entitled to the benefits of the
Indenture, subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's
rights and to general equity principles (whether considered in a proceeding
at law or in equity).
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Mayer, Brown & Platt under the
caption "Legal Matters."
Very truly yours,
/s/ Mayer Brown & Platt
--------------------------------
MAYER, BROWN & PLATT
<PAGE>
GUARANTY
DATED as of May 1, 1994
among
Perkins Family Restaurants, L.P.,
Perkins Restaurants Operating Company, L.P.
and
BancBoston Leasing Inc.
<PAGE>
TABLE OF CONTENTS
1. Definitions. ......................................................1
2. Guaranty of Payment and Performance. ..............................1
3. Guarantor's Agreement to Pay Enforcement Costs, etc. ..............2
5. Waivers by Guarantors; BBL's Freedom to Act. ......................3
6. Unenforceability of Obligations Against Approved Franchisee. ......4
7. Subrogation; Subordination. .......................................5
7.1 Waiver of Rights Against Approved Franchisee. ..............5
7.2 Subordination. .............................................5
7.4 Provisions Supplemental. ...................................6
8. Security; Setoff. .................................................6
9. Further Assurances; Provision of Collateral. ......................6
10. Termination; Reinstatement. .......................................7
11. Successors and Assigns. ...........................................7
12. Amendments and Waivers. ...........................................8
13. Notices. ..........................................................8
14. Governing Law; Consent to Jurisdiction. ...........................8
15. Waiver of Jury Trial. .............................................8
16. Miscellaneous. ....................................................9
<PAGE>
GUARANTY
GUARANTY, dated as of May 1, 1994 by Perkins Family Restaurants, L.P.
and Perkins Restaurants Operating Company, L.P., jointly and severally
(collectively, the "Guarantors") in favor of BancBoston Leasing Inc. ("BBL").
WHEREAS, the Guarantors have requested BBL to arrange and provide lease
financing for equipment for certain franchisees of the Guarantors (the
"Franchisees"); and
WHEREAS, BBL has agreed to consider providing such financing to
Franchisees jointly approved by BBL and the Guarantors ("Approved
Franchisees") which approval has been certified as provided in EXHIBIT A
hereto, on terms substantially as provided in the form of Master Lease
Finance Agreement and related agreements, schedules and certificates attached
as EXHIBIT B hereto (collectively, the "Agreements" and individually, an
"Agreement") such Agreements to be entered into during the period from the
date hereof through April 30, 1995 and in an aggregate amount not to exceed
$7,500,000 for all Approved Franchises; and
WHEREAS, it is a condition precedent to BBL's providing any such
financing to Approved Franchisees, that the Guarantors jointly and severally
guaranty payment by each of the Approved Franchisees of their obligations
under the Agreements to which it is a party, on the terms and conditions
provided herein; and
WHEREAS, the Guarantors wish to guaranty the Approved Franchisees'
obligations to BBL as provided herein;
NOW, THEREFORE, the Guarantors hereby agrees with BBL as follows:
1. DEFINITIONS. The term "Obligations" shall mean all Daily Rent, Monthly
Rent and all other amounts payable under or in respect of any of the
Agreements, including, without limitation, all fees and expenses of BBL. All
capitalized terms used herein without definition shall have the respective
meanings provided therefor in the Agreements.
2. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantors hereby jointly and
severally guarantee to BBL the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), of
all of the Obligations including all such which would become due but for the
operation of the automatic stay
<PAGE>
-2-
pursuant to Section 362(a) of the Federal Bankruptcy Code and the operation
of Sections 502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty
is an absolute, unconditional and continuing guaranty of the full and
punctual payment of all of the Obligations and not of their collectibility
only and is in no way conditioned upon any requirement that BBL first attempt
to collect any of the Obligations from the applicable Approved Franchisee or
any other guarantor of such Approved Franchisee's Obligations, or resort to
any collateral security or other means of obtaining payment, provided,
however, that during any period of a Significant Continuing Default (as
defined below), upon request of the Guarantors (but without limiting BBL's
rights absent such request), BBL will use its usual efforts to collect the
Obligations subject to such Significant Continuing Default. Should the
Approved Franchisee default in the payment or performance of any of the
Obligations and such default shall continue for 91 days, the joint and
several obligations of the Guarantors hereunder with respect to such
Obligations in default shall become immediately due and payable to BBL, upon
demand. Payments by the Guarantors hereunder may be required by BBL on any
number of occasions. Demands by BBL in respect of any defaulted Monthly Rent
payments by an Approved Franchisee may be satisfied by the Guarantors
hereunder by paying the amount of Monthly Rent then in default; however, if
the Guarantors have paid eight out of any twelve consecutive Monthly Rent
payments in respect of any Agreement (with respect to such Agreement a
"Significant Continuing Default"), upon any further Event of Default under
such Agreement, the Guarantors shall, upon demand for payment under this
Guaranty, repay all Obligations under such Agreement, PROVIDED, that the
Guarantors may satisfy such obligations, at their option, in either manner
provided in EXHIBIT C hereto.
3. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. The Guarantors
further agree, as the principal obligors and not as guarantors only, to pay
to BBL, on demand, all costs and expenses (including court costs and legal
expenses) incurred or expended by BBL in connection with this Guaranty and
the enforcement thereof, together with interest on amounts recoverable under
this Section 3 from the time when such amounts become due until payment,
whether before or after judgment, at the rate of interest for overdue amounts
set forth in the Agreements, PROVIDED that if such interest exceeds the
maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
4. LIMITATION ON LIABILITY. The Guarantors' joint and several obligations
under Section 2 of this Guaranty shall be limited, as of the time of any
demand hereunder, to the lesser of (i) an amount equal to ten
<PAGE>
-3-
percent (10%) of the then outstanding aggregate Obligations under all
Agreements but not less than $250,000, and (ii) $750,000 (the "Guarantors'
Liability"). Each payment under this Guaranty shall reduce the Guarantors'
Liability by the amount of such payment. In the event that, after one or more
payments are made by a Guarantor hereunder in respect of any Agreement,
either Guarantor recovers all or a portion of the amount paid, from the
applicable Approved Franchisee, from proceeds of the underlying equipment or
from payments made to or proceeds recovered by BBL, whether by means of
subrogation or otherwise, or by reassignment of the applicable Agreement as
provided in EXHIBIT C, the amount recovered (but not more than the amount
paid under this Guaranty in respect of such Approved Franchisee's Agreement)
shall be added to the then applicable Guarantors' Liability, as if such
payments under this Guaranty had not been made. The Guarantors' obligations
under Section 3 of this Guaranty shall be in addition to the amounts
specified in this Section 4.
5. WAIVERS BY GUARANTORS; BBL'S FREEDOM TO ACT. Except as expressly
provided in Section 2, the Guarantors agree that the Obligations will be paid
strictly in accordance with their respective terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of BBL with respect thereto. The Guarantors
waive promptness, diligence, presentment, demand, protest, notice of
acceptance, notice of any Obligations incurred and (except as expressly
provided for herein) all other notices of any kind, all defenses which may be
available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshaling of assets
of any of the Approved Franchisees or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations, and
all suretyship defenses generally. Without limiting the generality of the
foregoing, the Guarantors agree to the provisions of the Agreements
evidencing, securing or otherwise executed in connection with any Obligation
and agree that the obligations of the Guarantors hereunder shall not be
released or discharged, in whole or in part, or otherwise affected by (i) the
failure of BBL to assert any claim or demand or to enforce any right or
remedy against any Approved Franchisee or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations; (ii)
(except to the extent provided below) any extensions, compromise,
refinancing, consolidation or renewals of any Obligation; (iii) (except to
the extent provided below) any change in the time, place or manner of payment
of any of the Obligations or any rescissions, waivers, compromise,
refinancing, consolidation, amendments or modifications of any of the terms
or provisions of the Agreements evidencing, securing or otherwise executed in
connection with
<PAGE>
-4-
any of the Obligations; (iv) the addition (but not release) of any entity or
other person primarily or secondarily liable for any Obligation, (v) the
adequacy of any rights which BBL may have against any collateral security or
other means of obtaining repayment of any of the Obligations; (vi) the
impairment of any collateral securing any of the Obligations, including
without limitation the failure to perfect or preserve any rights which BBL
might have in such collateral security or the loss or destruction of any such
collateral security; or (vii) any other act or omission which might in any
manner or to any extent vary the risk of the Guarantors or otherwise operate
as a release or discharge of the Guarantors all of which may be done without
notice to the Guarantors, provided, that BBL agrees to act in a commercially
reasonable manner and provided, further, that BBL will not, without the
consent of the Guarantors, which will not be unreasonably withheld, agree
with any Approved Franchisee to (i) extend the time for payment of any
Obligation, (ii) increase the amount of any payment of Daily Rent or Monthly
Rent or the aggregate principal amount due under any Agreement, (iii) amend
or modify in any material way any other provision of any Agreement, if the
effect of such amendment or modification could be to increase the liability
or exposure of the Guarantors in respect of such Agreement, or (iv) release,
settle or otherwise compromise any claims against any Approved Franchisee or
any other guarantor of the payment or performance of any Agreement, and BBL
agrees that it will not materially change any provisions in the forms of the
Agreements attached hereto as Exhibit B insofar as such forms relate to
Obligations guaranteed hereunder, without first notifying the Guarantors and
affording the Guarantors an opportunity to comment on any proposed changes.
To the fullest extent permitted by law, the Guarantors hereby expressly waive
any and all rights or defenses arising by reason of (A) any "one action" or
"anti-deficiency" law which would otherwise prevent BBL from bringing any
action, including any claim for a deficiency, or exercising any other right
or remedy (including any right of set-off), against the Guarantors before or
after BBL's commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or (B) any other law
which in any other way would otherwise require any election of remedies by
BBL.
6. UNENFORCEABILITY OF OBLIGATIONS AGAINST APPROVED FRANCHISEE. If for
any reason any Approved Franchisee has no legal existence or is under no
legal obligation to discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from any Approved Franchisee by reason
of any Approved Franchisee's insolvency, bankruptcy or reorganization or by
other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the
<PAGE>
-5-
Guarantors to the same extent as if the Guarantors at all times had been the
principal obligors on all such Obligations. In the event that acceleration of
the time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of any Approved Franchisee, or for any other
reason, all such amounts otherwise subject to acceleration under the terms of
the Agreements evidencing, securing or otherwise executed in connection with
any Obligation shall be immediately due and payable by the Guarantors upon
demand. Upon payment in full by the Guarantors of the Obligations in respect
of any Agreement, the related Agreement shall be assigned to the Guarantors
as provided in EXHIBIT C.
7. SUBROGATION; SUBORDINATION.
7.1 WAIVER OF RIGHTS AGAINST APPROVED FRANCHISEE. Subject to the
exceptions contained in Subsection 7.3, until the final payment in full
of all Obligations against any Approved Franchisee, the Guarantors shall
not exercise any rights against such Approved Franchisee arising as a
result of payment by the Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not
prove any claim in competition with BBL in respect of any payment
hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Guarantors will not claim any setoff,
recoupment or counterclaim against any Approved Franchisee in respect of
any liability of the Guarantors to such Approved Franchisee; and the
Guarantors waive any benefit of and any right to participate in any
collateral security which may be held by BBL.
7.2 SUBORDINATION. Subject to the exceptions contained in
Subsection 7.3, the payment of any amounts due with respect to any
indebtedness of any Approved Franchisee now or hereafter owed to the
Guarantor is hereby subordinated to the prior payment in full of all of
the Obligations of such Approved Franchisee. The Guarantors agree that,
after the occurrence of any default in the payment of any of the
Obligations, neither of the Guarantors will demand, sue for or otherwise
attempt to collect any such indebtedness of any Approved Franchisee to
either Guarantor until all of the Obligations of such Approved
Franchisee shall have been paid in full. If, notwithstanding the
foregoing sentence, either Guarantor shall collect, enforce or receive
any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantors as trustee for BBL
and be paid over to BBL on account of the Obligations without affecting
in any manner
<PAGE>
-6-
the liability of the Guarantors under the other provisions of this
Guaranty.
7.3 EXCEPTION. The provisions of Subsections 7.1 and 7.2 shall not
apply to any royalty, marketing fund or other advertising payments made
under any franchise or license agreement between any Approved Franchisee
and the Guarantors (or any notes or other evidences of indebtedness
given in payment therefor) or payments for any products, materials, or
supplies purchased from Guarantors by an Approved Franchisee in the
ordinary course of business.
7.4 PROVISIONS SUPPLEMENTAL. The provisions of this Section 7 shall
be supplemental to and not in derogation of any rights and remedies of
BBL or any affiliate of BBL under any separate subordination agreement
which BBL or such affiliate may at any time and from time to time enter
into with either Guarantor.
8. SECURITY: SETOFF. The Guarantors grant to BBL, as security for the
full and punctual payment and performance of all of the Guarantors'
obligations hereunder, a continuing lien on and security interest in all
securities or other property belonging to each Guarantor now or hereafter
held by BBL and its affiliates and in all deposits (general or special, time
or demand, provisional or final) and other sums credited by or due from BBL
or its affiliates to a Guarantor or subject to withdrawal by a Guarantor.
Regardless of the adequacy of any collateral security or other means of
obtaining payment of any of the Obligations, BBL is hereby authorized at any
time and from time to time, without notice to a Guarantor (any such notice
being expressly waived by the Guarantors) and to the fullest extent permitted
by law, to set off and apply such deposits and other sums against the
obligations of the Guarantors under this Guaranty, whether or not BBL shall
have made any demand under this Guaranty.
9. FURTHER ASSURANCES: PROVISION OF COLLATERAL. (a) The Guarantors
agree that they will from time to time, at the request of BBL, provide to BBL
the Guarantors' most recent audited and unaudited balance sheets and related
statements of income and cash flows (prepared on a consolidated basis with
the Guarantor's subsidiaries, if any) and such other information relating to
the business and affairs of the Guarantors as BBL may reasonably request. The
Guarantors agree to provide BBL promptly after the execution and delivery of
this Guaranty, with a list of Franchisees who the Guarantors believe qualify
as Approved Franchisees in accordance with the criteria set forth on the
attached EXHIBIT D and to update such list from time to time to keep BBL
informed of any additions
<PAGE>
-7-
and deletions of Franchisees who meet such requirements. The Guarantors also
agree to do all such things and execute all such documents as BBL may
reasonably consider necessary or desirable to give full effect to this
Guaranty and to perfect and preserve the rights and powers of BBL hereunder.
The Guarantors acknowledge and confirm that the Guarantors themselves have
established their own adequate means of obtaining from the Approved
Franchisees on a continuing basis all information desired by the Guarantors
concerning the financial condition of the Approved Franchisees and that the
Guarantors will look to the Approved Franchisees and not to BBL in order for
the Guarantors to keep adequately informed of changes in the Approved
Franchisees' financial condition.
(b) In the event that an Event of Default caused by non compliance with
any covenant contained in Section 9 under the Revolving Credit Agreement,
dated as of February 18, 1992 among the Guarantors, The First National Bank
of Boston, The Bank of Tokyo, Ltd. and The First National Bank of Boston, as
agent, shall continue for a period of two consecutive fiscal quarters (a
"Collateral Event"), the Guarantors hereby agree to provide, immediately upon
demand by BBL made at any time after the occurrence of a Collateral Event,
cash or cash equivalents satisfactory to BBL in an amount at least equal to
the Guarantors' Liability from time to time in effect in pledge to secure the
Guarantors' obligations hereunder, pursuant to a cash collateral pledge
agreement in form and substance satisfactory to BBL. BBL shall be entitled to
retain such cash collateral until all obligations of the Guarantors hereunder
have been irrevocably paid in full in cash.
10. TERMINATION: REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Obligations have been irrevocably paid in full in cash.
This Guaranty shall continue to be effective or be reinstated, if at any time
any payment made or value received with respect to any Obligation is
rescinded or must otherwise be returned by BBL upon the insolvency, bankruptcy
or reorganization of any Approved Franchisee, or otherwise, all as though
such payment had not been made or value received.
11. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon BBL and
the Guarantors, their successors, transferees and assigns, and shall inure to
the benefit of and be enforceable by BBL and the Guarantors and their
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, BBL may, with the consent of the Guarantors, which shall
not be unreasonably withheld, assign or otherwise transfer any of the
Agreements or any other
<PAGE>
-8-
agreement or note held by it evidencing, securing or otherwise executed in
connection with the Obligations, or sell participations in any interest
therein, to any other entity or other person, and such other entity or other
person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer or participation, with all the
rights in respect thereof granted to BBL herein.
12. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by the Guarantors therefrom
shall be effective unless the same shall be in writing and signed by BBL. No
failure on the part of BBL to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
13. NOTICES. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically
provided herein, shall be deemed to have been duly made or given when
delivered by hand or mailed first class, postage prepaid, or, in the case of
telegraphic or telexed notice, when transmitted, answer back received,
addressed as follows: if to the Guarantor, at the address set forth beneath
its signature hereto, and if to BBL, at the address for notices to BBL set
forth in the Agreement, or at such address as either party may designate in
writing to the other.
14. GOVERNING LAW: CONSENT TO JURISDICTION. THE GUARANTY IS INTENDED
TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The
Guarantor agrees that any suit for the enforcement of this Guaranty may be
brought in the courts of the Commonwealth of Massachusetts or any federal
court sitting therein and consents to the nonexclusive jurisdiction of such
court and to service of process in any such suit being made upon the
Guarantors by mail at the address specified by reference in Section 13. The
Guarantors hereby waive any objection that they may now or hereafter have to
the venue of any such suit or any such court or that such suit was brought in
an inconvenient court.
15. WAIVER OF JURY TRIAL. EACH OF THE GUARANTORS HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT
<PAGE>
-9-
TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF
SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, each of the
Guarantors hereby waives any right which it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition
to, actual damages. The Guarantors (i) certify that neither BBL nor any
representative, agent or attorney of BBL has represented, expressly or
otherwise, that BBL would not, in the event of litigation, seek to enforce
the foregoing waivers and (ii) acknowledge that, in entering into the
Agreements and the other documents to which BBL is a party, BBL is relying
upon, among other things, the waivers and certifications contained in this
Section 15.
16. MISCELLANEOUS. This Guaranty constitutes the entire agreement of
the Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in
addition to any other guaranty of or collateral security for any of the
Obligations. The invalidity or unenforceability of any one or more sections
of this Guaranty shall not affect the validity or enforceability of its
remaining provisions. Captions are for the ease of reference only and shall
not affect the meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally applicable to the
singular and plural forms of the terms defined.
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty
to be executed and delivered as of the date first above written.
PERKINS FAMILY
RESTAURANTS, L.P.
By: Perkins Management
Company, Inc., its
general partner
By: /s/ [ILLEGIBLE]
-----------------------------
Its: VP
<PAGE>
-10-
PERKINS RESTAURANTS
OPERATING COMPANY, L.P.
By: Perkins Management
Company, Inc., its
general partner
By: /s/ [ILLEGIBLE]
-----------------------------
Its: VP
<PAGE>
EXHIBIT A
Certificate of Acceptance
The undersigned Perkins Family Restaurants, L.P. and Perkins
Restaurants Operating Company, L.P. (collectively, the "Guarantors") hereby
certify and agree with reference to the Guaranty (the "Guaranty"), dated
May___, 1994 among the Guarantors and BancBoston Leasing Inc. ("BBL"), as
follows:
1. BBL has informed the Guarantors that ___________ (the
"Franchisee"), a franchisee of the Guarantors' restaurant business,
has requested a lease (the "Lease") in an amount not to exceed
$______ for a period of ___ months, covering equipment listed on
SCHEDULE 1 attached hereto (the "Equipment"), to be used at _______,
and that BBL is willing to enter into such Lease of the Equipment
with _____, subject to Guarantors' inclusion of such Lease to the
Franchisee in the pool of lease obligations guaranteed under the
Guaranty.
2. The Guarantors hereby certify to and agree with BBL that a Lease
to the Franchisee on the terms described above will constitute an
"Agreement" as defined in and covered by the Guaranty and the
Franchisee will constitute an Approved Franchisee for all purposes
of the Guaranty.
3. After giving effect to the Obligations under the above Lease, the
aggregate Obligations presently covered by the Guaranty shall not to
exceed $______, based on balances as of the most recent month end.
IN WITNESS WHEREOF, the undersigned have executed this Certificate
as of the ___ day of ________, 1994.
PERKINS FAMILY RESTAURANTS, L.P.
By:
-----------------------------------------
<PAGE>
-2-
PERKINS RESTAURANTS OPERATING
COMPANY, L.P.
By:
-----------------------------------------
<PAGE>
AMENDMENT NO. 1 TO GUARANTY
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS RESTAURANTS OPERATING COMPANY, L.P.
This AMENDMENT (the "Amendment"), dated as of May 3, 1995, among Perkins
Family Restaurants, L.P., Perkins Restaurants Operating Company, L.P.
(collectively, the "Guarantors") and BancBoston Leasing Inc. ("BBL").
WHEREAS, the Guarantors have guaranteed to BBL the payment and
performance of the Obligations (as defined in the Guaranty referred to below)
of certain Approved Franchisees (as defined in the Guaranty referred to below)
to BBL pursuant to that certain Guaranty dated as of May 31, 1994 (as amended
and in effect from time to time, the "Guaranty"); and
WHEREAS, the Guarantors and BBL wish to amend a provision of the
Guaranty;
NOW, THEREFORE, in consideration of the foregoing premises, the parties
hereto hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms which are used herein
without definition and which are defined in the Guaranty shall have the same
meanings herein as in the Guaranty.
SECTION 2. AMENDMENT TO GUARANTY. (a) The Guaranty is hereby amended by
deleting the date "April 30, 1995" where it appears in the second whereas
clause of the preamble thereof, and substituting therefor the date "April 30,
1996".
(b) Section 9 of the Guaranty is hereby amended by deleting the
phrase "Section 9 of the Revolving Credit Agreement, dated as of February 18,
1992 among the Guarantors, The First National Bank of Boston, The Bank of
Tokyo, Ltd. and The First National Bank of Boston, as agent" and substituting
therefor "Section 9 of that certain Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of June 29, 1994, among the Guarantors, The
First National Bank of Boston, The Bank of Tokyo, Ltd., First American
National Bank, such other lenders as may become parties thereto from time to
time, and The First National Bank of Boston, as agent, as such agreement may
be amended, supplemented, restated and in effect from time to time".
SECTION 3. EFFECTIVE DATE. Upon execution and delivery by each of the
parties hereto, the provisions of this Amendment shall become effective as of
the date hereof.
SECTION 4. MISCELLANEOUS PROVISIONS. Each of the Guarantors hereby
reaffirms its absolute and unconditional guaranty of the payment and
performance by the Approved Franchisees of their obligations to BBL, as more
fully set forth in the Guaranty as amended hereby. Except as otherwise
expressly provided by this Amendment, all of the terms, conditions and
provisions of the Guaranty shall remain the same. It is declared and agreed
by each of the parties hereto
<PAGE>
-2-
that the Guaranty, as amended hereby, shall continue in full force and
effect, and that this Amendment and such Guaranty shall be read and construed
as one instrument. The Guarantors hereby agree to pay to BBL, on demand by
BBL, all reasonable out-of-pocket costs and expenses incurred or sustained by
BBL in connection with the preparation of this Amendment (including
reasonable legal fees). This Amendment shall be construed according to and
governed by the laws of the Commonwealth of Massachusetts. This Amendment
may be executed in any number of counterparts, but all such counterparts
shall together constitute but one instrument. In making proof of this
Amendment it shall not be necessary to produce or account for more than one
counterpart signed by each party hereto by and against which enforcement hereof
is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
an agreement under seal as of the date first written above.
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management Company, Inc., its
general partner
By: /s/ [Illegible]
----------------------------------------
Title: V.P.
PERKINS RESTAURANTS OPERATING
COMPANY, L.P.
By: Perkins Management Company, Inc., its
general partner
By: /s/ [Illegible]
----------------------------------------
Title: V.P.
BANCBOSTON LEASING INC.
By: /s/ James D. [Illegible]
----------------------------------------
Title: Vice President
<PAGE>
GUARANTY
Dated as of July 5, 1995
among
Perkins Family Restaurants, L.P.,
Perkins Restaurants Operating Company, L.P.
and
BancBoston Leasing Inc.
19
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TABLE OF CONTENTS
20
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GUARANTY
GUARANTY, dated as of July 5, 1995 by Perkins Family Restaurants, L.P. and
Perkins Restaurants Operating Company, L.P., jointly and severally
(collectively, the "Guarantors") in favor of BancBoston Leasing Inc. ("BBL").
WHEREAS, the Guarantors have requested that BBL arrange and provide lease
financing for equipment to be installed in the Perkins Family Restaurants
listed on Exhibit A attached hereto by Park Development Corporation, a
franchisee of the Guarantors (the "Franchisee"); and
WHEREAS, BBL has agreed to consider providing such financing to the
Franchisee pursuant to agreements, substantially in the form of the Master
Lease Finance Agreement and the related agreements, schedules and
certificates attached hereto as Exhibit B, which have been jointly approved
by the Guarantors and which approval has been certified as provided in
Exhibit C attached hereto, (collectively, the "Agreements" and individually,
an "Agreement"), such Agreements to be entered into during the period from
the date hereof through September 30, 1996 and in an aggregate amount not to
exceed $1,350,000; AND
WHEREAS, IT IS A CONDITION PRECEDENT TO BBL'S PROVIDING ANY SUCH FINANCING TO
THE FRANCHISEE, THAT THE GUARANTORS JOINTLY AND SEVERALLY GUARANTY PAYMENT BY
THE FRANCHISEE OF ITS OBLIGATIONS UNDER THE AGREEMENTS, ON THE TERMS AND
CONDITIONS PROVIDED HEREIN; AND
WHEREAS, THE GUARANTORS WISH TO GUARANTY THE FRANCHISEE'S OBLIGATIONS TO BBL
AS PROVIDED HEREIN;
NOW, THEREFORE, EACH OF THE GUARANTORS HEREBY AGREES WITH BBL AS FOLLOWS:
SECTION DEFINITIONS.
THE TERM "OBLIGATIONS" SHALL MEAN ALL DAILY RENT, MONTHLY RENT AND ALL OTHER
AMOUNTS PAYABLE UNDER OR IN RESPECT OF ANY OF THE AGREEMENTS, INCLUDING,
WITHOUT LIMITATION, ALL FEES AND EXPENSES OF BBL. ALL CAPITALIZED TERMS USED
HEREIN WITHOUT DEFINITION SHALL HAVE THE RESPECTIVE MEANINGS PROVIDED
THEREFOR IN THE AGREEMENTS.
SECTION GUARANTY OF PAYMENT AND PERFORMANCE.
THE GUARANTORS HEREBY JOINTLY AND SEVERALLY GUARANTEE TO BBL THE FULL AND
PUNCTUAL PAYMENT WHEN DUE (WHETHER AT STATED MATURITY, BY REQUIRED PRE
PAYMENT, BY ACCELERATION OR OTHERWISE), OF ALL OF THE OBLIGATIONS INCLUDING
ALL SUCH WHICH WOULD BECOME DUE BUT FOR THE OPERATION OF THE AUTOMATIC STAY
PURSUANT TO SECTION 362(a) OF THE FEDERAL BANKRUPTCY CODE AND THE OPERATION
OF SECTION SECTION 502(b) AND 506(b) OF THE FEDERAL BANKRUPTCY CODE. THIS
GUARANTY IS AN ABSOLUTE, UNCONDITIONAL AND CONTINUING GUARANTY OF THE FULL
AND PUNCTUAL PAYMENT OF ALL OF THE OBLIGATIONS AND NOT OF THEIR
COLLECTIBILITY ONLY AND IS IN NO WAY CONDITIONED UPON ANY REQUIREMENT THAT
BBL FIRST ATTEMPT TO COLLECT ANY OF THE OBLIGATIONS FROM THE FRANCHISEE OR
ANY OTHER GUARANTOR OF THE OBLIGATIONS, OR RESORT TO ANY COLLATERAL SECURITY
OR OTHER MEANS OF OBTAINING PAYMENT, PROVIDED, HOWEVER, THAT DURING ANY
PERIOD OF A SIGNIFICANT CONTINUING DEFAULT (AS DEFINED BELOW), UPON REQUEST
OF THE GUARANTORS (BUT WITHOUT LIMITING BBL'S RIGHTS ABSENT SUCH REQUEST),
BBL WILL USE ITS USUAL EFFORTS TO COLLECT THE OBLIGATIONS SUBJECT TO SUCH
SIGNIFICANT CONTINUING DEFAULT. SHOULD THE FRANCHISEE DEFAULT IN THE PAYMENT
OR PERFORMANCE OF ANY OF THE OBLIGATIONS AND SUCH DEFAULT SHALL CONTINUE FOR
91 DAYS, THE JOINT AND SEVERAL OBLIGATIONS OF THE GUARANTORS HEREUNDER WITH
RESPECT TO SUCH OBLIGATIONS IN DEFAULT SHALL BECOME IMMEDIATELY DUE AND
PAYABLE TO BBL, UPON DEMAND. PAYMENTS BY THE GUARANTORS HEREUNDER MAY BE
REQUIRED BY BBL ON ANY NUMBER OF OCCASIONS. DEMANDS BY BBL IN RESPECT OF ANY
DEFAULTED MONTHLY RENT PAYMENTS BY THE FRANCHISEE MAY BE SATISFIED BY THE
GUARANTORS HEREUNDER BY PAYING THE AMOUNT OF MONTHLY RENT THEN IN DEFAULT;
HOWEVER, IF THE GUARANTORS HAVE PAID EIGHT OUT OF ANY TWELVE CONSECUTIVE
MONTHLY RENT PAYMENTS IN RESPECT OF ANY AGREEMENT (WITH RESPECT TO SUCH
AGREEMENT, A "SIGNIFICANT CONTINUING DEFAULT"), UPON ANY FURTHER EVENT OF
DEFAULT UNDER SUCH AGREEMENT, THE GUARANTORS SHALL, UPON DEMAND FOR PAYMENT
UNDER THIS GUARANTY, REPAY ALL OBLIGATIONS UNDER SUCH AGREEMENT, PROVIDED,
THAT THE GUARANTORS MAY SATISFY SUCH OBLIGATIONS, AT THEIR OPTION, IN EITHER
MANNER PROVIDED IN EXHIBIT D ATTACHED HERETO.
SECTION GAURANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. THE GUARANTORS
FURTHER AGREE, AS THE PRINCIPAL OBLIGORS AND NOT AS GUARANTORS ONLY, TO PAY
TO BBL, ON DEMAND, ALL COSTS AND EXPENSES (INCLUDING COURT COSTS AND LEGAL
EXPENSES) INCURRED OR EXPENDED BY BBL IN CONNECTION WITH THIS GUARANTY AND
THE ENFORCEMENT THEREOF, TOGETHER WITH INTEREST ON AMOUNTS RECOVERABLE UNDER
THIS SECTION 3 FROM THE TIME WHEN SUCH AMOUNTS BECOME DUE UNTIL PAYMENT,
WHETHER BEFORE OR AFTER JUDGMENT, AT THE RATE OF INTEREST FOR OVERDUE AMOUNTS
SET FORTH IN THE AGREEMENTS, PROVIDED THAT IF SUCH INTEREST EXCEEDS THE
MAXIMUM AMOUNT PERMITTED TO BE PAID UNDER APPLICABLE LAW, THEN SUCH INTEREST
SHALL BE REDUCED TO SUCH MAXIMUM PERMITTED AMOUNT.
SECTION LIMITATION OF LIABILITY.
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<PAGE>
THE GUARANTORS' JOINT AND SEVERAL OBLIGATIONS UNDER SECTION 2 OF THIS
GUARANTY SHALL BE LIMITED, AS OF THE TIME OF ANY DEMAND HEREUNDER, TO AN
AMOUNT EQUAL TO THE APPLICABLE PERCENTAGE (AS DEFINED BELOW) OF THE THEN
OUTSTANDING AGGREGATE OBLIGATIONS UNDER ALL AGREEMENTS (THE "GUARANTORS'
LIABILITY"). THE
"APPLICABLE PERCENTAGE" ON ANY DATE OF DETERMINATION SHALL BE THE APPLICABLE
PERCENTAGE SET FORTH ON EXHIBIT E ATTACHED HERETO ON SUCH DATE. EACH PAYMENT
UNDER THIS GUARANTY SHALL REDUCE THE GUARANTORS' LIABILITY BY THE AMOUNT OF
SUCH PAYMENT. IN THE EVENT THAT, AFTER ONE OR MORE PAYMENTS ARE MADE BY A
GUARANTOR HEREUNDER IN RESPECT OF ANY AGREEMENT, EITHER GUARANTOR RECOVERS
ALL OR A PORTION OF THE AMOUNT PAID FROM THE FRANCHISEE, FROM PROCEEDS OF THE
UNDERLYING EQUIPMENT OR FROM PAYMENTS MADE TO OR PROCEEDS RECOVERED BY BBL,
WHETHER BY MEANS OF SUBROGATION OR OTHERWISE, OR BY REASSIGNMENT OF THE
APPLICABLE AGREEMENT AS PROVIDED IN EXHIBIT D ATTACHED HERETO, THE AMOUNT
RECOVERED (BUT NOT MORE THAN THE AMOUNT PAID UNDER THIS GUARANTY IN RESPECT
OF THE FRANCHISEE'S AGREEMENT) SHALL BE ADDED TO THE THEN APPLICABLE
GUARANTORS' LIABILITY, AS IF SUCH PAYMENTS UNDER THIS GUARANTY HAD NOT BEEN
MADE. THE GUARANTORS' OBLIGATIONS UNDER SECTION 3 OF THIS GUARANTY SHALL BE
IN ADDITION TO THE AMOUNTS SPECIFIED IN THIS SECTION 4.
SECTION WAIVERS BY GUARANTORS; BBL'S FREEDOM TO ACT.
EXCEPT AS EXPRESSLY PROVIDED IN SECTION 2 HEREOF, THE GUARANTORS AGREE THAT
THE OBLIGATIONS WILL BE PAID STRICTLY IN ACCORDANCE WITH THEIR RESPECTIVE
TERMS, REGARDLESS OF ANY LAW, REGULATION OR ORDER NOW OR HEREAFTER IN EFFECT
IN ANY JURISDICTION AFFECTING ANY OF SUCH TERMS OR THE RIGHTS OF BBL WITH
RESPECT THERETO. THE GUARANTORS WAIVE PROMPTNESS, DILIGENCE, PRESENTMENT,
DEMAND, PROTEST, NOTICE OF ACCEPTANCE, NOTICE OF ANY OBLIGATIONS INCURRED AND
(EXCEPT AS EXPRESSLY PROVIDED FOR HEREIN) ALL OTHER NOTICES OF ANY KIND, ALL
DEFENSES WHICH MAY BE AVAILABLE BY VIRTUE OF ANY VALUATION, STAY, MORATORIUM
LAW OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT, ANY RIGHT TO REQUIRE THE
MARSHALING OF ASSETS OF THE FRANCHISEE OR ANY OTHER ENTITY OR OTHER PERSON
PRIMARILY OR SECONDARILY LIABLE WITH RESPECT TO ANY OF THE OBLIGATIONS, AND
ALL SURETYSHIP DEFENSES GENERALLY. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE GUARANTORS AGREE TO THE PROVISIONS OF THE AGREEMENTS
EVIDENCING, SECURING OR OTHERWISE EXECUTED IN CONNECTION WITH ANY OBLIGATION
AND AGREE THAT THE OBLIGATIONS OF THE GUARANTORS HEREUNDER SHALL NOT BE
RELEASED OR DISCHARGED, IN WHOLE OR IN PART, OR OTHERWISE AFFECTED BY (a) THE
FAILURE OF BBL TO ASSERT ANY CLAIM OR DEMAND OR TO ENFORCE ANY RIGHT OR
REMEDY AGAINST THE FRANCHISEE OR ANY OTHER ENTITY OR OTHER PERSON PRIMARILY
OR SECONDARILY LIABLE WITH RESPECT TO ANY OF THE OBLIGATIONS; (b) (EXCEPT TO
THE EXTENT PROVIDED BELOW) ANY EXTENSIONS, COMPROMISE, REFINANCING,
CONSOLIDATION OR RENEWALS OF ANY OBLIGATION; (c) (EXCEPT TO THE EXTENT
PROVIDED BELOW) ANY CHANGE IN THE TIME, PLACE OR MANNER OF PAYMENT OF ANY OF
THE OBLIGATIONS OR ANY RESCISSIONS, WAIVERS, COMPROMISE, REFINANCING,
CONSOLIDATION, AMENDMENTS OR MODIFICATIONS OF ANY OF THE TERMS OR PROVISIONS
OF THE AGREEMENTS EVIDENCING, SECURING OR OTHERWISE EXECUTED IN CONNECTION
WITH ANY OF THE OBLIGATIONS; (d) THE ADDITION (BUT NOT RELEASE) OF ANY ENTITY
OR OTHER PERSON PRIMARILY OR SECONDARILY LIABLE FOR ANY OBLIGATION; (e)
EXCEPT TO THE EXTENT PROVIDED BELOW, THE ADEQUACY OF ANY RIGHTS WHICH BBL MAY
HAVE AGAINST ANY COLLATERAL SECURITY OR OTHER MEANS OF OBTAINING REPAYMENT OF
ANY OF THE OBLIGATIONS; (f) EXCEPT TO THE EXTENT PROVIDED BELOW, THE
IMPAIRMENT OF ANY COLLATERAL SECURING ANY OF THE OBLIGATIONS, INCLUDING
WITHOUT LIMITATION THE FAILURE TO PERFECT OR PRESERVE ANY RIGHTS WHICH BBL
MIGHT HAVE IN SUCH COLLATERAL SECURITY OR THE LOSS OR DESTRUCTION OF ANY SUCH
COLLATERAL SECURITY; OR (g) ANY OTHER ACT OR OMISSION WHICH MIGHT IN ANY
MANNER OR TO ANY EXTENT VARY THE RISK OF THE GUARANTORS OR OTHERWISE OPERATE
AS A RELEASE OR DISCHARGE OF THE GUARANTORS ALL OF WHICH MAY BE DONE WITHOUT
NOTICE TO THE GUARANTORS, PROVIDED, THAT BBL AGREES TO ACT IN A COMMERCIALLY
REASONABLE MANNER AND PROVIDED, FURTHER, THAT BBL WILL NOT, WITHOUT THE
CONSENT OF THE GUARANTORS, WHICH WILL NOT BE UNREASONABLY WITHHELD, AGREE
WITH THE FRANCHISEE TO (i) EXTEND THE TIME FOR PAYMENT OF ANY OBLIGATION,
(ii) INCREASE THE AMOUNT OF ANY PAYMENT OF DAILY RENT OR MONTHLY RENT OR THE
AGGREGATE PRINCIPAL AMOUNT DUE UNDER ANY AGREEMENT, (iii) AMEND OR MODIFY IN
ANY MATERIAL WAY ANY OTHER PROVISION OF ANY AGREEMENT, IF THE EFFECT OF SUCH
AMENDMENT OR MODIFICATION COULD BE TO INCREASE THE LIABILITY OR EXPOSURE OF
THE GUARANTORS IN RESPECT OF SUCH AGREEMENT, OR (iv) RELEASE, SETTLE OR
OTHERWISE COMPROMISE ANY CLAIMS AGAINST THE FRANCHISEE OR ANY OTHER GUARANTOR
OF THE PAYMENT OR PERFORMANCE OF ANY AGREEMENT, AND BBL AGREES THAT IT WILL
NOT MATERIALLY CHANGE ANY PROVISIONS IN THE FORMS OF THE AGREEMENTS ATTACHED
HERETO AS EXHIBIT B INSOFAR AS SUCH FORMS RELATE TO OBLIGATIONS GUARANTEED
HEREUNDER, WITHOUT FIRST NOTIFYING THE GUARANTORS AND AFFORDING THE
GUARANTORS AN OPPORTUNITY TO COMMENT ON ANY PROPOSED CHANGES. TO THE FULLEST
EXTENT PERMITTED BY LAW, THE GUARANTORS HEREBY EXPRESSLY WAIVE ANY AND ALL
RIGHTS OR DEFENSES ARISING BY REASON OF (A) ANY "ONE ACTION" OR "ANTI
DEFICIENCY" LAW WHICH WOULD OTHERWISE PREVENT BBL FROM BRINGING ANY ACTION,
INCLUDING ANY CLAIM FOR A DEFICIENCY, OR EXERCISING ANY OTHER RIGHT OR REMEDY
(INCLUDING ANY RIGHT OF SET OFF), AGAINST THE GUARANTORS BEFORE OR AFTER
BBL'S COMMENCEMENT OR COMPLETION OF ANY FORECLOSURE ACTION, WHETHER
JUDICIALLY, BY EXERCISE OF
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<PAGE>
POWER OF SALE OR OTHERWISE, OR (B) ANY OTHER LAW WHICH IN ANY OTHER WAY WOULD
OTHERWISE REQUIRE ANY ELECTION OF REMEDIES BY BBL.
SECTION UNENFORCEABILITY OF OBLIGATIONS AGAINST FRANCHISEE.
IF FOR ANY REASON THE FRANCHISEE HAS NO LEGAL EXISTENCE OR IS UNDER NO LEGAL
OBLIGATION TO DISCHARGE ANY OF THE OBLIGATIONS, OR IF ANY OF THE OBLIGATIONS
HAVE BECOME IRRECOVERABLE FROM THE FRANCHISEE BY REASON OF THE FRANCHISEE'S
INSOLVENCY, BANKRUPTCY OR REORGANIZATION OR BY OTHER OPERATION OF LAW OR FOR
ANY OTHER REASON, THIS GUARANTY SHALL NEVERTHELESS BE BINDING ON THE
GUARANTORS TO THE SAME EXTENT AS IF THE GUARANTORS AT ALL TIMES HAD BEEN THE
PRINCIPAL OBLIGORS ON ALL SUCH OBLIGATIONS. IN THE EVENT THAT ACCELERATION OF
THE TIME FOR PAYMENT OF ANY OF THE OBLIGATIONS IS STAYED UPON THE INSOLVENCY,
BANKRUPTCY OR REORGANIZATION OF THE FRANCHISEE, OR FOR ANY OTHER REASON, ALL
SUCH AMOUNTS OTHERWISE SUBJECT TO ACCELERATION UNDER THE TERMS OF THE
AGREEMENTS EVIDENCING, SECURING OR OTHERWISE EXECUTED IN CONNECTION WITH ANY
OBLIGATION SHALL BE IMMEDIATELY DUE AND PAYABLE BY THE GUARANTORS UPON
DEMAND. UPON PAYMENT IN FULL BY THE GUARANTORS OF THE OBLIGATIONS IN RESPECT
OF ANY AGREEMENT, THE RELATED AGREEMENT SHALL BE ASSIGNED TO THE GUARANTORS
AS PROVIDED IN EXHIBIT D ATTACHED HERETO.
SECTION SUBROGATION; SUBORDINATION.
SECTION WAIVER OF RIGHTS AGAINST FRANCHISEE.
SUBJECT TO THE EXCEPTIONS
CONTAINED IN SUBSECTION 7.3 HEREOF, UNTIL THE FINAL PAYMENT IN FULL OF ALL
OBLIGATIONS OF THE FRANCHISEE, THE GUARANTORS SHALL NOT EXERCISE ANY RIGHTS
AGAINST THE FRANCHISEE ARISING AS A RESULT OF PAYMENT BY A GUARANTOR
HEREUNDER, BY WAY OF SUBROGATION, REIMBURSEMENT, RESTITUTION, CONTRIBUTION OR
OTHERWISE, AND WILL NOT PROVE ANY CLAIM IN COMPETITION WITH BBL IN RESPECT OF
ANY PAYMENT HEREUNDER IN ANY BANKRUPTCY, INSOLVENCY OR REORGANIZATION CASE OR
PROCEEDINGS OF ANY NATURE; THE GUARANTORS WILL NOT CLAIM ANY SETOFF,
RECOUPMENT OR COUNTERCLAIM AGAINST THE FRANCHISEE IN RESPECT OF ANY LIABILITY
OF THE GUARANTORS TO THE FRANCHISEE; AND THE GUARANTORS WAIVE ANY BENEFIT OF
AND ANY RIGHT TO PARTICIPATE IN ANY COLLATERAL SECURITY WHICH MAY BE HELD BY
BBL.
SECTION SUBORDINATION.
SUBJECT TO THE EXCEPTIONS CONTAINED IN SUBSECTION 7.3 HEREOF,
THE PAYMENT OF ANY AMOUNTS DUE WITH RESPECT TO ANY INDEBTEDNESS OF THE
FRANCHISEE NOW OR HEREAFTER OWED TO THE GUARANTORS IS HEREBY SUBORDINATED TO
THE PRIOR PAYMENT IN FULL OF ALL OF THE OBLIGATIONS OF THE FRANCHISEE. THE
GUARANTORS AGREE THAT, AFTER THE OCCURRENCE OF ANY DEFAULT IN THE PAYMENT OF
ANY OF THE OBLIGATIONS, NEITHER OF THE GUARANTORS WILL DEMAND, SUE FOR OR
OTHERWISE ATTEMPT TO COLLECT ANY SUCH INDEBTEDNESS OF THE FRANCHISEE TO
EITHER GUARANTOR UNTIL ALL OF THE OBLIGATIONS OF THE FRANCHISEE SHALL HAVE
BEEN PAID IN FULL. IF, NOTWITHSTANDING THE FOREGOING SENTENCE, EITHER
GUARANTOR SHALL COLLECT, ENFORCE OR RECEIVE ANY AMOUNTS IN RESPECT OF SUCH
INDEBTEDNESS, SUCH AMOUNTS SHALL BE COLLECTED, ENFORCED AND RECEIVED BY THE
GUARANTORS AS TRUSTEE FOR BBL AND BE PAID OVER TO BBL ON ACCOUNT OF THE
OBLIGATIONS WITHOUT AFFECTING IN ANY MANNER THE LIABILITY OF THE GUARANTORS
UNDER THE OTHER PROVISIONS OF THIS GUARANTY.
SECTION EXCEPTION.
THE PROVISIONS OF SUBSECTIONS 7.1 AND 7.2 HEREOF SHALL NOT APPLY TO ANY
ROYALTY, MARKETING FUND OR OTHER ADVERTISING PAYMENTS MADE UNDER ANY
FRANCHISE OR LICENSE AGREEMENT BETWEEN THE FRANCHISEE AND THE GUARANTORS (OR
ANY NOTES OR OTHER EVIDENCES OF INDEBTEDNESS GIVEN IN PAYMENT THEREFOR) OR
PAYMENTS FOR ANY PRODUCTS, MATERIALS, OR SUPPLIES PURCHASED FROM THE
GUARANTORS BY THE FRANCHISEE IN THE ORDINARY COURSE OF BUSINESS. SECTION
PROVISIONS SUPPLEMENTAL. THE PROVISIONS OF THIS SECTION 7 SHALL BE
SUPPLEMENTAL TO AND NOT IN DEROGATION OF ANY RIGHTS AND REMEDIES OF BBL OR
ANY AFFILIATE OF BBL UNDER ANY SEPARATE SUBORDINATION AGREEMENT WHICH BBL OR
SUCH AFFILIATE MAY AT ANY TIME AND FROM TIME TO TIME ENTER INTO WITH EITHER
GUARANTOR.
SECTION SECURITY; SETOFF.
THE GUARANTORS GRANT TO BBL, AS SECURITY FOR THE FULL AND PUNCTUAL PAYMENT
AND PERFORMANCE OF ALL OF THE GUARANTORS' OBLIGATIONS HEREUNDER, A CONTINUING
LIEN ON AND SECURITY INTEREST IN ALL SECURITIES OR OTHER PROPERTY BELONGING
TO EACH GUARANTOR NOW OR HEREAFTER HELD BY BBL AND ITS AFFILIATES AND IN ALL
DEPOSITS (GENERAL OR SPECIAL, TIME OR DEMAND, PROVISIONAL OR FINAL) AND OTHER
SUMS CREDITED BY OR DUE FROM BBL OR ITS AFFILIATES TO A GUARANTOR OR SUBJECT
TO WITHDRAWAL BY A GUARANTOR. REGARDLESS OF THE ADEQUACY OF ANY COLLATERAL
SECURITY OR OTHER MEANS OF OBTAINING PAYMENT OF ANY OF THE OBLIGATIONS, BBL
IS HEREBY AUTHORIZED AT ANY TIME AND FROM TIME TO TIME, WITHOUT NOTICE TO
EITHER GUARANTOR (ANY SUCH NOTICE BEING EXPRESSLY WAIVED BY THE GUARANTORS)
AND TO THE FULLEST EXTENT PERMITTED BY
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LAW, TO SET OFF AND APPLY SUCH DEPOSITS AND OTHER SUMS AGAINST THE
OBLIGATIONS OF THE GUARANTORS UNDER THIS GUARANTY, WHETHER OR NOT BBL SHALL
HAVE MADE ANY DEMAND UNDER THIS GUARANTY.
SECTION FURTHER ASSURANCES; PROVISION OF COLLATERAL. (a) THE GUARANTORS AGREE
THAT THEY WILL FROM TIME TO TIME, AT THE REQUEST OF BBL, PROVIDE TO BBL THE
GUARANTORS' MOST RECENT AUDITED AND UNAUDITED BALANCE SHEETS AND RELATED
STATEMENTS OF INCOME AND CASH FLOWS (PREPARED ON A CONSOLIDATED BASIS WITH
EACH GUARANTOR'S SUBSIDIARIES, IF ANY) AND SUCH OTHER INFORMATION RELATING TO
THE BUSINESS AND AFFAIRS OF THE GUARANTORS AS BBL MAY REASONABLY REQUEST. THE
GUARANTORS AGREE TO DO ALL SUCH THINGS AND EXECUTE ALL SUCH DOCUMENTS AS BBL
MAY REASONABLY CONSIDER NECESSARY OR DESIRABLE TO GIVE FULL EFFECT TO THIS
GUARANTY AND TO PERFECT AND PRESERVE THE RIGHTS AND POWERS OF BBL HEREUNDER.
THE GUARANTORS ACKNOWLEDGE AND CONFIRM THAT THE GUARANTORS THEMSELVES HAVE
ESTABLISHED THEIR OWN ADEQUATE MEANS OF OBTAINING FROM THE FRANCHISEE ON A
CONTINUING BASIS ALL INFORMATION DESIRED BY THE GUARANTORS CONCERNING THE
FINANCIAL CONDITION OF THE FRANCHISEE AND THAT THE GUARANTORS WILL LOOK TO
THE FRANCHISEE AND NOT TO BBL IN ORDER FOR THE GUARANTORS TO KEEP ADEQUATELY
INFORMED OF CHANGES IN THE FRANCHISEE'S FINANCIAL CONDITION.
(b) IN THE EVENT THAT AN EVENT OF DEFAULT CAUSED BY NONCOMPLIANCE WITH ANY
COVENANT CONTAINED IN SECTION 9 OF THAT CERTAIN AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT, DATED AS OF JUNE 29, 1994, AMONG
THE GUARANTORS, THE FIRST NATIONAL BANK OF BOSTON, THE BANK OF TOKYO, LTD.,
FIRST AMERICAN NATIONAL BANK, SUCH OTHER LENDERS AS MAY BECOME PARTIES
THERETO FROM TIME TO TIME, AND THE FIRST NATIONAL BANK OF BOSTON, AS AGENT,
AS SUCH AGREEMENT MAY BE AMENDED, SUPPLEMENTED, RESTATED AND IN EFFECT FROM
TIME TO TIME, SHALL CONTINUE FOR A PERIOD OF TWO CONSECUTIVE FISCAL QUARTERS
(A "COLLATERAL EVENT"), THE GUARANTORS HEREBY AGREE TO PROVIDE, IMMEDIATELY
UPON DEMAND BY BBL MADE AT ANY TIME AFTER THE OCCURRENCE OF A COLLATERAL
EVENT, CASH OR CASH EQUIVALENTS SATISFACTORY TO BBL IN AN AMOUNT AT LEAST
EQUAL TO THE GUARANTORS' LIABILITY FROM TIME TO TIME IN EFFECT IN PLEDGE TO
SECURE THE GUARANTORS' OBLIGATIONS HEREUNDER, PURSUANT TO A CASH COLLATERAL
PLEDGE AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO BBL. BBL SHALL BE
ENTITLED TO RETAIN SUCH CASH COLLATERAL UNTIL ALL OBLIGATIONS OF THE
GUARANTORS HEREUNDER HAVE BEEN IRREVOCABLY PAID IN FULL IN CASH.
SECTION TERMINATION; REINSTATEMENT. SUBJECT TO SECTION 4 HEREOF, THIS
GUARANTY SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL THE OBLIGATIONS HAVE
BEEN IRREVOCABLY PAID IN FULL IN CASH. THIS GUARANTY SHALL CONTINUE TO BE
EFFECTIVE OR BE REINSTATED, IF AT ANY TIME ANY PAYMENT MADE OR VALUE RECEIVED
WITH RESPECT TO ANY OBLIGATION IS RESCINDED OR MUST OTHERWISE BE RETURNED BY
BBL UPON THE INSOLVENCY, BANKRUPTCY OR REORGANIZATION OF THE FRANCHISEE, OR
OTHERWISE, ALL AS THOUGH SUCH PAYMENT HAD NOT BEEN MADE OR VALUE RECEIVED.
SECTION SUCCESSORS AND ASSIGNS. THIS GUARANTY SHALL BE BINDING UPON BBL AND
THE GUARANTORS, THEIR SUCCESSORS, TRANSFEREES AND ASSIGNS, AND SHALL INURE TO
THE BENEFIT OF AND BE ENFORCEABLE BY BBL AND THE GUARANTORS AND THEIR
SUCCESSORS, TRANSFEREES AND ASSIGNS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING SENTENCE, BBL MAY, WITH THE CONSENT OF THE GUARANTORS, WHICH SHALL
NOT BE UNREASONABLY WITHHELD, ASSIGN OR OTHERWISE TRANSFER ANY OF THE
AGREEMENTS OR ANY OTHER AGREEMENT OR NOTE HELD BY IT EVIDENCING, SECURING OR
OTHERWISE EXECUTED IN CONNECTION WITH THE OBLIGATIONS, OR SELL PARTICIPATIONS
IN ANY INTEREST THEREIN, TO ANY OTHER ENTITY OR OTHER PERSON, AND SUCH OTHER
ENTITY OR OTHER PERSON SHALL THEREUPON BECOME VESTED, TO THE EXTENT SET FORTH
IN THE AGREEMENT EVIDENCING SUCH ASSIGNMENT, TRANSFER OR PARTICIPATION, WITH
ALL THE RIGHTS IN RESPECT THEREOF GRANTED TO BBL HEREIN.
SECTION AMENDMENTS AND WAIVERS.
NO AMENDMENT OR WAIVER OF ANY PROVISION OF THIS GUARANTY NOR CONSENT TO ANY
DEPARTURE BY THE GUARANTORS THEREFROM SHALL BE EFFECTIVE UNLESS THE SAME
SHALL BE IN WRITING AND SIGNED BY BBL. NO FAILURE ON THE PART OF BBL TO
EXERCISE, AND NO DELAY IN EXERCISING, ANY RIGHT HEREUNDER SHALL OPERATE AS A
WAIVER THEREOF; NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT
HEREUNDER PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE EXERCISE OF
ANY OTHER RIGHT.
SECTION NOTICES.
ALL NOTICES AND OTHER COMMUNICATIONS CALLED FOR HEREUNDER SHALL BE MADE IN
WRITING AND, UNLESS OTHERWISE SPECIFICALLY PROVIDED HEREIN, SHALL BE DEEMED
TO HAVE BEEN DULY MADE OR GIVEN WHEN DELIVERED BY HAND OR MAILED FIRST CLASS,
POSTAGE PREPAID, OR, IN THE CASE OF TELEGRAPHIC OR TELEXED NOTICE, WHEN
TRANSMITTED, ANSWER BACK RECEIVED, ADDRESSED AS FOLLOWS: IF TO A GUARANTOR,
AT THE ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO, AND IF TO BBL, AT THE
ADDRESS FOR NOTICES TO BBL SET FORTH IN THE AGREEMENT, OR AT SUCH ADDRESS AS
EITHER PARTY MAY DESIGNATE IN WRITING TO THE OTHER.
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SECTION GOVERNING LAW; CONSENT TO JURISDICTION.
THE GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS.
EACH GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS GUARANTY MAY
BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND TO SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
GUARANTORS BY MAIL AT THE ADDRESS SPECIFIED BY REFERENCE IN SECTION 13
HEREOF. THE GUARANTORS HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT WAS BROUGHT IN AN INCONVENIENT COURT.
SECTION WAIVER OF JURY TRIAL.
EACH OF THE GUARANTORS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF
SUCH RIGHTS OR OBLIGATIONS.
EXCEPT AS PROHIBITED BY LAW, EACH OF THE GUARANTORS HEREBY WAIVES ANY RIGHT
WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE GUARANTORS
(a) CERTIFY THAT NEITHER BBL NOR ANY REPRESENTATIVE, AGENT OR ATTORNEY OF
BBL HAS REPRESENTED, EXPRESSLY OR OTHERWISE THAT BBL WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b) ACKNOWLEDGE
THAT, IN ENTERING INTO THE AGREEMENTS AND THE OTHER DOCUMENTS TO WHICH BBL IS
A PARTY, BBL IS RELYING UPON, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 15. SECTION MISCELLANEOUS. THIS
GUARANTY CONSTITUTES THE ENTIRE AGREEMENT OF THE GUARANTORS WITH RESPECT TO
THE MATTERS SET FORTH HEREIN. THE RIGHTS AND REMEDIES HEREIN PROVIDED ARE
CUMULATIVE AND NOT EXCLUSIVE OF ANY REMEDIES PROVIDED BY LAW OR ANY OTHER
AGREEMENT, AND THIS GUARANTY SHALL BE IN ADDITION TO ANY OTHER GUARANTY OF OR
COLLATERAL SECURITY FOR ANY OF THE OBLIGATIONS. THE INVALIDITY OR
UNENFORCEABILITY OF ANY ONE OR MORE SECTIONS OF THIS GUARANTY SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ITS REMAINING PROVISIONS. CAPTIONS
ARE FOR THE EASE OF REFERENCE ONLY AND SHALL NOT AFFECT THE MEANING OF THE
RELEVANT PROVISIONS. THE MEANINGS OF ALL DEFINED TERMS USED IN THIS GUARANTY
SHALL BE EQUALLY APPLICABLE TO THE SINGULAR AND PLURAL FORMS OF THE TERMS
DEFINED.
IN WITNESS WHEREOF, EACH OF THE GUARANTORS HAS CAUSED THIS GUARANTY TO BE
EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT
COMPANY, INC., ITS
GENERAL PARTNER
BY:
TITLE:
PERKINS RESTAURANTS OPERATING
COMPANY, L.P.
BY: PERKINS MANAGEMENT
COMPANY, INC., ITS
GENERAL PARTNER
BY:
TITLE:
25
<PAGE>
BANCBOSTON LEASING INC.
BY:
TITLE:
THE FIRST NATIONAL BANK OF
BOSTON
BY:
TITLE:
MASTER LEASE AND RELATED AGREEMENTS.
26
<PAGE>
EXHIBIT C
FORM OF
CERTIFICATE OF ACCEPTANCE
THE UNDERSIGNED PERKINS FAMILY RESTAURANTS, L.P. AND PERKINS RESTAURANTS
OPERATING COMPANY, L.P. (COLLECTIVELY, THE "GUARANTORS") HEREBY CERTIFY AND
AGREE WITH REFERENCE TO THE GUARANTY (THE "GUARANTY"), DATED , 1995
AMONG THE GUARANTORS AND BANCBOSTON LEASING INC. ("BBL"), AS FOLLOWS:
1. BBL HAS INFORMED THE GUARANTORS THAT PERK DEVELOPMENT CORPORATION (THE
"FRANCHISEE"), A FRANCHISEE OF THE GUARANTORS' RESTAURANT BUSINESS, HAS
REQUESTED A LEASE (THE "LEASE") IN AN AMOUNT NOT TO EXCEED $ FOR A
PERIOD OF FORTY EIGHT (48) MONTHS, COVERING EQUIPMENT LISTED ON
SCHEDULE 1 ATTACHED HERETO (THE "EQUIPMENT"), TO BE USED AT THE ADDRESS(S)
SET FORTH ON SCHEDULE 1, AND THAT BBL IS WILLING TO ENTER INTO SUCH LEASE OF
THE EQUIPMENT WITH PERK DEVELOPMENT CORPORATION, SUBJECT TO GUARANTORS'
ACCEPTANCE OF THE LEASE AS AN "AGREEMENT" UNDER THE GUARANTY.
2. THE GUARANTORS HEREBY CERTIFY TO AND AGREE WITH BBL THAT THE LEASE WILL
CONSTITUTE AN "AGREEMENT" AS DEFINED IN AND COVERED BY THE GUARANTY.
3. AFTER GIVING EFFECT TO THE OBLIGATIONS UNDER THE ABOVE LEASE, THE MAXIMUM
AGGREGATE OBLIGATIONS PRESENTLY COVERED BY THE GUARANTY DO NOT EXCEED $
BASED ON BALANCES AS OF THE MOST RECENT MONTH END.
IN WITNESS WHEREOF, THE UNDERSIGNED HAVE EXECUTED THIS CERTIFICATE AS OF THE
DAY OF , 1995.
PERKINS FAMILY RESTAURANTS, L.P.
BY:
TITLE:
PERKINS RESTAURANTS
OPERATING COMPANY, L.P.
BY:
TITLE:
27
<PAGE>
EXHIBIT E
EXCEPT AS PROVIDED BELOW, THE APPLICABLE PERCENTAGE ON ANY DATE OF
DETERMINATION SHALL BE 100%.
THE APPLICABLE PERCENTAGE SHALL REDUCE TO 70% OR, IF THE APPLICABLE
PERCENTAGE HAS ALREADY BEEN REDUCED TO 70% IN ACCORDANCE WITH THE TERMS
HEREOF, 40% OR, IF THE APPLICABLE PERCENTAGE HAS ALREADY BEEN REDUCED TO 40%
IN ACCORDANCE WITH THE TERMS HEREOF 10% IF, AND ONLY IF:
(i) THE FRANCHISEE CERTIFIES IN WRITING TO BBL (a) THAT A GUARANTY REDUCTION
EVENT (AS DEFINED BELOW) HAS OCCURRED, (b) THE AMOUNT OF THE NET PROCEEDS
RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION WITH THE OCCURRENCE OF SUCH
GUARANTY REDUCTION EVENT (THE "ACTUAL NET PROCEEDS"), (c) IF THE AMOUNT OF
THE ACTUAL NET PROCEEDS IS NOT EQUAL TO OR GREATER THAN 90% OF THE TARGET NET
PROCEEDS (AS DEFINED BELOW) FOR SUCH GUARANTY REDUCTION EVENT, THAT A MAKE
WHOLE EVENT (AS DEFINED BELOW) HAS ALSO OCCURRED, AND (d) THAT THE FRANCHISEE
HAS NOT DEFAULTED IN THE PAYMENT OR PERFORMANCE OF ANY OF ITS OBLIGATIONS; AND
(ii) THE FRANCHISEE DELIVERS TO BBL AND THE GUARANTORS COPIES OF ALL SUCH
DOCUMENTS AND INSTRUMENTS AS BBL AND THE GUARANTORS MAY REASONABLY REQUEST IN
ORDER TO CONFIRM THE OCCURRENCE OF THE GUARANTY REDUCTION EVENT AND, IF
APPLICABLE, THE MAKE WHOLE EVENT AND THE AMOUNT OF THE ACTUAL NET PROCEEDS;
PROVIDED, THAT A GUARANTY REDUCTION EVENT OR A MAKE WHOLE EVENT WHICH IS THE
SUBJECT OF THE CERTIFICATE DELIVERED PURSUANT TO THE FOREGOING CLAUSE (i) MAY
ONLY BE CERTIFIED BY THE FRANCHISEE TO BBL AND THE GUARANTORS ON ONE OCCASION.
FOR PURPOSES HEREOF, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
GUARANTY REDUCTION EVENT MEANS ANY ONE OF THE FOLLOWING EVENTS (WHICH BBL AND
THE GUARANTORS MAY AGREE TO AMEND FROM TIME TO TIME):
(a) THE FRANCHISEE HAS ENTERED INTO A SALE LEASEBACK TRANSACTION FOR THE TEN
PERKINS FAMILY RESTAURANTS PREVIOUSLY DISCLOSED TO BBL, ON TERMS AND
CONDITIONS SATISFACTORY TO BBL AND THE GUARANTORS IN ALL RESPECTS, AND THE
AMOUNT OF THE NET PROCEEDS RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION
WITH SUCH SALE LEASEBACK TRANSACTION IS EQUAL TO OR IN EXCESS OF $1,135,000;
OR
(b) THE FRANCHISEE SELLS ITS ELMRIDGE PROPERTY ON TERMS AND CONDITIONS WHICH
ARE SATISFACTORY TO BBL AND THE GUARANTORS IN ALL RESPECTS AND THE AMOUNT OF
THE NET PROCEEDS RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION WITH SUCH
SALE IS EQUAL TO OR IN EXCESS OF $1,484,714; OR
(c) THE FRANCHISEE SELLS ITS BAYTOWNE PROPERTY ON TERMS AND CONDITIONS WHICH
ARE SATISFACTORY TO BBL AND THE GUARANTORS IN ALL RESPECTS AND THE NET
PROCEEDS RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION WITH SUCH SALE IS
EQUAL TO OR IN EXCESS OF $731,000.
MAKE WHOLE EVENT MEANS ANY ONE OF THE FOLLOWING EVENTS:
(a) THE FRANCHISEE SHALL HAVE ENTERED INTO A FORBEARANCE ARRANGEMENT WITH
FLEET BANK, N.A. ("FLEET") WITH RESPECT TO THE PRINCIPAL AMOUNT OF $660,000
OWED TO FLEET PURSUANT TO THAT CERTAIN PLAZA LINE OF CREDIT AND THE
FRANCHISEE SHALL HAVE ENTERED INTO A FORBEARANCE ARRANGEMENT WITH THE CHASE
MANHATTAN BANK, N.A. ("CHASE") WITH RESPECT TO PRINCIPAL AND INTEREST IN AN
AGGREGATE EQUAL TO $175,000 OWED
28
<PAGE>
TO CHASE PURSUANT THAT CERTAIN PLAZA LINE OF CREDIT, AND IN EACH CASE THE
FORBEARANCE ARRANGEMENT SHALL BE SATISFACTORY TO BBL AND THE GUARANTORS IN
ALL RESPECTS; OR
(b) THE FRANCHISEE SELLS ITS GATEWAY PROPERTY ON TERMS AND CONDITIONS WHICH
ARE SATISFACTORY TO BBL AND THE GUARANTORS IN ALL RESPECTS AND THE AMOUNT OF
THE NET PROCEEDS RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION WITH SUCH
SALE IS EQUAL TO OR IN EXCESS OF ($10,000); OR
(c) THE FRANCHISEE SELLS ITS WINTON PROPERTY ON TERMS AND CONDITIONS WHICH
ARE SATISFACTORY TO BBL AND THE GUARANTORS IN ALL RESPECTS AND THE AMOUNT OF
THE NET PROCEEDS RECEIVED BY THE FRANCHISEE IN CASH IN CONNECTION WITH SUCH
SALE IS EQUAL TO OR IN EXCESS OF $296,450;
PROVIDED, THAT NO MAKE WHOLE EVENT SHALL BE DEEMED TO HAVE OCCURRED UNLESS
AND UNTIL THE MAKE WHOLE EVENT DESCRIBED IN CLAUSE (a) OF THIS DEFINITION HAS
OCCURRED.
TARGET NET PROCEEDS MEANS, WITH RESPECT TO ANY GUARANTY REDUCTION EVENT, THE
MINIMUM NET PROCEEDS REQUIRED TO BE RECEIVED BY THE FRANCHISEE IN CASH IN
CONNECTION WITH SUCH GUARANTY REDUCTION EVENT.
29
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of December 22, 1997
by and among
PERKINS FAMILY RESTAURANTS, L.P.
(the "Borrower")
THE RESTAURANT COMPANY
PERKINS RESTAURANTS, INC.
PERKINS MANAGEMENT COMPANY, INC.
PERKINS FINANCE CORP.
(the "Guarantors")
BANKBOSTON, N.A.
and the other financial institutions from time to time
listed on Schedule 1 hereto
(the "Banks")
and
BANKBOSTON, N.A., as Agent and Administrative Agent
(the "Agent")
NATIONSBANK, N.A., as Syndication Agent
with
BANCBOSTON SECURITIES INC.,
Having Acted as Arranger
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION. 1
1.1. Definitions. 1
1.2. Rules of Interpretation. 15
2. THE REVOLVING CREDIT FACILITY. 16
2.1. Commitment to Lend. 16
2.2. Commitment Fee. 16
2.3. Reduction of Total Revolving Credit Commitment. 16
2.4. The Revolving Credit Notes. 17
2.5. Interest on Revolving Credit Loans. 17
2.6. Requests for Revolving Credit Loans. 17
2.7. Conversion Options. 18
2.7.1. Conversion to Different Type of
Revolving Credit Loan. 18
2.7.2. Continuation of Type of Revolving Credit Loan. 18
2.7.3. Eurodollar Rate Loans. 18
2.8. Funds for Revolving Credit Loans. 18
2.8.1. Funding Procedures. 18
2.8.2. Advances by Agent. 19
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. 19
3.1. Maturity. 19
3.2. Mandatory Repayments of Revolving Credit Loans. 19
3.3. Optional Repayments of Revolving Credit Loans. 19
4. [Intentionally Omitted]. 20
5. LETTERS OF CREDIT. 20
5.1. Letter of Credit Commitment. 20
5.1.1. Commitment to Issue Letters of Credit. 20
5.1.2. Letter of Credit Applications. 20
5.1.3. Terms of Letters of Credit. 20
5.1.4. Reimbursement Obligations of Banks. 20
5.1.5. Participations of Banks. 21
5.2. Reimbursement Obligation of the Borrower. 21
5.3. Letter of Credit Payments. 21
5.4. Obligations Absolute. 22
5.5. Reliance by Issuer. 22
5.6. Letter of Credit Fee. 22
6. CERTAIN GENERAL PROVISIONS. 23
6.1. Fees. 23
6.2. [Intentionally Omitted]. 23
6.3. Funds for Payments. 23
6.3.1. Payments to Agent. 23
6.3.2. No Offset, etc. 23
6.4. Computations. 24
<PAGE>
-ii-
6.5. Inability to Determine Eurodollar Rate. 24
6.6. Illegality. 24
6.7. Additional Costs, etc. 24
6.8. Capital Adequacy. 25
6.9. Certificate. 26
6.10. Indemnity. 26
6.11. Interest After Default. 26
6.11.1. Overdue Amounts. 26
6.11.2. Amounts Not Overdue. 26
6.11.3. Letters of Credit. 26
6.12. Replacement of Individual Banks. 27
7. COLLATERAL SECURITY AND GUARANTIES. 27
7.1. Security of Borrower. 27
7.2. Guaranties and Security of Subsidiaries. 27
7.3. Collateral Notes. 27
8. REPRESENTATIONS AND WARRANTIES. 27
8.1. Corporate Authority. 27
8.1.1. Existence; Good Standing. 27
8.1.2. Authorization. 28
8.1.3. Enforceability. 28
8.2. Governmental Approvals. 28
8.3. Title to Properties; Leases. 28
8.4. Financial Statements and Projections. 28
8.4.1. Financial Statements. 28
8.4.2. Projections. 29
8.5. No Material Changes, etc. 29
8.6. Franchises, Patents, Copyrights, etc. 29
8.7. Litigation. 29
8.8. No Materially Adverse Contracts, etc. 30
8.9. Compliance with Other Instruments, Laws, etc. 30
8.10. Tax Status. 30
8.11. No Event of Default. 30
8.12. Holding Company and Investment Company Acts. 30
8.13. Absence of Financing Statements, etc. 30
8.14. Employee Benefit Plans. 30
8.14.1. In General. 30
8.14.2. Terminability of Welfare Plans. 30
8.14.3. Guaranteed Pension Plans. 31
8.14.4. Multiemployer Plans. 31
8.15. Use of Proceeds. 31
8.15.1. General. 31
8.15.2. Regulations U and X. 31
8.15.3. Ineligible Securities. 31
8.16. Chief Executive Offices. 32
<PAGE>
-iii-
8.17. Disclosure. 32
8.18. Environmental Compliance. 32
8.19. Subsidiaries, etc. 33
8.20. Fiscal Year. 34
8.21. Solvency. 34
9. AFFIRMATIVE COVENANTS. 34
9.1. Punctual Payment. 34
9.2. Maintenance of Office. 34
9.3. Records and Accounts. 34
9.4. Financial Statements, Certificates and Information. 34
9.5. Notices. 35
9.5.1. Defaults. 35
9.5.2. Environmental Events. 35
9.5.3. Notification of Claim against Collateral. 36
9.5.4. Notice of Litigation and Judgments. 36
9.6. Existence; Maintenance of Properties. 36
9.6.1. Existence. 36
9.6.2. Maintenance of Properties. 36
9.7. Insurance. 36
9.8. Taxes. 37
9.9. Inspection of Properties and Books, etc. 37
9.9.1. General. 37
9.9.2. Environmental Assessments. 37
9.10. Compliance with Laws, Contracts, Licenses, and Permits. 37
9.11. Employee Benefit Plans. 38
9.12. Use of Proceeds. 38
9.13. Additional Mortgaged Property. 38
9.14. Further Assurances. 39
9.15. Conduct of Business. 39
9.16. Interest Rate Protection Arrangements. 39
9.17. Cash Management. 39
10. CERTAIN NEGATIVE COVENANTS. 39
10.1. Restrictions on Indebtedness. 39
10.2. Restrictions on Liens. 41
10.3. Restrictions on Investments. 42
10.4. Distributions. 43
10.5. Merger, Consolidation and Disposition of Assets. 43
10.6. Sale and Leaseback. 45
10.7. Compliance with Environmental Laws. 45
10.8. Employee Benefit Plans. 45
10.9. Change in Fiscal Year. 46
10.10. Changes in Terms of Partnership Documents. 46
10.11. Transactions with Affiliates. 46
10.12. Prepayment of Other Indebtedness. 46
<PAGE>
-iv-
10.13. Restrictions On Negative Pledges. 46
10.14. Concerning PFC. 46
11. FINANCIAL COVENANTS OF THE BORROWER. 46
11.1. Leverage Ratio. 46
11.2. Net Worth. 47
11.3. Cash Flow Ratio. 47
11.4. Interest Coverage Ratio. 47
11.5. Capital Expenditures. 47
12. CLOSING CONDITIONS. 48
12.1. Loan Documents. 48
12.2. Certified Copies of Charter Documents. 48
12.3. Corporate and Partnership Action. 48
12.4. Incumbency Certificate. 48
12.5. Validity of Liens. 48
12.6. Perfection Certificates and UCC Search Results. 49
12.7. Taxes. 49
12.8. Title Insurance. 49
12.9. Landlord Consents. 49
12.10. Hazardous Waste Assessments. 49
12.11. Certificates of Insurance. 49
12.12. Solvency Opinion. 49
12.13. Opinions of Counsel. 49
12.14. Payment of Fees. 50
12.15. Existing Indebtedness. 50
12.16. Capital Structure. 50
12.17. Repurchase; Merger, Etc.. 50
12.18. No Material Adverse Change. 50
12.19. Balance Sheets. 50
12.20. No Litigation. 50
12.21. Consents and Approvals. 50
12.22. Other Documentation. 51
12.23. Commercial Finance Examination. 51
12.24. Collateral Valuation. 51
13. CONDITIONS TO ALL BORROWINGS. 51
13.1. Representations True; No Event of Default. 51
13.2. No Legal Impediment. 51
13.3. Governmental Regulation. 51
13.4. Proceedings and Documents. 51
14. EVENTS OF DEFAULT; ACCELERATION; ETC. 52
14.1. Events of Default and Acceleration. 52
14.2. Termination of Commitments. 54
14.3. Remedies. 54
14.4. Distribution of Collateral Proceeds. 55
15. SETOFF. 55
<PAGE>
-v-
16. THE AGENT. 56
16.1. Authorization. 56
16.2. Employees and Agents. 56
16.3. No Liability. 56
16.4. No Representations. 56
16.5. Payments. 56
16.5.1. Payments to Agent. 57
16.5.2. Distribution by Agent. 57
16.5.3. Delinquent Banks. 57
16.6. Holders of Notes. 57
16.7. Indemnity. 58
16.8. Agent as Bank; Syndication Agent. 58
16.9. Resignation. 58
16.10. Removal of Agent. 58
16.11. Notification of Defaults and Events of Default. 58
16.12. Duties in the Case of Enforcement. 59
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 59
17.1. Sharing of Information with Section 20 Subsidiary. 59
17.2. Confidentiality. 59
17.3. Prior Notification. 59
17.4. Other. 60
18. EXPENSES. 60
19. INDEMNIFICATION. 60
20. SURVIVAL OF COVENANTS, ETC. 61
21. ASSIGNMENT AND PARTICIPATION. 61
21.1. Conditions to Assignment by Banks. 61
21.2. Certain Representations and Warranties; Limitations;
Covenants. 62
21.3. Register. 63
21.4. New Notes. 63
21.5. Participations. 63
21.6. Disclosure. 63
21.7. Assignee or Participant Affiliated with the Borrower. 64
21.8. Miscellaneous Assignment Provisions. 64
21.9. Assignment by Borrower and Guarantors. 64
22. NOTICES, ETC. 64
23. GOVERNING LAW. 65
24. HEADINGS. 65
25. COUNTERPARTS. 65
26. ENTIRE AGREEMENT, ETC. 65
27. WAIVER OF JURY TRIAL. 65
28. CONSENTS, AMENDMENTS, WAIVERS, ETC. 66
29. GUARANTY. 66
29.1. Guaranty. 66
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-vi-
29.2. Guaranteed Obligations. 66
29.3. Guaranty Absolute. 67
29.4. Authorized Actions. 67
29.5. Effectiveness; Enforcement. 68
29.6. Waiver. 68
29.7. Subordination; Subrogation Rights. 68
29.8. Concerning Joint and Several Liability of the Guarantors. 69
29.9. New Guarantors. 71
29.10. Limitation on Liability. 71
30. SEVERABILITY. 71
31. RIGHT TO PUBLICIZE. 71
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE 1 Banks; Revolving Credit Commitments; Revolving Credit
Commitment Percentages
SCHEDULE 5.1.1 Letters of Credit
SCHEDULE 8.3 Title to Properties; Leases
SCHEDULE 8.7 Litigation
SCHEDULE 8.19 Subsidiaries
SCHEDULE 10.1 Existing Indebtedness
SCHEDULE 10.2 Existing Liens
SCHEDULE 10.3 Existing Investments
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Revolving Credit Loan Request
EXHIBIT C Form of Compliance Certificate
EXHIBIT D Form of Assignment and Acceptance
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of December 22, 1997, by and
among , PERKINS FAMILY RESTAURANTS, L.P., a Delaware limited partnership (the
"Borrower"), THE RESTAURANT COMPANY ("TRC"), a Delaware corporation, PERKINS
RESTAURANTS, INC., a Minnesota corporation ("PRI") and PERKINS MANAGEMENT
COMPANY, INC., a Delaware corporation ("PMC"), PERKINS FINANCE CORP., a
Delaware corporation (together with TRC, PRI and PMC, the "Guarantors"),
BANKBOSTON, N.A. ("BKB"), a national banking association and the other
lending institutions listed on SCHEDULE 1 and BANKBOSTON, N.A. as agent and
administrative agent for itself and such other lending institutions, and
NATIONSBANK, N.A., as Syndication Agent (the "Syndication Agent").
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS.
The following terms shall have the meanings set forth in this Section 1
or elsewhere in the provisions of this Credit Agreement referred to below:
ADDITIONAL SENIOR NOTES. The unsecured Senior Notes of the Borrower to
be issued pursuant to the shelf registration made in connection with the
Senior Notes, in an aggregate principal amount not to exceed $20,000,000,
with an interest rate PER ANNUM not in excess of 11.5%, issued pursuant to
the Senior Indenture, and on terms and conditions substantially the same as
those relating to the Senior Notes and otherwise approved by, the Agent.
ADJUSTMENT DATE. The first day of the month immediately following the
month in which a Compliance Certificate is delivered by the Borrower pursuant
to Section 9.4(d).
AFFILIATE. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower
were issuing securities.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time.
AGENT. BKB acting as agent for the Banks, or such successor Agent as
may be appointed pursuant to Section 16.9 or Section 16.10 hereof.
AGENT'S SPECIAL COUNSEL. Bingham Dana LLP or such other counsel as may
be approved by the Agent.
APPLICABLE MARGIN. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "RATE
ADJUSTMENT PERIOD"), the Applicable Margin with respect to Revolving Credit
Loans, (for Base Rate Loans and Eurodollar Rate Loans) and for the Letters of
Credit shall be the applicable percentage set forth below with respect to
each such Loan or Letter of Credit, as the case may be, corresponding to the
Borrower's Leverage Ratio, as determined at the end of the fiscal quarter of
the Borrower and its Subsidiaries ending immediately prior to the applicable
Rate Adjustment Period:
REVOLVING CREDIT LOANS
<PAGE>
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EURODOLLAR
LEVERAGE BASE RATE LOANS AND
RATIO RATE LETTERS OF
LOANS CREDIT
- ------------------------------------------------------------------------------
I LESS THAN 2.75:1 0.50% 2.00%
- ------------------------------------------------------------------------------
II GREATER THAN 2.75:1 and 1.00% 2.50%
LESS THAN 3.50:1
- ------------------------------------------------------------------------------
III GREATER THAN 3.50:1 1.50% 3.00%
- ------------------------------------------------------------------------------
Notwithstanding the foregoing, (a) for the period commencing on the Closing
Date through the end of the month in which the quarterly compliance
certificate for the fiscal quarter ending December 31, 1997 is delivered
pursuant to Section 9.4(d) hereof, the Applicable Margin shall be that
percentage corresponding to Level III in the table above; and (b) if the
Borrower fails to deliver any Compliance Certificate pursuant to Section
9.4(d) hereof, then for the period commencing on the first day of the month
immediately following the date such Compliance Certificate was due through
the date immediately preceding the Adjustment Date that occurs immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be that percentage corresponding to Level III in the
table above.
ARRANGER. BancBoston Securities Inc.
ASSIGNMENT AND ACCEPTANCE. See Section 21.1.
BALANCE SHEET DATE. December 31, 1996.
BANKS. BKB and the other lending institutions listed on SCHEDULE 1
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 21.
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds
Effective Rate" shall mean for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three funds brokers of recognized standing selected by the Agent.
BASE RATE LOANS. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
BKB. As defined in the preamble hereto.
BORROWER. As defined in the preamble hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the
case of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
<PAGE>
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CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will); PROVIDED that Capital
Assets shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance
with generally accepted accounting principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet
of the lessee or obligor in accordance with generally accepted accounting
principles.
CASH FLOW RATIO. As at the end of each fiscal quarter of the Borrower,
the ratio of (a) Consolidated Cash Flow for the period of the four (4)
consecutive fiscal quarters then ending to (b) Consolidated Financial
Obligations for the period of the four (4) consecutive fiscal quarters then
ending.
CERCLA. See Section 8.18(a).
CLOSING DATE. The first date on which the conditions set forth in
Sections 12 and 13 have been satisfied and any Loans are to be made or any
Letter of Credit is to be issued hereunder.
CODE. The Internal Revenue Code of 1986.
COLLATERAL. All of the property, rights and interests of the Borrower
and the Guarantors that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
COLLATERAL NOTES. See Section 7.3.
CONSOLIDATED OR CONSOLIDATED. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and
all of its Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
CONSOLIDATED CASH FLOW. For any period, the sum of (a) the Consolidated
Net Income of the Borrower and its Subsidiaries for such period, MINUS (b)
Tax Distributions made and cash taxes paid during such period, PLUS (c) to
the extent deducted in the calculation of Consolidated Net Income,
depreciation and amortization for such period, PLUS (d) Consolidated Total
Interest Expense for such period, PLUS (e) to the extent deducted in the
calculation of Consolidated Net Income, income tax expense for such period,
PLUS (f) income of a non-wholly-owned Subsidiary of the Borrower which is
properly attributable to minority interest and which has been deducted in the
calculation of Consolidated Net Income but which has not been distributed by
such Subsidiary, PLUS (g) to the extent deducted in the calculation of
Consolidated Net Income and without duplication, other non-cash charges, if
any, for such period, MINUS (h) the aggregate amount of Maintenance Capital
Expenditures made during such period, PLUS (i) to the extent deducted in the
calculation of Consolidated Net Income and without duplication, nonrecurring
noncapitalized transaction expenses relating to the Repurchase and the
transactions contemplated hereby.
CONSOLIDATED EBITDA. For any period, the sum of (a) the Consolidated
Net Income of the Borrower and its Subsidiaries for such period, PLUS (b)
income of a non-wholly-owned
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Subsidiary of the Borrower which is properly attributable to minority
interest and which has been deducted in the calculation of Consolidated Net
Income but which has not been distributed by such Subsidiary, PLUS (c)
Consolidated Total Interest Expense for such period, PLUS (d) to the extent
deducted in the calculation of Consolidated Net Income, income tax expense
for such period, PLUS (e) to the extent deducted in the calculation of
Consolidated Net Income, depreciation and amortization for such period, PLUS
(f) to the extent deducted in the calculation of Consolidated Net Income and
without duplication, other non-cash charges of the Borrower and its
Subsidiaries for such period PLUS (g) to the extent deducted in the
calculation of Consolidated Net Income and without duplication, nonrecurring
noncapitalized transaction expenses relating to the Repurchase and the
transactions contemplated hereby.
CONSOLIDATED FINANCIAL OBLIGATIONS. For any period, the sum of all
scheduled payments (including without limitation, principal, interest and
commitment fees) on Indebtedness of the Borrower and its Subsidiaries,
including Capitalized Leases, during such period.
CONSOLIDATED FUNDED INDEBTEDNESS. At any time, the sum of (a) the
aggregate amount of Indebtedness of the Borrower and its Subsidiaries, on a
consolidated basis, relating to the borrowing of money or the obtaining of
credit or in respect of Capitalized Leases, PLUS (b) without duplication, all
reimbursement obligations of such Persons in respect of letters of credit
outstanding, PLUS (c) without duplication, all Indebtedness guaranteed by the
Borrower or any of its Subsidiaries.
CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all
expenses, taxes, and other proper charges, but before deduction of Tax
Distributions, determined in accordance with generally accepted accounting
principles.
CONSOLIDATED NET WORTH. The excess of Consolidated Total Assets over
Consolidated Total Liabilities.
CONSOLIDATED TOTAL ASSETS. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the remainder of
(a) the aggregate amount of interest required to be paid or accrued by the
Borrower and its Subsidiaries during such period on all Indebtedness of the
Borrower and its Subsidiaries outstanding during all or any part of such
period, whether such interest was or is required to be reflected as an item
of expense or capitalized, including payments consisting of interest in
respect of Capitalized Leases and including commitment fees, agency fees,
facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money, MINUS (b) interest income of the
Borrower and its Subsidiaries for such period, in each case, determined on a
consolidated basis for such Persons in accordance with generally accepted
accounting principles.
CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with
Section 2.7.
CREDIT AGREEMENT. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
CREDIT APPROVED. A Person that at the time it becomes an assignee of
any Bank pursuant to Section 21 hereof (a) has a credit rating of at least
the greater of (i) BBB by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or Baa2 by Moody's
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Investor's Service, Inc. and (ii) the rating, if any, issued by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or by
Moody's Investor's Service, Inc. in respect of senior debt issued by the
Borrower, or (b) has been approved by the Borrower and the Agent in writing
to be an Eligible Assignee.
DEFAULT. See Section 14.1.
DELINQUENT BANK. See Section 16.5.3.
DISTRIBUTION. The declaration or payment of any dividend or other
distribution on or in respect of any Equity Interests of a Person, other than
dividends or distributions payable solely in Equity Interests of such Person
of the same class; the purchase, redemption, or other retirement of any
Equity Interests of a Person, directly or indirectly through a Subsidiary of
such Person or otherwise; the return of capital by a Person to the holders of
its Equity Interests as such; or any other distribution on or in respect of
any Equity Interests of a Person.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States of America that will be making or
maintaining Base Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be made, and
the date on which any Revolving Credit Loan is converted or continued in
accordance with Section 2.7.
ELIGIBLE ASSIGNEE. Any of (a) a Credit Approved commercial bank or
finance company organized under the laws of the United States of America, or
any State thereof or the District of Columbia, and having total assets in
excess of $5,000,000,000; (b) a Credit Approved savings and loan association
or savings bank organized under the laws of the United States of America, or
any State thereof or the District of Columbia, and having a net worth of at
least $500,000,000, calculated in accordance with generally accepted
accounting principles; (c) a Credit Approved commercial bank organized under
the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision
of any such country, and having total assets in excess of $5,000,000,000,
PROVIDED that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (d) the central bank of any country which is a member of the OECD
and is Credit Approved; (e) any investment company registered under the
Investment Company Act of 1940, as amended, and any insurance company; and
(f) if, but only if, any Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Agent, such approval not to be
unreasonably withheld.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. See Section 8.18(a).
EPA. See Section 8.18(b).
EQUITY INTERESTS. All equity interests of a Person, including any (a)
common or preferred stock, (b) limited or general partnership interests, (c)
limited liability company membership interests, (d) options, warrants, or
other rights to purchase or acquire any Equity Interest, or (e) securities
convertible into any Equity Interest.
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ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender
subject thereto would be required to maintain reserves under Regulation D of
the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D), if such
liabilities were outstanding. The Eurocurrency Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent in its
sole discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Bank
designated as such in SCHEDULE 1 hereto; thereafter, such other office of
such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (a) the rate at which the Agent's
Eurodollar Lending Office is offered Dollar deposits at 10:00 a.m. (Boston
time) two Eurodollar Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations of such Eurodollar Lending Office are
customarily conducted, for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of the Eurodollar Rate Loan of BKB to which such Interest Period
applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve
Rate, if applicable.
EURODOLLAR RATE LOANS. Revolving Credit Loans bearing interest
calculated by reference to the Eurodollar Rate.
EVENT OF DEFAULT. See Section 14.1.
EXISTING CREDIT AGREEMENT. The Revolving Credit and Term Loan
Agreement, dated as of June 25, 1997, by and among the Borrower, BKB and the
other banks party thereto, and BKB as agent for itself and such banks.
FEE LETTER. The letter agreement dated September 29, 1997 between TRC
and the Agent.
FRONTING FEE. See Section 5.6.
GENERAL PARTNER. PMC.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in Section 11,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards
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Board and its predecessors, in effect for the fiscal year ended on the
Balance Sheet Date, and (ii) to the extent consistent with such principles,
the accounting practice of the Borrower reflected in its financial statements
for the year ended on the Balance Sheet Date, and (b) when used in general,
other than as provided above, means principles that are (i) consistent with
the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time, and (ii)
consistently applied with past financial statements of the Borrower adopting
the same principles, provided that in each case referred to in this
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles)
as to financial statements in which such principles have been properly
applied. In connection with the conversion of the Borrower into corporate
form, the provisions of this Credit Agreement, including without limitation
Sections 10 and 11, shall not give effect to any purchase accounting
adjustments made in connection with such conversion until this Credit
Agreement shall have been appropriately amended to reflect such adoption in a
manner reasonably acceptable to the parties hereto.
GUARANTEED OBLIGATIONS. See Section 29.2.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
GUARANTORS. As defined in the preamble hereto, which term shall include
the wholly-owned Subsidiaries of the Borrower which become parties to this
Credit Agreement from time to time pursuant to Section 29.9 hereof.
GUARANTY. See Section 29.1.
HAZARDOUS SUBSTANCES. See Section 8.18(b).
IMPROVEMENT CAPITAL EXPENDITURES. Capital Expenditures relating to the
improvement of existing operating units of the Borrower and its Subsidiaries,
as described in the projections delivered pursuant to Section 8.4.2.
INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such
Person and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses,
(iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized Lease,
<PAGE>
(vi) every obligation of such Person under any lease (a "synthetic
lease") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes,
(vii) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (C) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith,
(viii) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights,
(ix) every obligation of such Person under any forward contract
(other than forward contracts relating to the purchase of commodities used
in the operation of the Borrower's business, entered into between such
Person and the suppliers of such commodities), futures contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the value of
which is dependent upon interest rates, currency exchange rates,
commodities or other indices,
(x) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law, and
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(i) through (x) (the "primary obligation") of another Person (the "primary
obligor"), in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (A) to purchase or pay
(or advance or supply funds for the purchase of) any security for the
payment of such primary obligation, (B) to purchase property, securities or
services for the purpose of assuring the payment of such primary
obligation, or (C) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any forward contract, futures contract,
swap, interest rate protection arrangements or exchange rate protection
arrangements shall be the net liability of the Borrower and its Subsidiaries
under such arrangements at such time, calculated on a basis satisfactory to
the Agent in accordance with accepted practice, (v) any Indebtedness, issued
at a price that is less than the principal amount at maturity thereof, shall
be the amount of the liability in respect thereof determined in accordance
with generally accepted accounting principles, (w) any Capitalized Lease
shall be the principal component of the aggregate of the rentals obligation
under such Capitalized Lease payable over the term thereof that is not
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subject to termination by the lessee, (x) any sale of receivables shall be
the amount of unrecovered capital or principal investment of the purchaser
(other than the Borrower or any of its wholly-owned Subsidiaries) thereof,
excluding amounts representative of yield or interest earned on such
investment, (y) any synthetic lease shall be the stipulated loss value,
termination value or other equivalent amount and (z) any equity related
purchase obligation shall be the maximum fixed redemption or purchase price
thereof inclusive of any accrued and unpaid dividends to be comprised in such
redemption or purchase price.
INELIGIBLE SECURITIES. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
INTEREST COVERAGE RATIO. As at the end of each fiscal quarter of the
Borrower, the ratio of (a) Consolidated EBITDA for the period of the four (4)
consecutive fiscal quarters then ending to (b) Consolidated Total Interest
Expense for the period of the four (4) consecutive fiscal quarters then
ending, PROVIDED that, for each fiscal quarter of the Borrower ending on or
before December 31, 1998, Consolidated Total Interest Expense shall be
determined on a Pro Forma Basis as if all Indebtedness of the Borrower and
its Subsidiaries, including, without limitation, the Loans and the Senior
Notes, were incurred on the first day of such period of four fiscal quarters.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan, the last day of
each calendar quarter; and (b) as to any Eurodollar Rate Loan in respect of
which the Interest Period is (i) 3 months or less, the last day of such
Interest Period, and (ii) more than 3 months, the date that is 3 months from
the first day of such Interest Period and, in addition, the last day of such
Interest Period.
INTEREST PERIOD. With respect to each Revolving Credit Loan,
(a) initially, the period commencing on the Drawdown Date of such Loan and
ending on the last day of one of the periods set forth below, as selected by
the Borrower in a Revolving Credit Loan Request (i) for any Base Rate Loan,
the last day of the calendar quarter; and (ii) for any Eurodollar Rate Loan,
1, 2, 3 or 6 months; and (b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such Revolving Credit
Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; PROVIDED that all of the
foregoing provisions relating to Interest Periods are subject to the
following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in Section
2.7, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no
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numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date shall
end on the Revolving Credit Loan Maturity Date.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of,
or for loans, advances, capital contributions or transfers of property to, or
in respect of any guaranties (or other commitments described under
Indebtedness) or obligations of any Person (other than in respect of accounts
receivable arising in the ordinary course of business). In determining the
aggregate amount of Investments outstanding at any particular time: (a) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still outstanding
(after giving effect to any limit on the amount of such guaranty); (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is
paid; (c) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (d)
there shall not be deducted in respect of any Investment any amounts received
as earnings on such Investment, whether as dividends, interest or otherwise,
except that accrued interest included as provided in the foregoing clause (b)
may be deducted when paid; and (e) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.
LETTER OF CREDIT. See Section 5.1.1.
LETTER OF CREDIT APPLICATION. See Section 5.1.1.
LETTER OF CREDIT FEE. See Section 5.6.
LETTER OF CREDIT PARTICIPATION. See Section 5.1.4.
LEVERAGE RATIO. As at the end of any fiscal quarter of the Borrower,
the ratio of (a) Consolidated Funded Indebtedness at such date to (b)
Consolidated EBITDA for the period of the four (4) consecutive fiscal
quarters then ending.
LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Security Documents.
LOANS. The Revolving Credit Loans.
MAINTENANCE CAPITAL EXPENDITURES. All Capital Expenditures other than
Improvement Capital Expenditures, New Site Capital Expenditures and
Remodeling Capital Expenditures.
MAJORITY BANKS. As of any date, any combination of Banks, excluding
Delinquent Banks, whose aggregate Revolving Credit Commitments constitute at
least fifty-one percent (51%) of the Total Revolving Credit Commitment
(excluding the Revolving Credit Commitments of such Delinquent Banks) or, if
the Total Revolving Credit Commitment has been terminated, any combination of
Banks, excluding Delinquent Banks, holding at least fifty-one percent (51%)
of the outstanding principal amount of the Notes on such date (excluding
amounts outstanding on the Notes payable to such Delinquent Banks).
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MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
MERGER. The merger of PAC with and into the Borrower, with the Borrower
to be the surviving partnership of such merger, pursuant to the Merger
Agreement.
MERGER AGREEMENT. The Second Amended and Restated Agreement and Plan of
Merger, dated as of September 11, 1997, among TRC, PAC and the Borrower, in
the form delivered to the Agent prior to the Closing Date.
MORTGAGED PROPERTY. Any Real Estate which is subject to a mortgage.
MORTGAGES. The several mortgages and deeds of trust, dated or to be
dated on or prior to the Closing Date, and each of the mortgages and deeds of
trust which may be delivered after the Closing Date in accordance with
Section 9.13, from the Borrower or, as the case may be, its Subsidiaries, to
the Agent with respect to the interests of the Borrower and its Subsidiaries
in the Real Estate and in form and substance satisfactory to the Agent.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
NET CASH PROCEEDS. The cash proceeds received from the issuance of
equity after the Closing Date, net of all costs of sale, underwriting or
brokerage costs, and (so long as no Default or Event of Default shall have
occurred and be continuing) taxes paid or payable as a result thereof by any
of the Guarantors, the Borrower or any of their Subsidiaries.
NEW SITE CAPITAL EXPENDITURES. Capital Expenditures relating to the
construction or acquisition of new operating units of the Borrower and its
Subsidiaries after the Closing Date.
NOTE(S). The Revolving Credit Notes and the Collateral Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement
or arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred (i) under this Credit Agreement or any of the other Loan Documents,
(ii) in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Applications, Letters of
Credit or other instruments at any time evidencing any thereof or (iii) in
respect of any foreign exchange or derivative arrangements entered into among
the Borrower and the Agent or any Bank.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PAC. Perkins Acquisition Corp., a Delaware corporation.
PARTNERSHIP DOCUMENTS. The limited partnership agreement of the
Borrower, including all exhibits to such agreement and the certificate of
limited partnership of the Borrower.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERKINS GROUP. The Guarantors, the Borrower, and the Borrower's
Subsidiaries.
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PERMITTED ACQUISITION. See Section 10.5(c) hereof.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 10.2.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
PMC. As defined in the preamble hereto.
PRI. As defined in the preamble hereto.
PRO FORMA BASIS. In connection with any proposed Permitted Acquisition,
the calculation of compliance with the financial covenants described in
Section 10.5(c) hereof by the Borrower and its Subsidiaries (including the
Person to be acquired) with reference to the audited historical financial
results, if available, or such other management reports as approved by the
Agent, of such Person and the Borrower and its Subsidiaries for the
applicable Test Period after giving effect on a PRO FORMA basis to such
Permitted Acquisition in the manner described in (a), (b) and (c) below; and,
following a Permitted Acquisition, the calculation of compliance with the
covenants set forth in Section 11 for the fiscal quarter in which such
Permitted Acquisition occurred and each of the three fiscal quarters
immediately following such Permitted Acquisition with reference to the
audited historical financial results, if available, or such other management
reports as approved by the Agent of the Person so acquired and the Borrower
and its Subsidiaries for the applicable Test Period after giving effect on a
PRO FORMA basis to such Permitted Acquisition in the manner described in (a),
(b) and (c) below:
(a) all Indebtedness (whether under this Credit Agreement or
otherwise) and any other balance sheet adjustments incurred or made in
connection with the Permitted Acquisition shall be deemed to have been
incurred or made on the first day of the Test Period, and all Indebtedness
of the Person acquired or to be acquired in such Permitted Acquisition
which was or will have been repaid in connection with the consummation of
the Permitted Acquisition shall be deemed to have been repaid on the first
day of the Test Period;
(b) all Indebtedness assumed to have been incurred pursuant to the
preceding clause (a) shall be deemed to have borne interest at the (i) the
arithmetic mean of (A) the Eurodollar Rate for Eurodollar Rate Loans having
an Interest Period of one month in effect on the first day of the Test
Period and (B) the Eurodollar Rate for Eurodollar Rate Loans having an
Interest Period of one month in effect on the last day of the Test Period
PLUS (ii) the Applicable Margin with respect to Revolving Credit Loans
which are Eurodollar Rate Loans then in effect (after giving effect to the
Permitted Acquisition on a PRO FORMA Basis); and
(c) other reasonable cost savings, expenses and other income
statement or operating statement adjustments which are attributable to the
change in ownership and/or management resulting from such Permitted
Acquisition as may be approved by the Agent in writing (which approval
shall not be unreasonably withheld) shall be deemed to have been realized
on the first day of the Test Period.
RCRA. See Section 8.18(a).
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
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RECORD. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any
Bank with respect to any Loan referred to in such Note.
REGISTER. See Section 21.3.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse BKB on
account of any drawing under any Letter of Credit as provided in Section 5.2.
REMODELING CAPITAL EXPENDITURES. Capital Expenditures relating to the
remodeling of existing operating and manufacturing units of the Borrower and
its Subsidiaries, as described in the projections delivered pursuant to
Section 8.4.2.
REPLACEMENT BANK. See Section 6.12 hereof.
REPURCHASE. Collectively, (i) the purchase by the Borrower of the
limited partnership interests of the Borrower owned by the public unit
holders thereof, as described in the Repurchase Documents and (ii) the
refinancing of certain existing Indebtedness of the Borrower, as described in
the Preliminary Offering Memorandum relating to the Senior Notes, dated
December 3, 1997.
REPURCHASE DOCUMENTS. The Perkins Family Restaurants, L.P. Proxy
Statement, dated November 28, 1997, in the form delivered to the Agent prior
to the Closing Date.
REVOLVING CREDIT COMMITMENT. With respect to each Bank, the amount set
forth on SCHEDULE 1 hereto as the amount of such Bank's commitment to make
Revolving Credit Loans to the Borrower, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions
hereof, zero.
REVOLVING CREDIT COMMITMENT PERCENTAGE. With respect to each Bank, the
percentage set forth on SCHEDULE 1 hereto as such Bank's percentage of the
aggregate Revolving Credit Commitments of all of the Banks.
REVOLVING CREDIT LOAN MATURITY DATE. January 1, 2003.
REVOLVING CREDIT LOAN REQUEST. See Section 2.6.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by
the Banks to the Borrower pursuant to Section 2.
REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving
Credit Note.
REVOLVING CREDIT NOTE(S). See Section 2.4.
SARA. See Section 8.18(a).
SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
SECURITIES PLEDGE AGREEMENT. The Securities Pledge Agreement, dated as
of the date hereof, among TRC, PRI, PMC and the Agent, in form and substance
satisfactory to the Banks and the Agent.
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SECURITY AGREEMENTS. Collectively, (i) the Security Agreement, dated as
of the date hereof, between the Borrower and the Agent and (ii) the Security
Agreement, dated as of the date hereof, between PFC and the Agent, in each
case, in form and substance satisfactory to the Banks and the Agent.
SECURITY DOCUMENTS. The Guaranty, the Security Agreements, the
Mortgages, the Trademark Security Agreement, the Securities Pledge Agreement,
the Stock Pledge Agreement, and all other instruments and documents,
including, without limitation, Uniform Commercial Code financing statements,
required to be executed or delivered pursuant to any Security Document.
SENIOR INDENTURE. The Indenture, dated as of December 22, 1997, between
the Borrower and State Street Bank and Trust Company of Connecticut, N.A., as
trustee, relating to the Senior Notes, on substantially the terms as
described in the Preliminary Offering Memorandum relating to the Senior
Notes, dated December 3, 1997, and otherwise in the form which shall have
been delivered to, and approved by, the Agent.
SENIOR NOTES. The 10.125% unsecured Senior Notes due 2007, of the
Borrower, issued pursuant to the Senior Indenture in an aggregate principal
amount not to exceed $130,000,000, on substantially the terms as described in
the Preliminary Offering Memorandum relating thereto, dated December 3, 1997.
STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated as of the
date hereof, between the Borrower and the Agent, in form and substance
satisfactory to the Banks and the Agent.
SUBSIDIARY. Any corporation, partnership, association, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes) of the outstanding Voting Stock.
SUBSTITUTED BANK. See Section 6.12 hereof.
SYNDICATION AGENT. As defined in the preamble hereto.
TAX DISTRIBUTIONS. For any period, Distributions made by the Borrower
to the holders of its Equity Interests in an amount equal to the tax
liability of such Persons resulting from their ownership of the Equity
Interests of the Borrower.
TEST PERIOD. (a) In connection with the calculation of financial
covenant compliance on a Pro Forma Basis as required by Section 10.5(c)(v)
with respect to any proposed Permitted Acquisition, the period of four fiscal
quarters most recently ended prior to such Permitted Acquisition for which
financial information is available, and (b) in connection with the
calculation of the covenants set forth in Section 11 hereof following any
Permitted Acquisition, the period of all fiscal quarters (and any portion of
a fiscal quarter) prior to the date of such Permitted Acquisition included in
the calculation of such financial covenant.
TITLE INSURANCE COMPANY. Old Republic National Title Insurance Company.
TITLE POLICY. In relation to each Mortgaged Property, an ALTA standard
form title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Agent may require, any such reinsurance to
be with direct access endorsements) in such amount as may be determined by
the Agent insuring the priority of the Mortgage of such Mortgaged Property
and that the Borrower or one of its Subsidiaries holds marketable fee simple
title to such Mortgaged Property, subject only to the encumbrances permitted
by such Mortgage and which shall not contain exceptions for mechanics liens
or persons in occupancy,
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shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to the Agent in its sole discretion, and
shall contain such endorsements and affirmative insurance as the Agent in its
discretion may require, including but not limited to (i) comprehensive
endorsement, (ii) variable rate of interest endorsement, (iii) usury
endorsement, (iv) revolving credit endorsement, and (v) doing business
endorsement.
TOTAL REVOLVING CREDIT COMMITMENT. The sum of the Revolving Credit
Commitments of the Banks, as in effect from time to time.
TRADEMARK SECURITY AGREEMENT. The Trademark Security Agreement, dated
as of the date hereof, between the Borrower and the Agent, in form and
substance satisfactory to the Banks and the Agent.
TRC. As defined in the preamble hereto.
TYPE. As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a Eurodollar Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto
adopted by BKB in the ordinary course of its business as a letter of credit
issuer and in effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse BKB on the date specified in, and in
accordance with, Section 5.2.
VOTING STOCK. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, partnership, association,
trust or other business entity involved, whether or not the right so to vote
exists by reason of the happening of a contingency.
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the
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Commonwealth of Massachusetts, have the meanings assigned to them therein,
with the term "instrument" being that defined under Article 9 of the
Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Revolving Credit Loan Maturity Date upon
notice by the Borrower to the Agent given in accordance with Section 2.6,
such sums as are requested by the Borrower up to a maximum aggregate amount
Outstanding (after giving effect to all amounts requested) at any one time
equal to such Bank's Revolving Credit Commitment PROVIDED the Outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested), PLUS the Maximum Drawing Amount, PLUS all Unpaid Reimbursement
Obligations shall not at any time exceed the Total Revolving Credit
Commitment. The Revolving Credit Loans shall be made PRO RATA in accordance
with each Bank's Revolving Credit Commitment Percentage. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in Section 12 and
Section 13, in the case of the initial Revolving Credit Loans to be made on
the Closing Date, and Section 13, in the case of all other Revolving Credit
Loans, have been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Revolving Credit
Commitment Percentages a commitment fee at an annual rate equal to one-half
of one percent (0.50%) on the average daily amount during each calendar
quarter or portion thereof from the Closing Date to the Revolving Credit Loan
Maturity Date by which the Total Revolving Credit Commitment exceeds the SUM
of (a) the Outstanding amount of Revolving Credit Loans PLUS (b) the Maximum
Drawing Amount, PLUS (c) all Unpaid Reimbursement Obligations during such
calendar quarter. The commitment fee shall be payable quarterly in arrears
on the last day of each calendar quarter for the calendar quarter then
ending, commencing on March 31, 1998, with a final payment on the Revolving
Credit Loan Maturity Date or any earlier date on which the Revolving Credit
Commitments shall terminate.
2.3. REDUCTION OF TOTAL REVOLVING CREDIT COMMITMENT. Subject to Section
6.10, the Borrower shall have the right at any time and from time to time
upon five (5) Business Days prior written notice to the Agent to reduce by
$1,000,000 or integral multiples of $250,000 in excess thereof, or terminate
entirely the Total Revolving Credit Commitment, whereupon the Revolving
Credit Commitments of the Banks shall be reduced PRO RATA in accordance with
their respective Revolving Credit Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this Section 2.3,
the Agent will notify the Banks of the substance thereof. Upon the effective
date of any such reduction or termination, the Borrower shall pay to the
Agent for the respective accounts of the Banks, in accordance with their
Revolving Credit Commitment Percentages, the full amount of any commitment
fee then accrued on the amount of the reduction. No reduction or termination
of the Revolving Credit Commitments may be reinstated.
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2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of EXHIBIT A hereto (each a "Revolving Credit Note"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Revolving Credit Commitment or, if less, the Outstanding amount of all Revolving
Credit Loans made by such Bank, plus interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal on such Bank's Revolving
Credit Note, an appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the case may be) the
receipt of such payment. The Outstanding amount of the Revolving Credit Loans
set forth on such Bank's Revolving Credit Note Record shall be PRIMA FACIE
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Revolving Credit Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
in Section 6.11,
(a) Each Revolving Credit Loan that is a Base Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at an
annual rate equal to the sum of (i) the Base Rate PLUS (ii) the Applicable
Margin with respect to Revolving Credit Loans which are Base Rate Loans, as
in effect from time to time while such Base Rate Loan is Outstanding.
(b) Each Revolving Credit Loan that is a Eurodollar Rate Loan shall
bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at an
annual rate equal to the sum of (i) the Eurodollar Rate PLUS (ii) the
Applicable Margin with respect to Revolving Credit Loans which are
Eurodollar Rate Loans, as in effect from time to time while such Eurodollar
Rate Loan is Outstanding.
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto,
commencing, with respect to Base Rate Loans, on March 31, 1998.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to
the Agent written notice in the form of EXHIBIT B hereto (or telephonic
notice confirmed in a writing in the form of EXHIBIT B hereto) of each
Revolving Credit Loan requested hereunder (a "Revolving Credit Loan Request")
(a) prior to 12:00 Noon (Boston time) on the proposed Drawdown Date of any
Base Rate Loan and (b) prior to 12:00 Noon (Boston time) on the second
Eurodollar Business Day prior to the proposed Drawdown Date of any Eurodollar
Rate Loan. Each such notice shall specify (w) the principal amount of the
Revolving Credit Loan requested, (x) the proposed Drawdown Date of such
Revolving Credit Loan, (y) if a Eurodollar Rate Loan, the Interest Period for
such Revolving Credit Loan and (z) the Type of such Revolving Credit Loan.
Upon receipt of any such notice, the Agent shall promptly notify each of the
Banks thereof. Each Revolving Credit Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the
Revolving Credit Loan requested from the Banks on the proposed Drawdown Date.
Each Revolving Credit Loan Request shall be in a minimum aggregate amount of
$250,000 or an integral multiple thereof.
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2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN.
The Borrower may elect from time to time to convert any Outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type, PROVIDED
that (a) with respect to any such conversion of a Revolving Credit Loan to
a Base Rate Loan, the Borrower shall give the Agent at least one (1)
Business Day prior written notice of such election; (b) with respect to any
such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent at least two (2) Eurodollar Business Days prior
written notice of such election; (c) with respect to any such conversion of
a Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only be
made on the last day of the Interest Period with respect thereto and (d) no
Loan may be converted into a Eurodollar Rate Loan when any Default or Event
of Default has occurred and is continuing. On the date on which such
conversion is being made each Bank shall take such action as is necessary
to transfer its Revolving Credit Commitment Percentage of such Revolving
Credit Loans to its Domestic Lending Office or its Eurodollar Lending
Office, as the case may be. All or any part of Outstanding Revolving
Credit Loans of any Type may be converted into a Revolving Credit Loan of
another Type as provided herein, PROVIDED that any partial conversion shall
be in an aggregate principal amount of $500,000 or a whole multiple of
$250,000 in excess thereof. Each Conversion Request relating to the
conversion of a Revolving Credit Loan to a Eurodollar Rate Loan shall be
irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN.
Any Revolving Credit Loan of any Type may be continued as a Revolving
Credit Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice provisions
contained in Section 2.7.1; PROVIDED that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto. The Agent shall notify
the Banks promptly when any such automatic conversion contemplated by this
Section 2.7.2 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Revolving
Credit Loans that are Eurodollar Rate Loans shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of all Revolving Credit Loans that are
Eurodollar Rate Loans having the same Interest Period shall not be less
than $500,000 or a whole multiple of $250,000 in excess thereof. At no
time shall there be more than four (4) Revolving Credit Loans that are
Eurodollar Rate Loans having different Interest Periods.
2.8. FUNDS FOR REVOLVING CREDIT LOANS.
2.8.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston time)
on the proposed Drawdown Date of any Revolving Credit Loans, each of the
Banks will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Revolving Credit
Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Bank of such amount, and upon receipt of the
documents required by Sections 12 and 13 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Revolving Credit
Loans made available to
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the Agent by the Banks. The failure or refusal of any Bank to make
available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Revolving Credit Commitment Percentage of the
requested Revolving Credit Loans shall not relieve any other Bank
from its several obligation hereunder to make available to the Agent the
amount of such other Bank's Revolving Credit Commitment Percentage of any
requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Revolving Credit Commitment Percentage of the Revolving Credit Loans to be
made on such Drawdown Date, and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, TIMES (b) the amount of such Bank's Revolving
Credit Commitment Percentage of such Revolving Credit Loans, TIMES (c) a
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
Revolving Credit Commitment Percentage of such Revolving Credit Loans shall
become immediately available to the Agent, and the denominator of which
is 360. A statement of the Agent submitted to such Bank with respect to any
amounts owing under this paragraph shall be PRIMA FACIE evidence of the
amount due and owing to the Agent by such Bank. If the amount of such
Bank's Revolving Credit Commitment Percentage of such Revolving Credit
Loans is not made available to the Agent by such Bank within three (3)
Business Days following such Drawdown Date, the Agent shall be entitled to
recover such amount from the Borrower on demand, with interest thereon at
the rate per annum applicable to the Revolving Credit Loans made on such
Drawdown Date.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
Outstanding on such date, together with any and all accrued and unpaid
interest thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
sum of the Outstanding amount of the Revolving Credit Loans, PLUS the Maximum
Drawing Amount, PLUS all Unpaid Reimbursement Obligations exceeds the Total
Revolving Credit Commitment, then the Borrower shall immediately pay the
amount of such excess to the Agent for the respective accounts of the Banks
for application to the Revolving Credit Loans. Each prepayment of Revolving
Credit Loans shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior payments or repayments not exactly in proportion. Each prepayment
pursuant to this Section 3.2 shall be made in accordance with the provisions
of Section 6.10.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. Subject to Section
6.10, the Borrower shall have the right, at its election, to repay the
Outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium. The Borrower shall give the Agent, no
later than 12:00 Noon, Boston time, on the date of any proposed prepayment
prior written notice (or telephonic notice confirmed in writing) of any
proposed prepayment pursuant to this Section 3.3 of Base Rate Loans, and no
later than 12:00 Noon, Boston
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time, two (2) Eurodollar Business Days prior to the date of any proposed
repayment, prior written notice (or telephonic notice confirmed in writing)
of any proposed prepayment pursuant to this Section 3.3 of Eurodollar Rate
Loans, in each case specifying the proposed date of prepayment of Revolving
Credit Loans and the principal amount to be prepaid. Each such partial
prepayment of the Revolving Credit Loans shall be in a minimum amount of
$250,000 or an integral multiple thereof and shall be applied, in the absence
of instruction by the Borrower, first to the principal of Base Rate Loans and
then to the principal of Eurodollar Rate Loans. Each partial prepayment
shall be allocated among the Banks, in proportion, as nearly as practicable,
to the respective unpaid principal amount of each Bank's Revolving Credit
Note, with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion.
4. [INTENTIONALLY OMITTED].
5. LETTERS OF CREDIT.
5.1. LETTER OF CREDIT COMMITMENT.
5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on BKB's customary form (a "Letter of Credit
Application"), BKB on behalf of the Banks and in reliance upon the
agreement of the Banks set forth in Section 5.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees,
in its individual capacity, to issue, extend and renew for the account of
the Borrower one or more standby letters of credit (individually, a
"Letter of Credit"), in such form as may be requested from time to time by
the Borrower and agreed to by BKB; PROVIDED, HOWEVER, that, after giving
effect to such request, (a) the sum of the aggregate Maximum Drawing Amount
and all Unpaid Reimbursement Obligations shall not exceed $5,000,000 at any
one time and (b) the sum of the aggregate Maximum Drawing Amount and all
Unpaid Reimbursement Obligations PLUS the Outstanding amount of the
Revolving Credit Loans shall not, at any time, exceed the Total Revolving
Credit Commitment. The letters of credit issued by BKB under the Existing
Credit Agreement, a list of which is attached hereto as SCHEDULE 5.1.1,
shall be Letters of Credit under this Credit Agreement.
5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of BKB. In the event
that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiry date no later than the date which
is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or otherwise provides for one or more nominated persons,
forty-five (45) days) prior to the Revolving Credit Loan Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject to
the Uniform Customs.
5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Revolving Credit Commitment Percentage, to
reimburse BKB on demand for the amount of each draft paid by BKB under each
Letter of Credit to the extent that such
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amount is not reimbursed by the Borrower pursuant to Section 5.2 (such
agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall
be treated as the purchase by such Bank of participating interest in the
Borrower's Reimbursement Obligation under Section 5.2 in an amount equal to
such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to Section 5.2.
5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce BKB to
issue, extend and renew each Letter of Credit the Borrower hereby agrees to
reimburse or pay to BKB, with respect to each Letter of Credit issued,
extended or renewed by BKB hereunder,
(a) on each date that any draft presented under such Letter of Credit
is honored by BKB, or BKB otherwise makes a payment with respect thereto,
(i) the amount paid by BKB under or with respect to such Letter of Credit,
and (ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by BKB in connection with any payment made by BKB
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Revolving
Credit Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by BKB for the
benefit of the Banks (including BKB) as cash collateral for all
Reimbursement Obligations, and
(c) upon the acceleration of the Reimbursement Obligations with
respect to all Letters of Credit in accordance with Section 14, an amount
equal to the then Maximum Drawing Amount on all Letters of Credit, which
amount shall be held by BKB as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to BKB at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining
unpaid by the Borrower under this Section 5.2 at any time from the date such
amounts become due and payable (whether as stated in this Section 5.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to BKB on demand at the rate specified in Section
6.11 for overdue principal on the Loans.
5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, BKB shall notify
the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor
such demand for payment. If the Borrower fails to reimburse BKB as provided
in Section 5.2 on or before the date that such draft is paid or other payment
is made by BKB, BKB may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each
Bank shall make available to BKB, at the Agent's Head Office, in immediately
available funds, such Bank's Revolving Credit Commitment Percentage of such
Unpaid Reimbursement Obligation, together with an amount equal to the product
of (i) the average, computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by BKB for federal funds
acquired by BKB during each day included in such period, TIMES (ii) the
amount equal to such Bank's Revolving Credit Commitment Percentage of such
Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the numerator of
which is the number of days that elapse from and including the date BKB paid
the draft presented for honor or otherwise made payment to the date on which
such Bank's Revolving Credit Commitment Percentage of such Unpaid
Reimbursement obligation shall become immediately available to BKB, and the
denominator of which is 360. The responsibility of BKB to the Borrower and
the Banks shall be only to determine that the documents (including
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each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter
of Credit.
5.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 5 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to
payment which the Borrower may have or have had against BKB, any other Bank
or any beneficiary of a Letter of Credit, other than claims arising due to
the gross negligence or willful misconduct of BKB. The Borrower further
agrees with BKB and the Banks that neither BKB nor any Bank shall be
responsible for, and the Borrower's Reimbursement Obligations under
Section 5.2 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or other
party to which any Letter of Credit may be transferred or any claims or
defenses whatsoever of the Borrower against the beneficiary of any Letter of
Credit or any such transferee. BKB and the Banks shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter
of Credit, other than any of the foregoing resulting from the gross
negligence or willful misconduct of BKB. The Borrower agrees that any action
taken or omitted by BKB or any Bank under or in connection with each Letter
of Credit and the related drafts and documents, if done in good faith and
without gross negligence, shall be binding upon the Borrower and shall not
result in any liability on the part of BKB or any Bank to the Borrower.
5.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 5.4, BKB shall be entitled to rely, and shall be fully protected in
relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel,
independent accountants and other experts selected by BKB. BKB shall be
fully justified in failing or refusing to take any action under this Credit
Agreement unless it shall first have received such advice or concurrence of
the Majority Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. BKB shall in all cases be fully
protected in acting, or in refraining from acting, under this Credit
Agreement in accordance with a request of the Majority Banks, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
5.6. LETTER OF CREDIT FEE. With respect to each Letter of Credit issued
hereunder, the Borrower shall pay to the Agent a fee (the "Letter of Credit
Fee") for each Letter of Credit issued or renewed by BKB at a rate per annum
equal to the Applicable Margin with respect to Revolving Credit Loans which
are Eurodollar Rate Loans in effect from time to time, on the Maximum Drawing
Amount of such Letter of Credit for the period such Letter of Credit is
outstanding. The Agent shall, in turn, remit to each Bank (including BKB)
such Bank's Revolving Credit Commitment Percentage of the Letter of Credit
Fee. In addition, the Borrower will pay BKB, for its own account, a Fronting
Fee (the "Fronting Fee") equal to one-eighth of one percent (0.125%) per
annum on the Maximum Drawing Amount of such Letter of Credit for the period
such Letter of Credit is outstanding. The Letter of Credit Fee and the
Fronting Fee shall be payable quarterly in arrears on the last day of each
calendar quarter for the calendar quarter then ending. In respect of each
Letter of Credit, the Borrower shall also pay to BKB, for its own account, at
such time or times as such charges are customarily made by BKB, BKB's
customary issuance, amendment, negotiation or document examination and other
administrative fees as in effect from time to time.
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6. CERTAIN GENERAL PROVISIONS.
6.1. FEES. The Borrower agrees to pay to the Agent the fees in
accordance with the Fee Letter.
6.2. [Intentionally Omitted].
6.3. FUNDS FOR PAYMENTS.
6.3.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the
Agent, at the Agent's Head Office or at such other location in the
Boston, Massachusetts, area that the Agent may from time to time designate,
in each case in immediately available funds.
6.3.2. NO OFFSET, ETC. (a) All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
(b) On or before the date it becomes a party to this Credit Agreement
and from time to time thereafter upon any change in status rendering any
certificate or document previously delivered pursuant to this Section 6.3.2
invalid or inaccurate, each Bank that is organized under the laws of a
jurisdiction outside the United States of America shall (if legally able to
do so) deliver to the Borrower such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulation
Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof
or subsequent version thereto, properly completed and duly executed by such
Bank establishing that such payment is (a) not subject to United States of
America Federal withholding tax under the Code because such payment is
effectively connected with conduct by such Bank of a trade or business in
the United States of America or (b) totally exempt from United States of
America Federal withholding tax or, if due to a change in law occurring
after the date such Bank became a party hereto, subject to a reduced rate
of such tax under a provision of an applicable tax treaty. The Borrower
shall not be required to pay any additional amounts to any Bank pursuant to
this Section 6.3.2 to the extent that the obligation to pay such additional
amounts would not have arisen but for a failure by such Bank to comply with
the provisions of the preceding sentence.
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6.4. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of
the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a
payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue
during such extension. The Outstanding amount of the Loans as reflected on
the Revolving Credit Note Records from time to time shall be considered
correct and binding on the Borrower unless within five (5) Business Days
after receipt of any notice by the Agent or any of the Banks of such
Outstanding amount, the Borrower shall notify the Agent or such Bank to the
contrary.
6.5. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that
would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Agent shall forthwith
give notice of such determination (which shall be conclusive and binding on
the Borrower and the Banks) to the Borrower and the Banks. In such event (a)
any Revolving Credit Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (b) each Eurodollar Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of the Banks to
make Eurodollar Rate Loans shall be suspended until the Agent or the Majority
Banks determine that the circumstances giving rise to such suspension no
longer exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Borrower and the other Banks and thereupon (a)
the commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b)
such Bank's Loans then Outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period
as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank
in making any conversion in accordance with this Section 6.6, including any
interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its Eurodollar Rate Loans hereunder. The Borrower
may take the actions permitted by Section 6.12 to replace any Bank requiring
the Borrower to pay additional costs incurred under this Section 6.6.
6.7. ADDITIONAL COSTS, ETC. If any change to any present law or any
future applicable law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged
with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Revolving Credit Commitment or
<PAGE>
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the Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Revolving Credit
Commitment or any class of loans, letters of credit or commitments of which
any of the Loans or such Bank's Revolving Credit Commitment forms a part,
and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans, such
Bank's Revolving Credit Commitment, or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Revolving Credit Commitment, any Letter of
Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest or Reimbursement Obligation or other sum
payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum. The Borrower may take the actions permitted by Section
6.12 to replace any Bank requiring the Borrower to pay additional costs incurred
under this Section 6.7.
6.8. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law) regarding capital requirements for banks or bank holding companies or
any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (b) compliance by
such Bank or the Agent or any corporation controlling such Bank or the Agent
with any law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such entity regarding capital
adequacy, has the effect of reducing the return on such Bank's or the Agent's
commitment with respect to any Loans to a level below that which such Bank or
the Agent could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's or the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such
entity's capital) by any amount deemed by such Bank or
<PAGE>
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(as the case may be) the Agent to be material, then such Bank or the Agent
may notify the Borrower of such fact. To the extent that the amount of such
reduction in the return on capital is not reflected in the Base Rate, the
Borrower and such Bank shall thereafter attempt to negotiate in good faith,
within thirty (30) days of the day on which the Borrower receives such
notice, an adjustment payable hereunder that will adequately compensate such
Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on
which the Borrower receives such notice, then commencing on the date of such
notice (but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that
will, in such Bank's reasonable determination, provide adequate compensation;
PROVIDED, HOWEVER, that the Borrower may take the actions permitted by
Section 6.12 to replace such Bank. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
6.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 6.7 or 6.8 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower,
shall be PRIMA FACIE evidence that such amounts are due and owing.
6.10. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss
of anticipated profits) that such Bank may sustain or incur as a consequence
of (a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Bank
to lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (b) default by the Borrower in making a borrowing or conversion after
the Borrower has given (or is deemed to have given) a Revolving Credit Loan
Request or a Conversion Request relating thereto in accordance with Section
2.6 or Section 2.7 or (c) the making of any payment of a Eurodollar Rate Loan
or the making of any conversion of any such Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain any such Loans.
6.11. INTEREST AFTER DEFAULT.
6.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per
annum equal to the Base Rate PLUS the Applicable Margin for Base Rate
Loans then in effect with respect to Revolving Credit Loans, PLUS three
percent (3%) per annum until such amount shall be paid in full (after as
well as before judgment).
6.11.2. AMOUNTS NOT OVERDUE. During the continuance of an Event of
Default the principal of the Loans not overdue shall, until such Event of
Default has been cured or remedied or such Event of Default has been waived
by the Banks pursuant to Section 28, bear interest at a rate per annum
equal to the Base Rate PLUS the Applicable Margin for Base Rate Loans then
in effect with respect to Revolving Credit Loans, PLUS three percent (3%)
per annum.
6.11.3. LETTERS OF CREDIT. The Unpaid Reimbursement Obligations and
(to the extent permitted by law) unpaid interest thereon (as provided in
this sentence) shall bear interest compounded monthly and payable on demand
at a rate per annum equal to the Base Rate PLUS the Applicable Margin for
Base Rate Loans then in effect with respect to Revolving Credit Loans PLUS
three percent (3%) per annum until such amount shall be paid in full (after
as well as before judgment).
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6.12. REPLACEMENT OF INDIVIDUAL BANKS. Upon the occurrence of any of the
events referenced in Section 6.6, Section 6.7 and Section 6.8 giving rise to
the Borrower's rights to replace a Bank, the Borrower may (PROVIDED that at
the time no Default or Event of Default exists or would result after giving
effect to the Borrower's action) require such Bank (the "Substituted Bank")
to assign all of its Loans and its Revolving Credit Commitment (i) to another
Bank hereunder which has committed to purchase such Loans and such Revolving
Credit Commitment pursuant to the provisions of Section 21, (ii) to an
Eligible Assignee approved by the Agent (such approval not to be unreasonably
withheld) which has committed to purchase such Loans and such Revolving
Credit Commitment pursuant to the provisions of Section 21 (such Bank
referred to herein as the "Replacement Bank")
7. COLLATERAL SECURITY AND GUARANTIES.
7.1. SECURITY OF BORROWER. The Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the
Borrower (including, without limitation, accounts and notes receivable,
inventory, equipment, real property, stock of subsidiaries, intangible
property, and intellectual property), whether now owned or hereafter
acquired, pursuant to the terms of the Security Documents to which the
Borrower is a party; PROVIDED that the Borrower shall only be required to
grant a mortgage on its leasehold interests in the Real Estate and on any fee
owned Real Estate located in Florida pursuant to Section 9.13 hereof.
7.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. The Obligations shall be
guaranteed by TRC, PRI, PMC and each wholly-owned Subsidiary of the Borrower
(now existing or hereafter formed or acquired) pursuant to the terms of the
Guaranty, PROVIDED that the guaranties by TRC, PRI and PMC shall be limited
in recourse to the pledge by such Guarantors of the Equity Interests in the
Borrower or the Guarantors owned by such Guarantors. The obligations under
the Guaranty shall be in turn secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under
applicable law) in (a) with respect to TRC, PRI and PMC, the Equity Interests
of the Borrower owned by each such Guarantor and (b) with respect to each
other Guarantor, all of the assets of each such Person (including, without
limitation, accounts and notes receivable, inventory, equipment, real
property, stock of subsidiaries, intangible property, and intellectual
property), whether now owned or hereafter acquired, pursuant to the terms of
the Security Documents to which such Person is a party.
7.3. COLLATERAL NOTES. In addition to the Revolving Credit Notes, the
Borrower agrees that with respect to any of the Real Estate to be mortgaged
by it or any of its Subsidiaries hereunder, it will execute and deliver or
cause such Subsidiary to execute and deliver to the Agent such collateral
notes (the "Collateral Notes") in such form as the Agent and the Borrower may
from time to time agree. The parties hereto hereby agree that (a) the
aggregate amount of the Outstanding Obligations shall not be increased by the
issuance of the Collateral Notes and (b) any payment or recovery on the
Collateral Notes shall be applied to the Obligations pursuant to Section
14.4. All Collateral Notes shall be payable to the order of the Agent, on
demand; PROVIDED that the Agent hereby agrees that it shall not demand
payment on any Collateral Note unless the Obligations shall have become
immediately due and payable pursuant to Section 14.1.
8. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as
follows:
8.1. CORPORATE AUTHORITY.
8.1.1. EXISTENCE; GOOD STANDING. Each member of the Perkins Group
(a) is duly organized, validly existing and in good standing under the
laws of its jurisdiction of
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organization, (b) has all requisite power to own its property and conduct
its business as now conducted and as presently contemplated, and (c) is in
good standing as a foreign corporation or partnership, as applicable, and
is duly authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so qualified would
not have a materially adverse effect on the business, assets or financial
condition of such Person.
8.1.2. AUTHORIZATION. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which any member of the
Perkins Group is or is to become a party and the transactions contemplated
hereby and thereby and the Repurchase (a) are within the corporate or
partnership authority (as applicable) of such Person, (b) have been duly
authorized by all necessary corporate or partnership proceedings (as
applicable), (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
such Person is subject or any judgment, order, writ, injunction, license or
permit applicable to such Person and (d) do not conflict with any provision
of the corporate charter or bylaws of, or of the certificate of limited
partnership or partnership agreement of, or any agreement or other
instrument binding upon, such Person.
8.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which any member of the Perkins
Group is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be
brought.
8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
each of the members of the Perkins Group of this Credit Agreement and the
other Loan Documents to which each such Person is or is to become a party and
the transactions contemplated hereby and thereby and the Repurchase do not
require the approval or consent of, or filing with, any governmental agency
or authority other than those already obtained, the filing of UCC financing
statements and the recording of the Mortgages.
8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3
hereto, the Borrower and its Subsidiaries lease (to the extent so described
in such consolidated balance sheet or the notes thereto) or own all of the
assets reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
8.4. FINANCIAL STATEMENTS AND PROJECTIONS.
8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the
Banks a consolidated balance sheet of the Borrower and its Subsidiaries as
at the Balance Sheet Date, and consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by a report and unqualified opinion of Arthur Andersen LLP.
There has also been furnished to each of the Banks a consolidated balance
sheet of the Borrower and its Subsidiaries as at September 30, 1997, and
the consolidated statements of income and cash flows of the Borrower and
its Subsidiaries for the portion of the fiscal year then ended. Such
balance sheets and statements of income and cash flows have been
prepared in accordance with generally
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accepted accounting principles and fairly present the financial
condition of the Borrower and its Subsidiaries as at the close of business
on the dates thereof and the results of operations for the fiscal year or
portion thereof then ended. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving material
amounts, known to the officers of the Borrower, which were not disclosed in
such balance sheets and the notes related thereto.
8.4.2. PROJECTIONS. The projections of the annual operating budgets of
the Borrower and its Subsidiaries on a consolidated basis, balance sheets
and cash flow statements for the 1997 through 2002 fiscal years, copies of
which have been delivered to each Bank, disclose all assumptions made with
respect to general economic, financial and market conditions used in
formulating such projections. To the knowledge of the Borrower or any of
its Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The
projections are based upon reasonable estimates and assumptions, have been
prepared on the basis of the assumptions stated therein and reflect the
reasonable estimates of the Borrower and its Subsidiaries of the results of
operations and other information projected therein, it being understood
that the projections are not guaranties of results and that actual results
will vary from the projections.
8.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date, other than
the Repurchase, there has occurred no materially adverse change in the
financial condition or business of the Borrower and its Subsidiaries as shown
on or reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, or the consolidated statements of
income and cash flows for the fiscal year then ended, other than changes in
the ordinary course of business that have not had any materially adverse
effect either individually or in the aggregate on the business or financial
condition of the Borrower or any of its Subsidiaries. Since the Balance
Sheet Date, neither the Borrower nor any of its Subsidiaries has made any
Distribution not permitted under the terms of this Credit Agreement, other
than the regular quarterly Distributions during 1997 to the holders of the
Borrower's Equity Interests.
8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and each of its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending or
threatened against the Borrower or any of its Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect
the properties, assets, financial condition or business of the Borrower and
its Subsidiaries, taken as a whole, or materially impair the right of the
Borrower and its Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any
of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto, or which might impair the ability of the Borrower, the
Guarantors and their Subsidiaries to effect the Repurchase.
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8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or
is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Borrower and its Subsidiaries.
Neither the Borrower nor any of its Subsidiaries is a party to any contract
or agreement that has or is expected, in the judgment of the officers of the
Borrower, to have any materially adverse effect on the business of the
Borrower and its Subsidiaries.
8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. No member of the
Perkins Group is in violation of any provision of its charter documents,
bylaws, or any agreement or instrument to which it may be subject or by which
it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a
manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or
business of the Borrower and its Subsidiaries, taken as a whole.
8.10. TAX STATUS. Each member of the Perkins Group (a) has made or filed
all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (b) has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) has set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of
the Borrower know of no basis for any such claim.
8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. No member of the
Perkins Group is a "holding company", or a "subsidiary company" of a "holding
company", or an affiliate" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is any of them an
"investment company", or a company controlled by an "investment company", as
such term is defined in the Investment Company Act of 1940.
8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover,
affect or give notice of any present or possible future lien on, or security
interest in, any assets or property of the Borrower or any of its
Subsidiaries or any rights relating thereto.
8.14. EMPLOYEE BENEFIT PLANS.
8.14.1. IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions. The Borrower
has heretofore delivered to the Agent the most recently completed annual
report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under Section 103(d) of ERISA, with respect to
each Guaranteed Pension Plan.
8.14.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs
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prior to plan termination (except as required by Title I, Part 6 of
ERISA). The Borrower or an ERISA Affiliate, as appropriate, may terminate
each such Plan at any time (or at any time subsequent to the expiration of
any applicable bargaining agreement) in the discretion of the Borrower or
such ERISA Affiliate without liability to any Person.
8.14.3. GUARANTEED PENSION PLANS. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan. No
liability to the PBGC (other than required insurance premiums, all of which
have been paid when due) has been incurred by the Borrower or any ERISA
Affiliate with respect to any Guaranteed Pension Plan and there has not
been any ERISA Reportable Event with respect to any Guaranteed Pension
Plan, or any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans within
the meaning of Section 4001 of ERISA did not exceed the aggregate value of
the assets of all such Guaranteed Pension Plans, disregarding for this
purpose the benefit liabilities and assets of any Guaranteed Pension Plan
with assets in excess of benefit liabilities, by more than $250,000.
8.14.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under Section 4041A of ERISA.
8.15. USE OF PROCEEDS.
8.15.1. GENERAL. The proceeds of the Loans shall be used (i) to fund a
portion of the purchase price of the Repurchase and to pay related fees and
expenses, (ii) to repay existing Indebtedness of the Borrower and to pay
related fees and expenses and (iii) for working capital and general
corporate and partnership purposes. The Borrower will obtain Letters of
Credit solely for working capital and general corporate and partnership
purposes.
8.15.2. REGULATIONS U AND X. No portion of any Loan is to be used, and
no portion of any Letter of Credit is to be obtained, for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224 in a manner which would
violate said Regulation U or X.
8.15.3. INELIGIBLE SECURITIES. No portion of the proceeds of any Loans
is to be used, and no portion of any Letter of Credit is to be obtained,
for the purpose of (a) knowingly purchasing, or providing credit support
for the purchase of, Ineligible Securities from a Section 20 Subsidiary
during any period in which such Section 20 Subsidiary makes a market in
such Ineligible Securities, (b) knowingly purchasing, or providing credit
support for the purchase of, during the underwriting or placement period,
any Ineligible Securities being underwritten or privately placed by a
Section 20
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Subsidiary, or (c) making, or providing credit support for the
making of, payments of principal or interest on Ineligible Securities
underwritten or privately placed by a Section 20 Subsidiary and issued by
or for the benefit of the Borrower or any Subsidiary or other Affiliate of
the Borrower.
8.16. CHIEF EXECUTIVE OFFICES. The chief executive offices of the
Borrower and each Subsidiary of the Borrower are located at 6075 Poplar
Avenue, Suite 800, Memphis, Tennessee 38119.
8.17. DISCLOSURE. No representation or warranty made by any Guarantor or
the Borrower in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Agent or the Banks, by or
on behalf of any such Person in connection with any of the transactions
contemplated by any of the Loan Documents or in any of the Repurchase
Documents contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained therein
not misleading in light of the circumstances in which they are made. There
is no fact known to the Borrower which materially adversely affects, or which
would, in the reasonable judgment of the Borrower, materially adversely
affect in the reasonable foreseeable future the financial position, business,
operations or affairs of the Borrower.
8.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all reasonable
steps to investigate the past and present condition and usage of the Real
Estate and the operations conducted thereon and, based upon such reasonable
investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of the
Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those
arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which violation
individually or in the aggregate would have a material adverse effect on
the environment or the business, assets or financial condition of the
Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal,
state or local governmental authority, (i) that any one of them has been
identified by the United States of America Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any
hazardous substances as defined by 42 U.S.C. Section 9601(14), any
pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any
toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Borrower or any of its
Subsidiaries conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages
of any kind whatsoever in connection with the release of Hazardous
Substances;
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(c) except as set forth on SCHEDULE 8.18 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of
the Real Estate; (ii) in the course of any activities conducted by the
Borrower, its Subsidiaries or operators of its properties, no Hazardous
Substances have been generated or are being used on the Real Estate except
in accordance with applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or
from the properties of the Borrower or its Subsidiaries, which releases
would have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters
and facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental
Laws; and
(d) None of the Borrower and its Subsidiaries, any Mortgaged Property
or any of the other Real Estate is subject to any applicable environmental
law requiring the performance of Hazardous Substances site assessments, or
the removal or remediation of Hazardous Substances, or the giving of notice
to any governmental agency or the recording or delivery to other Persons of
an environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the recording of any Mortgage or to the effectiveness of any other
transactions contemplated hereby.
8.19. SUBSIDIARIES, ETC.
(a) SCHEDULE 8.19 hereto sets forth all of the Subsidiaries of the
Borrower and, except as set forth on such Schedule, the Borrower has no
Subsidiaries. Except as set forth on SCHEDULE 8.19 hereto, neither the
Borrower nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person. All Subsidiaries of the Borrower are
parties to the Guaranty.
(b) On and as of the Closing Date, except as permitted by Section
10.3(i) hereof, the Borrower does not own or hold of record and/or
beneficially (whether directly or indirectly) any shares of any class in
the capital of any other corporations or any legal and/or beneficial
interests in any partnership, business trust or joint venture or in any
other unincorporated trade or business enterprise. Except for its general
partnership interests in the Borrower, the General Partner does not own or
hold of record and/or beneficially (whether directly or indirectly) any
shares of any class in the capital of any corporations and no legal and/or
beneficial interests in any partnership, business trust or joint venture or
in any other unincorporated trade or business enterprise.
(c) On and as of the Closing Date and after giving effect to the
Repurchase, no Person has any partnership or other equity ownership
interest in the Borrower, or any right to acquire such interest, except for
the General Partner and PRI who collectively own and hold all of the
partnership interests in the Borrower.
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(d) On and as of the Closing Date, the General Partner owns no assets
and conducts no business, other than acting as general partner of, and
holding 1% general partnership interests in, the Borrower.
8.20. FISCAL YEAR. The Borrower has a fiscal year ending December 31 of
each year.
8.21. SOLVENCY. The Borrower and its Subsidiaries, taken as a whole
(both before and after giving effect to the Repurchase and the other
transactions contemplated by this Credit Agreement and the other Loan
Documents) (i) are solvent, (ii) have assets having a fair value in excess of
their liabilities, (iii) have assets having a fair value in excess of the
amount required to pay their liabilities on their debts as they become due
and matured, and (iv) have, and expect to continue to have, access to
adequate capital for the conduct of their business and the ability to pay
their debts as they mature. In computing the amount of contingent and
unliquidated liabilities at any time, such liabilities will be computed as
the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that is probable to become an absolute and
matured liability.
9. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligation to issue,
extend or renew any Letters of Credit:
9.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the fees
provided in the Fee Letter and all other fees and other amounts provided for
in this Credit Agreement and the other Loan Documents to which the Borrower
or any of its Subsidiaries is a party, all in accordance with the terms of
this Credit Agreement and such other Loan Documents.
9.2. MAINTENANCE OF OFFICE. The Borrower and each of its Subsidiaries
will maintain their chief executive offices at the location indicated in
Section 8.16, or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Agent, where notices,
presentations and demands to or upon any such Person in respect of the Loan
Documents to which such Person is a party may be given or made.
9.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts
and reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves.
9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety-five (95) days after the end of each fiscal year of the Borrower,
the consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such year, and the related consolidated and
consolidating statement of income and consolidated statement of cash flow
for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification by Arthur
Andersen LLP or by other independent certified public accountants of
nationally recognized standing, selected by the General Partner, together
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with a written statement from such accountants to the effect that they have
read a copy of this Credit Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default; PROVIDED
that such accountants shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than fifty
(50) days after the end of each of the fiscal quarters of the Borrower,
copies of the unaudited consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter, and the
related consolidated or consolidating statement of income and consolidated
statement of cash flow for the portion of the fiscal year then elapsed, all
in reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof (subject
to year-end adjustments);
(c) promptly upon request therefor by the Agent, copies of all
management letters of substance and other material reports of substance
which are submitted to the Borrower by its independent accountants in
connection with any annual or interim audit of the books of the Borrower or
its Subsidiaries made by such accountants;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the General Partner in
substantially the form of EXHIBIT C hereto and setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
Section 11 and (if applicable) reconciliations to reflect changes in
generally accepted accounting principles since the Balance Sheet Date as
well as calculations for the purpose for determining the Applicable Margin;
(e) as soon as practicable and in any event not later than five (5)
days after the filing or mailing thereof, copies of all material of a
financial nature filed with the Securities and Exchange Commission by the
Perkins Group; and;
(f) from time to time such other financial data and information as
the Agent or any Bank may reasonably request.
9.5. NOTICES.
9.5.1. DEFAULTS. The Borrower will, and will cause each of its
Subsidiaries to, promptly notify the Agent in writing of the occurrence of
any Default or Event of Default. If any Person shall give any notice or
take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other
note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, in each
case, in respect of Indebtedness in excess of $1,000,000, the Borrower
shall forthwith give written notice thereof to the Agent and each of the
Banks, describing the notice or action and the nature of the claimed
default.
9.5.2. ENVIRONMENTAL EVENTS. The Borrower will, and will cause each
of its Subsidiaries to, promptly give notice to the Agent (a) of any
violation of any Environmental Law that the Borrower or any of its
Subsidiaries reports in writing or is
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reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (b) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any federal, state or
local environmental agency or board, that has the potential to materially
affect the assets, liabilities, financial conditions or operations of the
Borrower and its Subsidiaries, taken as a whole.
9.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower will,
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the Collateral with a fair market value in excess of $100,000, or the
Agent's rights with respect to any such Collateral, are subject.
9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and
will cause each of its Subsidiaries to, give notice to the Agent in writing
within fifteen (15) days of becoming aware of any litigation or proceedings
threatened in writing or any pending litigation and proceedings affecting
the Borrower or any of its Subsidiaries or to which the Borrower or any of
its Subsidiaries is or becomes a party involving an uninsured claim against
the Borrower or any of its Subsidiaries that could reasonably be expected
to have a materially adverse effect on the Borrower and its Subsidiaries,
taken as a whole, and stating the nature and status of such litigation or
proceedings. The Borrower will, and will cause each of its Subsidiaries to,
give notice to the Agent, in writing, in form and detail satisfactory to
the Agent, within ten (10) days of any judgment not covered by insurance,
final or otherwise, against the Borrower or any of its Subsidiaries in an
amount in excess of $500,000.
9.6. EXISTENCE; MAINTENANCE OF PROPERTIES.
9.6.1. EXISTENCE. Each of the Borrower and its Subsidiaries will do or
cause to be done all things necessary to preserve and keep in full force
and effect its existence, rights and franchises and the corporate existence
and rights and franchises (as applicable), of its Subsidiaries, other than
in connection with mergers permitted under Section 10.5 hereof, and will
not, and will not cause or permit any of its Subsidiaries to, convert to a
limited liability company or limited liability partnership.
9.6.2. MAINTENANCE OF PROPERTIES. Each of the Borrower and its
Subsidiaries (a) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (b) will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) will, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now conducted by them and in related businesses; PROVIDED that
nothing in this Section 9.6 shall prevent the Borrower or any of its
Subsidiaries from discontinuing the operation and maintenance of any of its
properties or any of those of its Subsidiaries if such discontinuance is,
in the judgment of the Borrower, desirable in the conduct of its or their
business and that do not in the aggregate materially adversely affect the
business of the Borrower and its Subsidiaries on a consolidated basis.
9.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and
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business against such casualties and contingencies as shall be in accordance
with the general practices of businesses engaged in similar activities in
similar geographic areas and in amounts, containing such terms, in such forms
and for such periods as may be reasonable and prudent and in accordance with
the terms of the Security Documents.
9.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the
same shall become overdue, all taxes, assessments and other governmental
charges imposed upon it and its real properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims
for labor, materials, or supplies that if unpaid might by law become a lien
or charge upon any of its property; PROVIDED that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof
shall currently be contested in good faith by appropriate proceedings and if
the Borrower or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and PROVIDED FURTHER that the Borrower and
each Subsidiary of the Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
9.9.1. GENERAL. The Borrower shall permit the Banks, through the Agent
or any of the Agent's designated representatives, to visit and inspect any
of the properties of the Borrower or any of its Subsidiaries, to examine
the books of account of the Borrower and its Subsidiaries (and to make
copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times and intervals as the Agent or any Bank may reasonably request.
9.9.2. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default
shall have occurred, the Agent may, from time to time, in its reasonable
discretion for the purpose of assessing and ensuring the value of any
Mortgaged Property, obtain one or more environmental assessments or audits
of such Mortgaged Property prepared by a hydrogeologist, an independent
engineer or other qualified consultant or expert approved by the Agent to
evaluate or confirm (i) whether any Hazardous Materials are present in the
soil or water at such Mortgaged Property and (ii) whether the use and
operation of such Mortgaged Property complies with all Environmental Laws.
Environmental assessments may include without limitation detailed visual
inspections of such Mortgaged Property including any and all storage areas,
storage tanks, drains, dry wells and leaching areas, and the taking of soil
samples, surface water samples and ground water samples, as well as such
other investigations or analyses as the Agent deems appropriate. All such
environmental assessments shall be conducted and made at the expense of the
Borrower.
9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (b) the provisions
of its charter documents and by-laws, (c) all agreements and instruments by
which it or any of its properties may be bound and (d) all applicable
decrees, orders, and judgments. If any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower or
any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Subsidiary is a
party, the Borrower will, or (as the case may be) will cause such Subsidiary
to, immediately take or cause to be taken all reasonable steps within the
power of or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
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9.11. EMPLOYEE BENEFIT PLANS. The Borrower will, upon the request of the
Agent, (a) promptly upon filing the same with the Department of Labor or
Internal Revenue Service furnish to the Agent a copy of the most recent
actuarial statement required to be submitted under Section 103(d) of ERISA
and Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan and (b) promptly upon receipt or dispatch,
furnish to the Agent any notice, report or demand sent or received in respect
of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063,
4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under
Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
9.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
and the Letters of Credit for the purposes described in Section 8.15, and
none other.
9.13. ADDITIONAL MORTGAGED PROPERTY.
(a) At the request of the Agent at any time after the Closing Date, the
Borrower shall, as soon as practicable, and in any event not later than sixty
(60) days after such request, (i) take all steps that may be requested by the
Agent in order to grant to the Agent, for the benefit of the Banks and the
Agent, a first priority perfected leasehold mortgage on the leasehold
interests of the Borrower and its Subsidiaries in the Real Estate and
(ii) deliver to the Agent such supporting and additional documentation,
including, without limitation, corporate authority documentation, legal
opinions, and landlord consents as may be reasonably requested by the Agent
in connection with such leasehold mortgages.
(b) If, after the Closing Date, the Borrower or any of its Subsidiaries
acquires or leases for a term in excess of ten (10) years real estate used as
a restaurant facility, the Borrower shall, within 10 Business Days of such
acquisition or such lease, notify the Agent of such acquisition or such lease
and, if requested by the Agent, the Borrower shall, or shall cause such
Subsidiary to, forthwith, and in any event not later than sixty (60) days
after such request, deliver to the Agent a fully executed mortgage or deed of
trust over such real estate, in form and substance satisfactory to the Agent,
together with title insurance policies, evidences of insurances with the
Agent named as loss payee and additional insured, legal opinions and other
documents and certificates with respect to such real estate as was required
for Real Estate of the Borrower or such Subsidiary as of the Closing Date.
The Borrower further agrees that, following the taking of such actions with
respect to such real estate, the Agent shall have for the benefit of the
Banks and the Agent a valid and enforceable first priority mortgage or deed
of trust over such real estate, free and clear of all defects and
encumbrances except for Permitted Liens.
(c) The parties hereto agree that the Borrower shall not be required to
deliver to the Agent on the Closing Date mortgages or deeds of trust with
respect to the Real Estate located in Florida. The Borrower agrees that,
upon the request of the Agent, it shall forthwith, and in any event not later
than sixty (60) days after such request, deliver to the Agent a fully
executed mortgage or deed of trust over such real estate, in form and
substance satisfactory to the Agent, together with title insurance policies,
evidences of insurances with the Agent named as loss payee and additional
insured, legal opinions and other documents and certificates with respect to
such real estate in the same manner as was required for the Real Estate which
was the subject of a Mortgage granted in favor of the Agent on the Closing
Date; PROVIDED that the Agent and the Banks agree that the Agent shall not
request that the Borrower deliver such mortgages or deeds of trust until
either (i) the occurrence and continuance of a Default or Event of Default,
(ii) the Borrower and its Subsidiaries have sold or otherwise disposed of
Real Estate with a value such that the Agent, in its reasonable discretion,
believes that the amount of Collateral securing the Obligations has been
materially diminished or (iii) the Credit Agreement has been amended to
include $20,000,000 or more of term loans as a portion of the Obligations.
The Borrower further agrees that, following the taking of such actions with
respect to such real estate, the Agent shall have for the benefit of the
Banks and the Agent a valid and
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enforceable first priority mortgage or deed of trust over such real estate,
free and clear of all defects and encumbrances except for Permitted Liens.
9.14. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by
this Credit Agreement and the other Loan Documents, including, without
limitation, the syndication of the credit facilities evidenced hereby.
9.15. CONDUCT OF BUSINESS. The Borrower will, and will cause its
Subsidiaries to, continue to engage only in the business of operating
restaurants and in businesses and activities closely related thereto.
9.16. INTEREST RATE PROTECTION ARRANGEMENTS. The Borrower shall maintain
interest rate protection arrangements as shall be satisfactory in form and
substance to the Agent (including, without limitation, with respect to
notional amount and tenor thereof and interest rates with respect thereto).
9.17. CASH MANAGEMENT. At all times after the occurrence and during the
continuance of an Event of Default, and from time to time at such times as
may be requested by the Agent, the Borrower will, and will cause each of its
Subsidiaries to, together with the employees, agents and other Persons acting
on behalf of the Borrower or such Subsidiary, cause all cash receipts and all
payments constituting proceeds of accounts receivable or other Collateral to
be paid, in the form received, with any appropriate endorsements, into an
account maintained with the Agent or such other accounts maintained with a
Bank or another bank as shall be subject to agency agreements in form and
substance satisfactory to the Agent.
10. CERTAIN NEGATIVE COVENANTS.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligations to issue,
extend or renew any Letters of Credit:
10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness
other than, so long as no Default or Event of Default shall then exist or
would result therefrom:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) Unsecured current liabilities of the Borrower or such Subsidiary
incurred in the ordinary course of business not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an
open account basis customarily extended and in fact extended in connection
with normal purchases of goods and services; PROVIDED, that each account
payable shall be paid or discharged in accordance with the Borrower's past
customary practice within the appropriate time period after the same shall
have become due and payable, unless the same shall currently be contested
by the Borrower or such Subsidiary in good faith by appropriate proceedings
or other appropriate action, and the Borrower or such Subsidiary, as the
case may be, shall have set aside such reserves, if any, with respect
thereto as are required by generally accepted accounting principles and
deemed adequate by the Borrower;
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(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 9.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower or
such Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) Other unsecured Indebtedness of the Borrower, provided that (i)
after the incurrence of such Indebtedness and after giving effect thereto,
no Default or Event of Default shall then exist and (ii) the aggregate
outstanding principal amount of all such Indebtedness shall not, at any
time, exceed $10,000,000;
(f) Indebtedness of the Borrower and its Subsidiaries in respect of
rental obligations (net of subleases) under leases (other than Capitalized
Leases) incurred in the ordinary course of business, provided that the
aggregate amount of such obligations required to be paid in any fiscal year
shall not exceed $15,000,000;
(g) Indebtedness of the Borrower in respect of Capitalized Leases
(net of subleases), provided that the aggregate Outstanding amount of all
future principal payments owing under (i) Capitalized Leases existing on
the date hereof and (ii) additional Capitalized Leases entered into
pursuant to this subsection (g) after the date hereof (as reflected in the
notes to the Borrower's audited financial statements in accordance with
generally accepted accounting principles) shall not at any time exceed
$20,000,000;
(h) Indebtedness existing on the Closing Date and listed and
described on SCHEDULE 10.1 hereto;
(i) Indebtedness consisting of the Senior Notes and the Additional
Senior Notes;
(j) purchase money Indebtedness incurred in connection with the
acquisition after the date hereof of any real or personal property by the
Borrower or any of its Subsidiaries; PROVIDED that (i) the amount of such
Indebtedness does not exceed the lesser of the fair market value or the
purchase price of the property so acquired, (ii) any lien securing such
Indebtedness covers only the property so acquired, and (iii) the aggregate
principal amount of such Indebtedness shall not, at any time, exceed
$10,000,000;
(k) Indebtedness in respect of interest rate protection arrangements
and currency exchange protection arrangements; PROVIDED that the aggregate
amount of such Indebtedness shall not, at any time, exceed $5,000,000;
(l) Indebtedness (i) of JA Joint Venture LLC owing to the Borrower;
PROVIDED that the Investment corresponding to such Indebtedness is
permitted pursuant to Section 10.3(l), (ii) of any non-Guarantor Subsidiary
of the Borrower owing to the Borrower; PROVIDED that the Investment
corresponding to such Indebtedness is permitted pursuant to Section
10.3(m)(i), and (iii) of any Subsidiary which is a Guarantor owing to the
Borrower or another Subsidiary which is a Guarantor; PROVIDED that the
Investment corresponding to such Indebtedness is permitted pursuant to
Section 10.3(m)(ii);
(m) Indebtedness of any Person acquired by the Borrower in a
Permitted Acquisition, PROVIDED that (i) after such Permitted Acquisition
and after giving effect
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thereto on a Pro Forma Basis, no Default or Event of Default shall then
exist, (ii) such Indebtedness was in existence prior to such Permitted
Acquisition and was not incurred in contemplation thereof, and
(iii) the aggregate amount of all such Indebtedness shall not, at any
time, exceed $10,000,000;
(n) Indebtedness of the Borrower and its Subsidiaries issued to
refinance or replace Indebtedness otherwise permitted under clauses (h),
(j), or (m) of this Section 10.1, PROVIDED that (i) the aggregate amount of
such Indebtedness does not exceed the principal amount of the Indebtedness
so refinanced or replaced, (ii) such Indebtedness has a tenor no shorter
than the Indebtedness so refinanced or replaced, (iii) such Indebtedness is
on terms and conditions (including, without limitation, terms relating to
interest rate, defaults, and mandatory prepayments) no more onerous to the
Borrower or such Subsidiary than the Indebtedness so refinanced or
replaced, and (iv) if secured, such Indebtedness is not secured by liens on
any assets of the Borrower or such Subsidiary which were not previously
subject to liens securing the Indebtedness so refinanced or replaced; and
(o) prior to June 30, 2001 and from and after the merger of the
Borrower and TRC, contingent liabilities arising from the indemnity
contained in that certain tax disaffiliation agreement between TRC and
Friendly Ice Cream Corporation not to exceed in the aggregate $10,500,000.
10.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, (i) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property
or assets of any character whether now owned or hereafter acquired, or upon
the income or profits therefrom; (ii) transfer any of such property or assets
or the income or profits therefrom for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have
an option to acquire, any property or assets upon conditional sale or other
title retention or purchase money security agreement, device or arrangement;
(iv) suffer to exist for a period of more than thirty (30) days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise,
be given any priority whatsoever over its general creditors; or (v) sell,
assign, pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse; PROVIDED
that the Borrower and any Subsidiary of the Borrower may create or incur or
suffer to be created or incurred or to exist:
(a) liens to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties to secure
claims for labor, material or supplies in respect of obligations not
overdue;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(c) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 10.1(d);
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(e) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the
<PAGE>
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title thereto, landlord's or lessor's liens under leases to which the
Borrower or a Subsidiary of the Borrower is a party, and other minor liens
or encumbrances none of which in the opinion of the Borrower interferes
materially with the use of the property affected in the ordinary conduct
of the business of the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on the
business of the Borrower individually or of the Borrower and its
Subsidiaries on a consolidated basis;
(f) liens existing on the date hereof and listed on SCHEDULE 10.2
hereto;
(g) liens and encumbrances on each Mortgaged Property as and to the
extent permitted by the Mortgage applicable thereto;
(h) liens securing Indebtedness permitted pursuant to
Sections 10.1(g), (j), (m) or (n); and
(i) liens in favor of the Agent for the benefit of the Banks securing
the Obligations.
10.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
Outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States of America banks having total assets in
excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by Standard and
Poor's;
(d) repurchase agreements secured by any one or more of the
Investments permitted by paragraphs (a), (b) or (c) above;
(e) shares of any so-called "money market fund" provided that such
fund is registered under the Investment Company Act of 1940, has net assets
of at least $100,000,000 and has an investment portfolio with an average
maturity of 365 days or less;
(f) existing Investments described on SCHEDULE 10.3 hereto;
(g) Investments made in the ordinary course of business in connection
with the Borrower's (i) conversion to Investments of franchisee
obligations, (ii) making of loans and advances to franchisees; PROVIDED
that the aggregate amount of all such Investments shall not, at any time,
exceed $2,500,000, and (iii) acceptance of notes from franchisees in
payment of goods and services provided by the Borrower to such franchisees;
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(h) the acquisition of one or more notes, leases or other evidences
of indebtedness of franchisees or guaranties of franchisee obligations in
accordance with franchisee leasing or loan programs not to exceed in the
aggregate $10,000,000;
(i) up to ten (10) shares (at the time of acquisition) of any
publicly traded stock of any competitor of the Borrower with an original
purchase price not to exceed $5,000 in the aggregate for all of such
shares;
(j) the acceptance of notes or other evidences of obligations to pay
the deferred purchase price of assets sold by the Borrower as otherwise
permitted under this Agreement, PROVIDED, that such assets have been sold
for fair market value in the reasonable judgment of the Borrower, in arms
length transactions, and such notes or evidences of indebtedness are
secured by a first priority lien and security interest in the assets sold;
(k) Investments in Permitted Acquisitions;
(l) Investments in JA Joint Venture LLC; PROVIDED that (i) the
aggregate amount of such Investments made during any one fiscal year shall
not exceed $5,000,000 and (ii) the aggregate amount of all such Investments
shall not, at any time, exceed $10,000,000;
(m) Investments (i) in Subsidiaries which are not Guarantors;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $2,500,000 and (ii) in Subsidiaries which are Guarantors;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $5,000,000; and
(n) Investments by the Borrower consisting of loans made to TRC;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $1,000,000;
PROVIDED that, with respect to each Investment permitted pursuant to
Sections 10.3(g), (h), (j), (m) or (n), the Borrower shall have taken, or shall
have caused such Subsidiary to take, all steps necessary or reasonably desirable
in order to grant to the Agent, for the benefit of the Banks and the Agent, a
first priority perfected security interest in such Investment.
10.4. DISTRIBUTIONS. The Borrower will not and will not permit any of
its Subsidiaries to make any Distributions, except that (i) if no Default or
Event of Default exists under this Credit Agreement, and none would result
from the making of any such Distributions, Subsidiaries of the Borrower may
make Distributions to the Borrower and PRO RATA to each other holder of such
Subsidiary's Equity Interests, if any, (ii) the Borrower may make
Distributions to each holder of its Equity Interests in an aggregate amount
in any one fiscal year not to exceed an amount sufficient to pay such
holder's estimated federal, state and local income taxes on such holder's
respective share of the taxable income of the Borrower for such fiscal year
and for any prior fiscal year that is the subject of an adjustment as a
result of an audit by tax authorities, and (iii) if no Default or Event of
Default exists under this Credit Agreement, and none would result from the
making of any such Distribution, and so long as the Leverage Ratio,
determined on a Pro Forma Basis as of the end of the most recently ended
fiscal quarter of the Borrower (giving effect to any borrowings made to fund
such Distribution), is less than or equal to 3.00:1, the Borrower may make
Distributions in an aggregate amount for all such Distributions after the
Closing Date not to exceed $5,000,000. The Borrower shall not permit any of
its Subsidiaries to enter into or become bound by any agreement or instrument
which limits or restricts the ability of such Subsidiary to make
Distributions to the Borrower.
10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. None of the
Guarantors or the Borrower will at any time, and the Borrower will not cause
or permit any of its Subsidiaries at any time to:
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(a) become a party to any merger or consolidation except, so long as
no Default or Event of Default shall exist or shall occur immediately after
such merger or consolidation and after giving effect thereto, (i) the
merger or consolidation of a Subsidiary of the Borrower with and into the
Borrower or a Subsidiary of the Borrower which is a Guarantor, with the
Borrower or such Guarantor to be the survivor of such merger or
consolidation, (ii) the merger or consolidation of a non-Guarantor
Subsidiary with and into another non-Guarantor Subsidiary, (iii) the merger
or consolidation of TRC, PRI or PMC with and into each other, (iv) the
merger or consolidation of TRC, PRI, PMC with and into the Borrower, with
the Borrower to be the survivor of such merger or consolidation; PROVIDED
THAT prior to such merger or consolidation, the Borrower has delivered to
the Agent Compliance Certificates (such Compliance Certificates to be
promptly distributed to the Banks by the Agent) demonstrating, both
immediately prior to and immediately after such merger or consolidation,
compliance on a PRO FORMA Basis with the covenants set forth in Section 11
of this Credit Agreement on a Pro Forma Basis (treating such merger or
consolidation as a "Permitted Acquisition" for purposes of the definition
of Pro Forma Basis), or (v) the merger of the Borrower with and into TRC,
PRI or PMC, with TRC, PRI or PMC to be the survivor of such merger or
consolidation; PROVIDED that (A) the survivor is a corporation duly
organized and validly existing under the laws of a state of the United
States of America with full corporate power to perform and observe the
obligations of the Borrower under the Loan Documents; (B) the charter
documents and capital structure of the survivor, and all documentation
relating to such merger or consolidation, are provided to the Banks and the
Agent not less than thirty (30) days prior to the effective date of such
merger or consolidation and are reasonably satisfactory to the Banks and
the Agent; (C) such survivor shall enter into such documents and shall
deliver such instruments, reasonably satisfactory in form and substance to
the Banks and the Agent, expressly assuming the obligations of the Borrower
under the Loan Documents, including, without limitation, such documents and
instruments as may be requested by the Agent in order to grant to the
Agent, for the benefit of the Banks and the Agent, a first priority
perfected security interest in all of such survivor's assets; (D) such
survivor shall deliver to the Banks and the Agent legal opinions, from
counsel reasonably satisfactory to the Banks and the Agent and in form and
substance reasonably satisfactory to the Banks and the Agent, as to the
assumption of the obligations of the Borrower under the Loan Documents
after such merger or consolidation and the grant of such security
interests; and (E) prior to such merger or consolidation, the Borrower has
delivered to the Agent Compliance Certificates (such Compliance
Certificates to be promptly distributed to the Banks by the Agent)
demonstrating, both immediately prior to and immediately after such merger
or consolidation, compliance on a PRO FORMA Basis with the covenants set
forth in Section 11 of this Credit Agreement on a Pro Forma Basis (treating
such merger or consolidation as a "Permitted Acquisition" for purposes of
the definition of Pro Forma Basis);
(b) become a party to or agree to or effect the disposition of any
substantial assets, other than sales of inventory in the ordinary course of
business, consistent with past practices; PROVIDED, HOWEVER, that if there
is no Default or Event of Default in existence at the time and none would
be created as a result of such action, such Persons may dispose of
additional assets in the ordinary course of business with an aggregate book
value not to exceed, on a cumulative basis from the Closing Date, the
greater of (i) ten percent (10%) of the sum of (A) net book value of the
Borrower's assets as of December 31, 1997 PLUS (B) the cost of all assets
acquired by the Borrower and its Subsidiaries after the Closing Date or
(ii) $20,000,000; or
(c) become a party to any acquisition other than the Repurchase and
the acquisition by the Borrower or a Subsidiary of the Borrower which is a
Guarantor (whether of stock or of substantially all of the assets of a
business or business division as a going concern or by means of a merger or
consolidation) of a 100% interest in any other
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Person (a "Permitted Acquisition") PROVIDED that (i) such other Person is
a Perkins Group restaurant franchisee or operates a similar business to
the Borrower, (ii) no Default or Event of Default has occurred and is
continuing or would exist after giving effect thereto, (iii) if the
Borrower or the acquiring Subsidiary merges with such other Person, the
Borrower or such Subsidiary, as the case may be, is the surviving party,
(iv) if such Person becomes a Subsidiary of the Borrower or any of its
Subsidiaries, it shall deliver a guaranty as provided in Section 29.9
hereof, and (v) with respect to acquisitions that exceed $5,000,000, the
Borrower has delivered to the Agent Compliance Certificates (such
Compliance Certificates to be promptly distributed to the Banks by the
Agent) demonstrating, both immediately prior to and immediately after such
acquisition, compliance on a PRO FORMA Basis with the covenants set forth
in Section 11 of this Credit Agreement and (vi) the aggregate amount
expended by the Borrower and its Subsidiaries for all Permitted
Acquisitions during any fiscal year shall not exceed the sum of (A) the
amount of New Site Capital Expenditures permitted to be made by the
Borrower and its Subsidiaries during such fiscal year pursuant to
Section 11.5 (which amount shall be considered New Site Capital
Expenditures for purposes of the covenants set forth herein) PLUS (B)
$10,000,000.
10.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property
or lease other property that the Borrower or any Subsidiary of the Borrower
intends to use for substantially the same purpose as the property being sold
or transferred, unless such transaction would be a permitted disposition of
assets under Section 10.5 and the obligations of the Borrower or such
Subsidiary as lessee would constitute permitted Indebtedness under Section
10.1.
10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and
will not permit any of its Subsidiaries to, (a) use any of the Real Estate or
any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the
Real Estate, (d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (e) otherwise conduct any
activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law.
10.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to Section 302(f) or Section
4068 of ERISA; or
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(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, by
more than $250,000.
10.9. CHANGE IN FISCAL YEAR. The Borrower shall not effect or permit any
change in its fiscal year without the prior written consent of the Agent
(such consent not to be unreasonably withheld); PROVIDED that the Borrower
may change its fiscal year to one consisting of thirteen 28-day fiscal
accounting periods ending in December or January.
10.10. CHANGES IN TERMS OF PARTNERSHIP DOCUMENTS. The Borrower shall not
effect or permit any change in or amendment to the Partnership Documents
which would materially adversely affect the interests of the Agent and the
Banks under the Loan Documents.
10.11. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any transaction with any
Affiliate (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
Affiliate or, to the knowledge of the Borrower, any corporation, partnership,
trust or other entity in which any such Affiliate has a substantial interest
or is an officer, director, trustee or partner, on terms more favorable to
such Person than would have been obtainable on an arm's-length basis in the
ordinary course of business.
10.12. PREPAYMENT OF OTHER INDEBTEDNESS. The Borrower shall not, without
the prior written consent of the Agent, optionally prepay, redeem, repurchase
or retire any Indebtedness (other than the Obligations) prior to the
originally scheduled maturity thereof.
10.13. RESTRICTIONS ON NEGATIVE PLEDGES. The Borrower will not, and will
not permit any of its Subsidiaries to, become bound by any agreement (other
than this Credit Agreement, the other Loan Documents and the Senior
Indenture) which limits or restricts the ability of such Person to grant
liens and security interests on its property.
10.14. CONCERNING PFC.
The Borrower shall not permit PFC to have any material assets or conduct
any material operations.
11. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligation to issue,
extend or renew any Letters of Credit:
11.1. LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio,
determined at the end of each fiscal quarter of the Borrower ending during a
Period set forth in the table below, to be greater than the Ratio set forth
opposite such Period in such table:
PERIOD RATIO
Closing Date - 6/29/98 4.75:1
6/30/98 - 12/30/98 4.50:1
12/31/98 - 12/30/99 4.25:1
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12/31/99 - 12/30/00 3.75:1
12/31/00 - 12/30/01 3.25:1
thereafter 3.00:1
11.2. NET WORTH. The Borrower will not permit Consolidated Net Worth, at
any time, to be less than the sum of (a) the remainder of (i) the greater of
(A) actual Consolidated Net Worth as at December 31, 1997 and (B) $25,561,000
MINUS (ii) $5,000,000, PLUS (b) fifty percent (50%) of positive Consolidated
Net Income after Tax Distributions for each fiscal year of the Borrower
ending after December 31, 1997, PLUS (c) one hundred percent (100%) of the
Net Cash Proceeds received by the Borrower and its Subsidiaries from the
issuance of equity securities after the Closing Date.
11.3. CASH FLOW RATIO. The Borrower will not permit the Cash Flow Ratio,
determined at the end of each fiscal quarter of the Borrower, to be less than
1.25:1.
11.4. INTEREST COVERAGE RATIO. The Borrower will not permit the Interest
Coverage Ratio, determined at the end of each fiscal quarter of the Borrower
ending during a Period listed in the table below, to be less than the amount
set forth opposite such Period in such table:
PERIOD RATIO
Closing Date - 12/31/97 2.25:1
1/1/98 - 12/30/98 2.50:1
12/31/98 - 12/30/99 2.60:1
12/31/99 - 12/30/00 3.00:1
12/31/00 - 12/30/01 3.25:1
thereafter 3.50:1
11.5. CAPITAL EXPENDITURES. The Borrower will not make, and will not
permit any of its Subsidiaries to make, Maintenance Capital Expenditures,
Improvement Capital Expenditures, New Site Capital Expenditures, or
Remodeling Capital Expenditures in any fiscal year set forth in the table
below, that exceed, for all such Persons, the aggregate amount set forth
opposite such fiscal year in the columns titled, respectively, "Maintenance
Capital Expenditures", "Improvement Capital Expenditures", "New Site Capital
Expenditures", and "Remodeling Capital Expenditures":
MAINTENANCE REMODELING IMPROVEMENT NEW SITE
CAPITAL CAPITAL CAPITAL CAPITAL
FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES EXPENDITURES
1997 $4,300,000 $4,600,000 $5,470,000 $6,200,000
1998 $4,500,000 $4,700,000 $2,950,000 $10,400,000
1999 $4,800,000 $4,800,000 $2,200,000 $12,400,000
2000 $4,900,000 $5,000,000 $2,450,000 $14,600,000
2001 $5,200,000 $5,100,000 $2,290,000 $17,000,000
2002 $5,500,000 $5,300,000 $2,280,000 $17,500,000
PROVIDED, however, that (i) if, during any fiscal year, the amount of
Maintenance Capital Expenditures, Improvement Capital Expenditures, New Site
Capital Expenditures, or Remodeling Capital Expenditures permitted for such
fiscal year is not so utilized, such unutilized amount of Maintenance Capital
Expenditures, Improvement Capital Expenditures, New Site Capital Expenditures
or, as the case may be, Remodeling Capital Expenditures may be used in the
next succeeding fiscal year but not in any subsequent fiscal year as,
respectively,
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Maintenance Capital Expenditures, Improvement Capital Expenditures, New Site
Capital Expenditures or Remodeling Capital Expenditures (it being understood
that the amount of Maintenance Capital Expenditures, Improvement Capital
Expenditures, New Site Capital Expenditures and Remodeling Capital
Expenditures made during any fiscal year will be applied first to the limit
of such Maintenance Capital Expenditures, Improvement Capital Expenditures,
New Site Capital Expenditures, or Remodeling Capital Expenditures permitted
for such year and second to any Maintenance Capital Expenditures, Improvement
Capital Expenditures, New Site Capital Expenditures or Remodeling Capital
Expenditures carried over from a preceding fiscal year) and (ii) if, during
any fiscal year, the amount of Maintenance Capital Expenditures and/or
Remodeling Capital Expenditures permitted for such fiscal year is not so
utilized, such unutilized amount of Maintenance Capital Expenditures and/or
Remodeling Capital Expenditures may be used in such fiscal year as
Maintenance Capital Expenditures, Remodeling Capital Expenditures,
Improvement Capital Expenditures or New Site Capital Expenditures. New Site
Capital Expenditure limits contained in this Section 11.5 shall not further
limit the amount the Borrower and its Subsidiaries may expend on Permitted
Acquisitions otherwise permitted under Section 10.5(c).
12. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Loans and of BKB to
issue any initial Letters of Credit shall be subject to the satisfaction of
the following conditions precedent on or before December 31, 1997:
12.1. LOAN DOCUMENTS. Each of the Loan Documents, the Repurchase
Documents and the Merger Agreement shall have been duly executed and
delivered by the respective parties thereto, shall be in full force and
effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from each of the Perkins Group a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing
Date, of each of (a) its charter or other incorporation or partnership
documents as in effect on such date of certification, and (b) its by-laws or
partnership agreement as in effect on such date.
12.3. CORPORATE AND PARTNERSHIP ACTION. All corporate and partnership
action necessary for the valid execution, delivery and performance by each
member of the Perkins Group of this Credit Agreement and the other Loan
Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Banks shall have
been provided to each of the Banks.
12.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
each member of the Perkins Group an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of such Person, and giving
the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of each member of the
Perkins Group, each of the Loan Documents to which such member of the Perkins
Group is or is to become a party; (b) in the case of the Borrower, to make
Revolving Credit Loan Requests and Conversion Requests and to apply for
Letters of Credit; and (c) to give notices and to take other action on its
behalf under the Loan Documents.
12.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest
in and lien upon the Collateral. All filings, recordings, deliveries of
instruments and other actions necessary or desirable in the opinion of the
Agent to protect and preserve such security interests shall have been duly
effected. The Agent shall have received evidence thereof in form and
substance satisfactory to the Agent.
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12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall
have received from each of the Borrower and its Subsidiaries a completed and
fully executed Perfection Certificate (as such term is defined in the
Security Agreements) and the results of UCC searches with respect to the
Collateral, indicating no liens other than Permitted Liens and otherwise in
form and substance satisfactory to the Agent.
12.7. TAXES. The Agent shall have received evidence of payment of real
estate taxes and municipal charges on all Real Estate not delinquent on or
before the Closing Date.
12.8. TITLE INSURANCE. The Agent shall have received a Title Policy
covering each Mortgaged Property (or commitments to issue such policies, with
all conditions to issuance of the Title Policy deleted by an authorized agent
of the Title Insurance Company) together with proof of payment of all fees
and premiums for such policies, from the Title Insurance Company and in
amounts satisfactory to the Agent, insuring the interest of the Agent and
each of the Banks as mortgagee under the Mortgages.
12.9. LANDLORD CONSENTS. The Borrower and its Subsidiaries shall have
delivered to the Agent all consents required for the Agent to receive, as
part of the Security Documents, a collateral assignment of each material
leasehold of personal property, and a mortgage of each material leasehold of
real property, together in each case with such estoppel certificates as the
Agent may request.
12.10. HAZARDOUS WASTE ASSESSMENTS. The Agent shall have received
hazardous waste site assessments from environmental engineers and in form and
substance satisfactory to the Agent, covering each Mortgaged Property and all
other real property in respect of which the Borrower or any of its
Subsidiaries may have material liability, whether contingent or otherwise,
for dumping or disposal of Hazardous Substances.
12.11. CERTIFICATES OF INSURANCE. The Agent shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance
with the provisions of the Security Agreements and (ii) certified copies of
all policies evidencing such insurance (or certificates therefore signed by
the insurer or an agent authorized to bind the insurer); provided that the
requirements of this Section 12.11(ii) may be satisfied by the delivery of
such certified copies on or before January 31, 1998.
12.12. SOLVENCY OPINION. If requested by the Agent, each of the Banks
shall have received an opinion of Valuation Research Inc., or such other firm
as shall be reasonably satisfactory to the Agent, dated as of the Closing
Date, as to the solvency of the Borrower and its Subsidiaries following the
consummation of the transactions contemplated herein and in form and
substance satisfactory to the Banks.
12.13. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinions addressed to the Banks and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the Banks
and the Agent, from (i) Donald F. Wiseman, Esq., counsel to the Borrower and
its Subsidiaries, (ii) Mayer, Brown & Platt, special counsel to the Borrower
and its Subsidiaries, (iii) Davis, Graham & Stubbs LLP, special Colorado
counsel to the Agent, (iv) Dorsey & Whitney LLP, special Minnesota counsel to
the Agent, (v) Cline, Williams, Wright, Johnson & Oldfather, special Nebraska
counsel to the Agent, (vi) Quarles & Brady, special Wisconsin counsel to the
Agent, (vii) Lord, Bissell & Brook, special Illinois counsel to the Agent,
(viii) Stinson, Mag & Fizzell, P.C., special Missouri counsel to the Agent,
(ix) Stinson, Mag & Fizzell, P.C., special Kansas counsel to the Agent, and
(x) Dykema Gossett, special Michigan counsel to the Agent.
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12.14. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
Agent, as appropriate, all fees due hereunder.
12.15. EXISTING INDEBTEDNESS. The Agent shall have received a payoff
letter in a form satisfactory to the Agent with respect to the Existing
Credit Agreement and evidence of the repayment of all Indebtedness of the
Borrower and its Subsidiaries (other than Indebtedness permitted under
Section 10.1 hereof).
12.16. CAPITAL STRUCTURE. The Agent shall be satisfied with the capital
structure of the Borrower (including, without limitation, senior unsecured or
subordinated Indebtedness of the Borrower).
12.17. REPURCHASE; MERGER, ETC. The Repurchase shall have been
consummated in accordance with the Preliminary Offering Memorandum relating
to the Senior Notes, dated December 3, 1997, and otherwise on terms and
conditions satisfactory to the Agent, for a purchase price not to exceed $14
per partnership unit of the Borrower and $76,500,000 in the aggregate. The
total transaction costs and expenses associated with the Repurchase and the
other transactions contemplated hereby (including, without limitation, tender
offer expenses and expenses relating to redeeming existing indebtedness and
issuing new indebtedness) shall not exceed an amount approved by the Agent.
The Merger shall have been consummated in accordance with the terms of the
Merger Agreement. Perkins Restaurants Operating Company, L.P. shall have
been merged with and into the Borrower, with the Borrower the surviving
partnership of such merger, and the Agent shall have received evidence
thereof in form and substance satisfactory to it.
12.18. NO MATERIAL ADVERSE CHANGE. The Agent shall be satisfied that
there shall have occurred no material adverse change in the business,
operations, assets, properties, condition income or prospects of the Borrower
or its Subsidiaries since the Balance Sheet Date or the ability of any Person
to consummate the Repurchase. The parties hereto acknowledge that the
failure of Mr. Donald N. Smith to be the chairman of the board of directors
of PMC on the Closing Date shall constitute such a material adverse change.
The Agent shall be satisfied that the financial statements delivered to it
fairly present the business and financial condition of the Guarantors, the
Borrower and its Subsidiaries.
12.19. BALANCE SHEETS. The Borrower shall have delivered to the Agent,
in each case, in form and substance satisfactory to the Agent, (a) the
consolidated balance sheet of the Borrower and its Subsidiaries, dated as of
September 30, 1997, and (b) the PRO FORMA consolidated closing balance sheet
of the Borrower and its Subsidiaries, based on the consolidated balance sheet
of the Borrower and its Subsidiaries dated as of September 30, 1997 and
giving effect to the Repurchase and the financing contemplated hereby, dated
as of the Closing Date; PROVIDED, that the requirements of this Section
12.19(b) may be satisfied by the delivery of such balance sheet on or before
January 31, 1998.
12.20. NO LITIGATION. No litigation, inquiry, injunction or restraining
order shall be pending, entered or threatened that, in the reasonable opinion
of the Agent, could reasonably be expected to have a material adverse effect
on (i) the transactions contemplated hereby or the Repurchase, (ii) the
business, assets, liabilities (actual or contingent) operations, condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, (iii) the ability of the Borrower and its Subsidiaries to perform
their obligations under the Loan Documents, (iv) the rights and remedies of
the Agent and the Banks under the Loan Documents, or (v) the perfection or
priority of any security interests granted to the Agent under the Loan
Documents.
12.21. CONSENTS AND APPROVALS. All governmental and third-party
approvals (including landlords' and other consents) necessary or advisable in
connection with the Repurchase, this Credit Agreement and the continuing
operations of the Borrower and its
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Subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent
or otherwise impose materially adverse conditions on the Borrower and its
Subsidiaries or the Repurchase.
12.22. OTHER DOCUMENTATION. All other documentation, including any tax
sharing agreements or other financing arrangements of the Borrower and its
Subsidiaries, shall be reasonably satisfactory in form and substance to the
Agent.
12.23. COMMERCIAL FINANCE EXAMINATION. The Agent shall have received and
be satisfied with the results of a commercial finance examination with
respect to the Borrower and its Subsidiaries (including, without limitation)
the Agent's environmental review of the Mortgaged Property and such
environmental consultant reports as shall be desired by the Agent.
12.24. COLLATERAL VALUATION. The Agent shall have received and be
satisfied with appraisals with respect to the Collateral including, without
limitation, third-party market value appraisals with respect to the Mortgaged
Property.
13. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, and of BKB to issue,
extend or renew any Letter of Credit, in each case whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties made by or on behalf of each member of this
Perkins Group contained in this Credit Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with
this Credit Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Letter of Credit, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank would make it illegal for such Bank to make such Loan or
to participate in the issuance, extension or renewal of such Letter of Credit
or in the reasonable opinion of the Agent would make it illegal for the Agent
to issue, extend or renew such Letter of Credit.
13.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents
and all other documents incident thereto shall be satisfactory in substance
and in form to the Banks and to the Agent and the Agent's Special Counsel,
and the Banks, the Agent and such counsel shall have received all information
and such counterpart originals or certified or other copies of such documents
as the Agent may reasonably request.
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14. EVENTS OF DEFAULT; ACCELERATION; ETC.
14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both
is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans, the
commitment fee, any Letter of Credit Fee, the Agent's fee, or other sums
due hereunder or under any of the other Loan Documents, when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in Sections 9.1, 9.4, 9.6, 9.12, 9.14, 10.1 through 10.6, 10.9
through 10.13, 11 and 29 hereof;
(d) the Borrower shall fail to perform any term, covenant or
agreement contained herein (other than those specified in subsections (a),
(b) and (c), above) and such failure shall continue for 30 days;
(e) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this Section 14.1) for
fifteen (15) days after written notice of such failure has been given to
the Borrower by the Agent;
(f) any representation or warranty of the Borrower in this Credit
Agreement or any of the other Loan Documents or in any other document or
instrument delivered pursuant to or in connection with this Credit
Agreement shall prove to have been false in any material respect upon the
date when made or deemed to have been made or repeated;
(g) any of the Borrower, its Subsidiaries, or the General Partner
shall fail to pay at maturity, or within any applicable period of grace,
any obligation for borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount greater than $500,000, or fail to
observe or perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing borrowed money
or credit received or in respect of any Capitalized Leases in an aggregate
amount greater than $500,000 for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof;
(h) any of the Borrower, its Subsidiaries, or the General Partner
shall make an assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of such Person(s) or of any
substantial part of the assets of such Person's or shall commence any case
or other proceeding relating to under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in effect, or shall
take any action to authorize or in furtherance of any of the foregoing, or
if any such petition or application shall be filed or any such case or
other proceeding shall be commenced against such Person(s) and such
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Person(s) shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within sixty (60) days following the filing thereof;
(i) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower, or any of
its Subsidiaries, or the General Partner bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of such Person(s) in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(j) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower, any of its Subsidiaries, or the General
Partner that, with other outstanding final judgments, undischarged, against
such Person(s) exceeds in the aggregate $1,000,000;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in the Collateral shall cease to be perfected or shall cease to have the
priority contemplated by the Security Documents, in each case otherwise
than in accordance with the terms thereof or with the prior written consent
of the Banks, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of the Perkins Group party thereto or any of
their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Banks shall have determined in
their reasonable discretion that such event reasonably could be expected to
result in liability of the Borrower or any of its Subsidiaries to the PBGC
or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000
and such event in the circumstances occurring would be reasonably likely to
constitute grounds for the termination of such Guaranteed Pension Plan by
the PBGC or for the appointment by the appropriate United States of America
District Court of a trustee to administer such Guaranteed Pension Plan; or
a trustee shall have been appointed by such District Court to administer
such Plan; or the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(m) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty
(30) days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation or other casualty, which in
any such case causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment or revenue producing activities at any
facility or facilities of the Borrower or any of its Subsidiaries if such
event or circumstance would have a material adverse effect on the business,
assets or condition (financial or otherwise) of the Borrower or such
Subsidiary;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a
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material adverse effect on the business or financial condition of the
Borrower or such Subsidiary;
(p) any of the Perkins Group shall be indicted for a state or federal
crime, or any civil or criminal action shall otherwise have been brought or
threatened against the Borrower or any of its Subsidiaries, a punishment
for which in any such case could include the forfeiture of any assets of
the Borrower or such Subsidiary having a fair market value in excess of
$250,000;
(q) a "Change of Control" under, and as defined in the Senior
Indenture shall have occurred; or
(r) if the Borrower shall, at any time, own or control less than one
hundred percent (100%) of the equity or ownership interests of each of its
Subsidiaries which is a Guarantor;
then, and in any such event, so long as the same may be continuing, (x) the
Agent may, and upon the request of the Majority Banks shall, by notice in
writing to the Borrower declare all amounts owing with respect to this Credit
Agreement, the Notes and the other Loan Documents, and (y) BKB may by notice in
writing to the Borrower declare all amounts owing with respect to the
Reimbursement Obligations to be, and in either case they shall thereupon
forthwith become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower; PROVIDED that in the event of any Event of Default specified in
Sections 14.1(h) or 14.1(i), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from the Agent or
any Bank.
14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 14.1(h) or Section 14.1(i) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of
the Banks shall be relieved of all further obligations to make Loans to the
Borrower and the Agent shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have
occurred and be continuing, the Agent may and, upon the request of the
Majority Banks, shall, by notice to the Borrower, terminate the unused
portion of the credit hereunder, and upon such notice being given such unused
portion of the credit hereunder shall terminate immediately and each of the
Banks shall be relieved of all further obligations to make Loans and the
Agent shall be relieved of all further obligations to issue, extend or renew
Letters of Credit. No termination of the credit hereunder shall relieve the
Borrower or any of its Subsidiaries of any of the Obligations.
14.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 14.1, each Bank, if
owed any amount with respect to the Loans may, with the consent of the
Majority Banks but not otherwise, or BKB, if owed any amount with respect to
the Reimbursement Obligations, may, proceed to protect and enforce its rights
by suit in equity, action at law or other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in this
Credit Agreement and the other Loan Documents or any instrument pursuant to
which the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the EX PARTE appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such
Bank. No remedy herein conferred upon any Bank or the Agent or the holder of
any Note or purchaser of any Letter of Credit Participation is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision
of law.
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14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the occurrence or during the continuance of any Default or Event of Default,
the Agent or any Bank, as the case may be, receives any monies in connection
with the enforcement of any the Security Documents, or otherwise with respect
to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; PROVIDED, HOWEVER, that (i) distributions
shall be made (A) PARI PASSU among Obligations with respect to the Agent's
fee payable pursuant to Section 6.2 and all other Obligations and (B) with
respect to each type of Obligation owing to the Banks, such as interest,
principal, fees and expenses, among the Banks PRO RATA, and (ii) the Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth
of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
15. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any
of the Banks to the Borrower and any securities or other property of the
Borrower in the possession of such Bank may be applied to or set off by such
Bank against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower to such Bank. Each of the
Banks agrees with each other Bank that (a) if an amount to be set off is to
be applied to Indebtedness of the Borrower to such Bank, other than
Indebtedness evidenced by the Notes held by such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced
by all such Notes held by such Bank, and (b) if such Bank shall receive from
the Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes
held by, such Bank by proceedings against the Borrower at law or in equity or
by proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment
of the Note or Notes held by such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the
Notes held by all of the Banks, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either by way
of distribution, PRO TANTO assignment of claims, subrogation or otherwise as
shall result in each Bank receiving in respect of the Notes held by it or its
proportionate payment as contemplated by this Credit Agreement; PROVIDED that
if all or any part of such excess payment is thereafter
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recovered from such Bank, such disposition and arrangements shall be
rescinded and the amount restored to the extent of such recovery, but without
interest.
16. THE AGENT.
16.1. AUTHORIZATION.
(a) The Agent and its affiliates are authorized to take such action
on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related
documents delegated to the Agent and its affiliates, together with such
powers as are reasonably incident thereto, PROVIDED that no duties or
responsibilities not expressly assumed herein or therein shall be implied
to have been assumed by the Agent and its affiliates.
(b) The relationship among the Agent, its affiliates and each of the
Banks is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention, the
independent contractual relationship among the Agent, its affiliates and
each of the Banks. Nothing contained in this Credit Agreement nor the
other Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship among the Agent, its affiliates and any of the
Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, each of the Agent and its affiliates is
nevertheless a "representative" of the Banks, as that term is defined in
Article 1 of the Uniform Commercial Code, for purposes of actions for the
benefit of the Banks and the Agent with respect to all collateral security
and guaranties contemplated by the Loan Documents. Such actions include
the designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust in
collateral security intended to secure the payment or performance of any of
the Obligations, all for the benefit of the Banks and the Agent.
16.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through affiliates, employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Credit Agreement and the other
Loan Documents. The Agent may utilize the services of such Persons as the
Agent in its sole discretion may reasonably determine, and all reasonable
fees and expenses of any such Persons shall be paid by the Borrower.
16.3. NO LIABILITY. Neither the Agent nor any of its affiliates nor any
of their shareholders, directors, officers or employees nor any other Person
assisting them in their duties nor any agent or employee thereof, shall be
liable for any waiver, consent or approval given or any action taken, or
omitted to be taken, in good faith by it or them hereunder or under any of
the other Loan Documents, or in connection herewith or therewith, or be
responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Agent or such other Person, as the case may be,
may be liable for losses due to its willful misconduct or gross negligence.
16.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
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for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to
the Notes, or for any recitals or statements, warranties or representations
made herein or in any of the other Loan Documents or in any certificate or
instrument hereafter furnished to it by or on behalf of the Borrower or any
of its Subsidiaries, or be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or intended
to constitute, collateral security for the Notes or to inspect any of the
properties, books or records of the Borrower or any of its Subsidiaries. The
Agent shall not be bound to ascertain whether any notice, consent, waiver or
request delivered to it by the Borrower or any holder of any of the Notes
shall have been duly authorized or is true, accurate and complete. The Agent
has not made nor does it now make any representations or warranties, express
or implied, nor does it assume any liability to the Banks, with respect to
the credit worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
16.5. PAYMENTS.
16.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's PRO RATA share of payments received by
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
16.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
16.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (a) to make available to the Agent its PRO RATA share of
any Loan or (b) to comply with the provisions of Section 15 with respect to
making dispositions and arrangements with the other Banks, where such
Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its PRO RATA share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the
provisions of this Credit Agreement, shall be deemed delinquent (a
"Delinquent Bank") and shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on
account of Outstanding Loans, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
PRO RATA shares of all Outstanding Loans. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent Banks
in proportion to their respective PRO RATA shares of all Outstanding Loans.
A Delinquent Bank shall be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
Outstanding Loans of the nondelinquent Banks, the Banks' respective PRO
RATA shares of all Outstanding Loans have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
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16.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note as the absolute owner or purchaser thereof for all purposes hereof until
it shall have been furnished in writing with a different name by such payee
or by a subsequent holder, assignee or transferee.
16.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been reimbursed
by the Borrower as required by Section 19), and liabilities of every nature
and character arising out of or related to this Credit Agreement, the Notes,
or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly
caused by the Agent's willful misconduct or gross negligence.
16.8. AGENT AS BANK; SYNDICATION AGENT. In its individual capacity, BKB
shall have the same obligations and the same rights, powers and privileges in
respect to its Revolving Credit Commitment and the Loans made by it, and as
the holder of any of the Notes, as it would have were it not also the Agent.
The Syndication Agent shall not have any obligation, liability,
responsibility or duty under this Credit Agreement other than as applicable
to all Banks as such.
16.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a
successor Agent, such successor Agent being reasonably acceptable to the
Borrower unless a Default or Event of Default shall have occurred and be
continuing. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty (30)
days after the removal of the Agent, then any Bank shall have the right to
petition a court of competent jurisdiction for the appointment of a successor
Agent. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the
provisions of this Credit Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Agent.
16.10. REMOVAL OF AGENT. The Borrower may, but shall have no obligation
to, remove the Agent from its capacity as Agent upon the merger or
consolidation of the Agent with or into any Person or upon the appointment of
the Federal Deposit Insurance Corporation as receiver for the Agent as a
result of the Agent's insolvency, by giving sixty (60) days prior written
notice thereof to the Agent and the Banks. Upon any such removal, the
Majority Banks shall have the right to appoint a successor Agent, such
successor Agent being reasonably acceptable to the Borrower unless a Default
or Event of Default shall have occurred and be continuing. If no successor
Agent shall have been so appointed by the Majority Banks and shall have
accepted such appointment within thirty (30) days after the removal of the
Agent, then any Bank shall have the right to petition a court of competent
jurisdiction for the appointment of a successor Agent. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the removed Agent, and the removed Agent
shall be discharged from its duties and obligations hereunder. After any
removal of the Agent, the provisions of this Credit Agreement and the other
Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
16.11. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 16.11 or
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Section 9.5.1 it shall promptly notify the other Banks of the existence of
such Default or Event of Default.
16.12. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (i)
so requested by the Majority Banks and (ii) the Banks have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in
respect of such Collateral. The Majority Banks may direct the Agent in
writing as to the method and the extent of any such sale or other
disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, PROVIDED that the Agent need not
comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
acknowledges that from time to time financial advisory, investment banking
and other services may be offered or provided to the Borrower or one or more
of its Subsidiaries, in connection with this Credit Agreement or otherwise,
by a Section 20 Subsidiary. The Borrower, for itself and each of its
Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with
the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Borrower or any of its Subsidiaries, and (b) the Agent and
each Bank to share with such Section 20 Subsidiary any information delivered
to the Agent or such Bank by the Borrower or any of its Subsidiaries pursuant
to this Credit Agreement, or in connection with the decision of such Bank to
enter into this Credit Agreement; it being understood, in each case, that any
such Section 20 Subsidiary receiving such information shall be bound by the
confidentiality provisions of this Credit Agreement. Such authorization
shall survive the payment and satisfaction in full of all of Obligations.
17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential
information of the same nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower or any
of its Subsidiaries pursuant to this Credit Agreement that is identified by
such Person as being confidential at the time the same is delivered to the
Banks or the Agent, PROVIDED that nothing herein shall limit the disclosure
of any such information (a) after such information shall have become public
other than through a violation of this Section 17, (b) to the extent required
by statute, rule, regulation or judicial process, (c) to counsel for any of
the Banks or the Agent, (d) to bank examiners or any other regulatory
authority having jurisdiction over any Bank or the Agent, or to auditors or
accountants, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in
connection with any litigation to which any one or more of the Banks, the
Agent or any Section 20 Subsidiary is a party, or in connection with the
enforcement of rights or remedies hereunder or under any other Loan Document,
(g) to a Subsidiary or affiliate of such Bank as provided in Section 17.1 or
(h) to any assignee or participant (or prospective assignee or participant)
so long as such assignee or participant agrees to be bound by the provisions
of Section 21.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable
law or court order, each of the Banks and the Agent shall, prior to
disclosure thereof, notify the Borrower of any request for disclosure of any
such non-public information by any governmental agency or
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representative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental
agency) or pursuant to legal process.
17.4. OTHER. In no event shall any Bank or the Agent be obligated or
required to return any materials furnished to it or any Section 20 Subsidiary
by the Borrower or any of its Subsidiaries. The obligations of each Bank
under this Section 17 shall supersede and replace the obligations of such
Bank under any confidentiality letter in respect of this financing signed and
delivered by such Bank to the Borrower prior to the date hereof and shall be
binding upon any assignee of, or purchaser of any participation in, any
interest in any of the Loans or Reimbursement Obligations from any Bank.
18. EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Agent or any of the
Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement
(the Borrower hereby agreeing to indemnify the Agent and each Bank with
respect thereto), (c) the reasonable fees, expenses and disbursements of the
Agent's Special Counsel and any local counsel to the Agent incurred in
connection with the preparation, syndication, administration, interpretation
or recordation of the Loan Documents and the other instruments mentioned
herein, each closing hereunder, and amendments, modifications, approvals,
consents or waivers hereto or hereunder, (d) the fees, expenses and
disbursements of the Agent, the Arranger and their affiliates incurred in
connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and surveyor, engineering and
appraisal charges, the fees and expenses relating to collateral examinations,
and the fees and expenses of environmental consultants (e) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys'
fees and costs, which attorneys may be employees of any Bank or the Agent,
and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and charges) incurred by any Bank or the Agent in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's, the Agent's or the Arranger's
relationship with the Borrower or any of its Subsidiaries and (f) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred
in connection with UCC searches, UCC filings or mortgage recordings. The
covenants of this Section 18 shall survive payment or satisfaction of all
other Obligations.
19. INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent, the
Arranger and their affiliates, and the Banks and their affiliates from and
against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement
or any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the Borrower
or any of its Subsidiaries of the proceeds of any of the Loans or Letters of
Credit, (b) the Borrower or any of its Subsidiaries entering into or
performing this Credit Agreement or any of the other Loan Documents or (c)
with respect to the Borrower and its Subsidiaries and their respective
properties and assets, the violation of any Environmental Law, the presence,
disposal, escape, seepage, leakage, spillage, discharge, emission, release or
threatened release of any hazardous
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substances or any action, suit, proceeding or investigation brought or
threatened with respect to any hazardous substances (including, but not
limited to, claims with respect to wrongful death, personal injury or damage
to property), in each case including, without limitation, the reasonable fees
and disbursements of counsel and allocated costs of internal counsel incurred
in connection with any such investigation, litigation or other proceeding;
PROVIDED, HOWEVER, (i) so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower shall not be required to pay the
fees and expenses of more than one counsel for the Agent and the Banks,
unless the Agent or a Bank shall have delivered to the Borrower an opinion of
counsel to the Agent or such Bank stating that the interests of the Agent and
such Bank are sufficiently divergent from the interests of the other Banks
or, as the case may be, the Agent, such that it would be inappropriate for
such Persons to be represented by the same counsel and (ii) the Borrower
shall not be obligated to indemnify any Person under this Section 19 for any
claims, proceedings, liabilities, losses, damages, settlement payments,
obligations, and expenses to the extent that the same result from the willful
misconduct or gross negligence of such Person. In litigation, or the
preparation therefor, the Banks and the Agent shall be entitled to select
their own counsel and, in addition to the foregoing indemnity, the Borrower
agrees to pay promptly the reasonable fees and expenses of such counsel. If,
and to the extent that the obligations of the Borrower under this Section 19
are unenforceable for any reason, the Borrower hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which
is permissible under applicable law. The covenants contained in this Section
19 shall survive payment or satisfaction in full of all other Obligations.
20. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any
of them, and shall survive the making by the Banks of any of the Loans and
the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes
or any of the other Loan Documents remains Outstanding or any Bank has any
obligation to make any Loans or the Agent has any obligation to issue, extend
or renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in
any certificate or other paper delivered to any Bank or the Agent at any time
by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or
in connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary hereunder.
21. ASSIGNMENT AND PARTICIPATION.
CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all
or a portion of its Revolving Credit Commitment Percentage and Revolving
Credit Commitment and the same portion of the Loans at the time owing to it,
the Revolving Credit Notes held by it and its participating interest in the
risk relating to any Letters of Credit; PROVIDED that (a) unless such
assignment is to an affiliate of a Bank which is owned by the same holding
company owning such Bank, the Agent shall have given its prior written
consent to such assignment (such consent not to be unreasonably withheld),
(b) unless such assignment is to an affiliate of a Bank which is owned by the
same holding company owning such Bank and so long as no Default or Event of
Default has occurred and is continuing, the Borrower shall have given its
prior written consent to such assignment (such consent not to be unreasonably
withheld), (c) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Bank's rights and obligations under
this Credit Agreement, (d) each assignment shall be in an amount that is a
minimum of $5,000,000 (or if less, such Bank's entire Loans and Revolving
Credit Commitment) and (e) the
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parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of EXHIBIT D hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall
be at least five (5) Business Days after the execution thereof, (x) the
assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder, and (y) the assigning Bank shall, to the extent provided in such
assignment and upon payment to the Agent of the registration fee referred to
in Section 21.3, be released from its obligations under this Credit
Agreement.
21.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or
observance by the Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations of any
of their obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in Section 8.4 and Section 9.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
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(i) such assignee confirms that it has made satisfactory arrangements
with the assigning Bank with respect to Letter of Credit Fees.
21.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register")
for the recordation of the names and addresses of the Banks and the Revolving
Credit Commitment Percentage of, and principal amount of the Loans owing to
the Banks from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Agent and the Banks
may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrower and the Banks at any reasonable time
and from time to time upon reasonable prior notice. Upon each such
recordation, the assigning Bank agrees to pay to the Agent a registration fee
in the sum of $3,500.
21.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject
to such assignment, the Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrower
and the Banks (other than the assigning Bank). Within five (5) Business Days
after receipt of such notice, the Borrower, at its own expense, shall execute
and deliver to the Agent, in exchange for each surrendered Note, a new Note
to the order of such Eligible Assignee in an amount equal to the amount
assumed by such Eligible Assignee pursuant to such Assignment and Acceptance
and, if the assigning Bank has retained some portion of its obligations
hereunder, a new Note to the order of the assigning Bank in an amount equal
to the amount retained by it hereunder. Such new Notes shall provide that
they are replacements for the surrendered Notes, shall be in an aggregate
principal amount equal to the aggregate principal amount of the surrendered
Notes, shall be dated the effective date of such Assignment and Acceptance
and shall otherwise be substantially the form of the assigned Notes. Within
five (5) days of issuance of any new Notes pursuant to this Section 21.4, the
Borrower shall, upon the request of the Agent, deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and
binding effect thereof, in form and substance satisfactory to the Banks. The
surrendered Notes shall be cancelled and returned to the Borrower.
21.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents;
PROVIDED that (a) each such participation shall be in an amount of not less
than $5,000,000, (b) any such sale or participation shall not affect the
rights and duties of the selling Bank hereunder to the Borrower and (c) the
only rights granted to the participant pursuant to such participation
arrangements with respect to waivers, amendments or modifications of the Loan
Documents shall be the rights to approve waivers, amendments or modifications
that would reduce the principal of or the interest rate on any Loans, extend
the term or increase the amount of the Revolving Credit Commitment of such
Bank as it relates to such participant, reduce the amount of any commitment
fees to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest.
21.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement
to assignees or participants and potential assignees or participants
hereunder; PROVIDED that such assignees or participants or potential
assignees or participants shall agree (a) to treat in confidence such
information unless such information otherwise becomes public knowledge, (b)
not to disclose such information to a third party, except as required by law
or legal process and (c) not to make use of such information for purposes of
transactions unrelated to such contemplated assignment or participation.
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21.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank
shall have no right to vote as a Bank hereunder or under any of the other
Loan Documents for purposes of granting consents or waivers or for purposes
of agreeing to amendments or other modifications to any of the Loan Documents
or for purposes of making requests to the Agent pursuant to Section 14.1 or
Section 14.2, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without
regard to such assignee Bank's interest in any of the Loans. If any Bank
sells a participating interest in any of the Loans to a participant, and such
participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 14.1 or Section 14.2 to the extent that such
participation is beneficially owned by the Borrower or any Affiliate of the
Borrower, and the determination of the Majority Banks shall for all purposes
of this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
21.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 19 with respect to
any claims or actions arising prior to the date of such assignment. If any
assignee Bank is not incorporated under the laws of the United States of
America or any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States of America federal income taxes. Anything contained in this Section 21
to the contrary notwithstanding, any Bank may at any time pledge all or any
portion of its interest and rights under this Credit Agreement (including all
or any portion of its Notes) to any of the twelve Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
No such pledge or the enforcement thereof shall release the pledgor Bank from
its obligations hereunder or under any of the other Loan Documents.
21.9. ASSIGNMENT BY BORROWER AND GUARANTORS. Neither the Borrower nor
any Guarantor shall assign or transfer any of their rights or obligations
under any of the Loan Documents without the prior written consent of each of
the Banks.
22. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to
this Credit Agreement or the Notes or any Letter of Credit Applications shall
be in writing and shall be delivered in hand, mailed by United States of
America registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower or any Guarantor, at 6075 Poplar Avenue, Suite
800, Memphis, Tennessee 38119, Attention: Chief Financial Officer, with a
copy sent to the attention of the General Counsel of the Borrower at the
same address or at such other address for notice as the Borrower shall last
have furnished in writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Christopher M. Holtz, Vice President, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
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(c) if to any Bank, at such Bank's address set forth on SCHEDULE 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (x) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(y) if sent by registered or certified first-class mail, postage prepaid, on the
third Business Day following the mailing thereof.
23. GOVERNING LAW.
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AND EACH GUARANTOR AGREE THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER
AND EACH GUARANTOR BY MAIL AT THE ADDRESS SPECIFIED IN Section 22. THE
BORROWER AND EACH GUARANTOR HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.
24. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
25. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
26. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in Section 28.
27. WAIVER OF JURY TRIAL.
The Borrower and each Guarantor hereby waive their rights to a jury
trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law,
the Borrower and
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each Guarantor hereby waive any right they may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition
to, actual damages. The Borrower and each Guarantor (a) certify that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event
of litigation, seek to enforce the foregoing waivers and (b) acknowledges
that the Agent and the Banks have been induced to enter into this Credit
Agreement, the other Loan Documents to which it is a party and the
Subordination Documents to which it is a party by, among other things, the
waivers and certifications contained herein.
28. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Credit Agreement, any
consent or approval required or permitted by this Credit Agreement to be
given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by the Borrower or
any of its Subsidiaries of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event
of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written
consent of the Borrower, the Guarantors and the written consent of the
Majority Banks. Notwithstanding the foregoing, the rate of interest on the
Notes may not be decreased (other than interest accruing pursuant to Section
6.11.2 following the effective date of any waiver by the Majority Banks of
the Default or Event of Default relating thereto), the term of the Notes, the
timing or amount of any required payments of principal and interest
hereunder, the amount of the Revolving Credit Commitments of the Banks, the
release of any material portion of the Collateral or any Guarantor from its
obligations under the Guaranty, the amount of commitment fee hereunder, the
definition of Majority Banks and this Section 28 may not be changed without
the written consent of the Borrower and the written consent of each of the
Banks affected thereby; and the amount of the Agent's Fee payable for the
Agent's account or any Letter of Credit Fees payable for BKB's account, and
Section 5 or Section 17 may not be amended without the written consent of BKB
and the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Agent or any Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
29. GUARANTY.
29.1. GUARANTY. The Obligations of the Borrower to the Banks hereunder
shall be guaranteed by the Guarantors pursuant to this Section 29 (the
"Guaranty").
29.2. GUARANTEED OBLIGATIONS. Each of the Guarantors acknowledges that
it is a member of a group of related companies with the Borrower, that it
expects to derive substantial direct and indirect benefits from the
extensions of credit by the Agent and the Banks to the Borrower pursuant
hereto (which benefits are hereby acknowledged), and that the execution and
delivery of this Guaranty is a condition precedent to the Agent and the Banks
entering into this Agreement and the other Loan Documents. For value
received and hereby acknowledged and as an inducement to the Banks to make
the Loans available to the Borrower and for BKB to issue the Letters of
Credit for the account of the Borrower, each of the Guarantors hereby
unconditionally and irrevocably, jointly and severally guarantees: (a) the
full punctual payment when due, whether at stated maturity, by acceleration
or otherwise, of all obligations of the Borrower now or hereafter existing
hereunder and under the Notes or the other Loan Documents, whether for
principal, interest, fees, expenses, or otherwise, and (b) the strict
performance and observance by the Borrower of its obligations under this
Agreement and the
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other Loan Documents and of all agreements, warranties and covenants
applicable to the Borrower in this Agreement and the other Loan Documents
(such obligations collectively being the "Guaranteed Obligations").
29.3. GUARANTY ABSOLUTE. The Guarantors guarantee that the Guaranteed
Obligations will be paid strictly in accordance with the terms hereof and of
the Notes, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Banks with respect thereto to the extent permitted by law. The guaranty
provided by each Guarantor hereunder is a guaranty of payment and not merely
of collection. Each Guarantor's Guaranteed Obligations are independent of,
and separate from, the Obligations of the Borrower and the Guaranteed
Obligations of the other Guarantors, and shall not be released by, but shall
survive as if the same have not been made, any and all payments by any
obligor of the Obligations or Guaranteed Obligations or the application of
any proceeds from or collateral security for the Obligations or Guaranteed
Obligations until all of such obligations are fully paid and finally
discharged. The liability of each Guarantor under this Guaranty with regard
to the Guaranteed Obligations of the Borrower shall, to the extent permitted
by law, be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of this Credit Agreement
with respect to the Borrower (with regard to such Guaranteed Obligations),
the Notes of the Borrower, or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or in any
other term, of, all or any of the Guaranteed Obligations or any other
amendment or waiver of or any consent to departure from any of the terms of
the Loan Documents;
(c) any exchange, release or nonperfection of a lien on any
collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations of the Borrower;
(d) any change in ownership of the Borrower;
(e) any acceptance of any partial payment(s) from the Borrower; or
(f) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower in respect of the Guaranteed
Obligations.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Banks upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such
payment had not been made.
29.4. AUTHORIZED ACTIONS. Each Guarantor authorizes the Agent and the
Banks in their discretion, without notice to such Guarantor, irrespective of
any change in the financial condition of the Borrower, such Guarantor or any
other Guarantor since the date hereof, and without affecting or impairing in
any way the liability of such Guarantor hereunder, from time to time to (a)
create new Guaranteed Obligations and, either before or after receipt of
notice of revocation, renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or otherwise change the terms
of the Guaranteed Obligations or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold security for the
payment or performance of the Guaranteed Obligations and exchange, enforce,
waive or release any such security; (c) apply such security and direct the
order or manner of sale thereof; (d) purchase such security at public or
private sale; (e) otherwise exercise any right or remedy it may have against
the Borrower, such Guarantor, any other Guarantor or any security, including,
without limitation, the right to foreclose upon any such security by judicial
or non-
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judicial sale; (f) settle, compromise with, release or substitute any
one or more makers, endorsers or guarantors of the Guaranteed Obligations;
and (g) subject to Section 21, assign the Guaranteed Obligations, the
provisions of this Section 29, or any of the Loan Documents in whole or in
part.
29.5. EFFECTIVENESS; ENFORCEMENT. The Guaranty herein of the Guarantors
shall be effective and shall be deemed to be made with respect to each Loan
made to the Borrower as of the time it is made and with respect to each
Letter of Credit issued as of the time of issuance. No invalidity,
irregularity or unenforceability by reason of any bankruptcy or similar law,
or any law or order of any government or agency thereof purporting to reduce,
amend or otherwise affect any liability of the Borrower, and no defect in or
insufficiency or want of powers of the Borrower or irregular or improperly
recorded exercise thereof, shall impair, affect, be a defense to or claim
against this Guaranty. This Guaranty is a continuing guaranty and shall (a)
survive any termination of this Agreement and (b) remain in full force and
effect until payment in full of, and performance of all Guaranteed
Obligations and all other amounts payable under these guaranties. This
Guaranty is made for the benefit of the Agent and the Banks and their
successors and assigns, and may be enforced from time to time as often as
occasion therefor may arise and without requirement on the part of the Banks
first to exercise any rights against the Borrower or to exhaust any remedies
available to them against the Borrower or to resort to any other source or
means of obtaining payment of any of the Obligations or to elect any other
remedy.
29.6. WAIVER. Each Guarantor to the extent permitted by law hereby
waives promptness, diligence, protest, notice of protest, all suretyship
defenses, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this guaranty and any requirement that the
Banks protect, secure, perfect or otherwise take action to ensure any
security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other Person or any
collateral. Each Guarantor also irrevocably waives, to the fullest extent
permitted by law, all defenses which at any time may be available to it in
respect of the Guaranteed Obligations by virtue of any statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect. Further, each Guarantor expressly waives the right to
require the Agent or any Bank first to (a) pursue the Borrower or any other
Guarantor or any other Person, (b) proceed against or exhaust any collateral,
or any other security or guaranty that may be held for the Obligations or the
Guaranteed Obligations, or to apply any such security or guaranty to the
Obligations or Guaranteed Obligations or (c) pursue any other remedy in the
Agent's or any Bank's power whatsoever, before seeking from such Guarantor
payment in full of its Guaranteed Obligations or proceeding against such
Guarantor for same.
29.7. SUBORDINATION; SUBROGATION RIGHTS. Until the payment and
performance in full of all Obligations, no Guarantor shall exercise any
rights against the Borrower arising as a result of payment by such Guarantor
hereunder, and no Guarantor will prove any claim in competition with the
Banks or any affiliate of any Banks in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; no Guarantor will claim
any set-off or counterclaim against the Borrower in respect of any liability
of such Guarantor to the Borrower; and each Guarantor waives any benefit of
and any right to participate in any collateral which may be held by the Banks
or any affiliate of any Banks. The payment of any amounts due with respect to
any Indebtedness of the Borrower now or hereafter held by any Guarantor is
hereby subordinated to the prior payment in full of the Obligations. Each
Guarantor agrees that after the occurrence of any default in the payment or
performance of the Obligations, such Guarantor will not demand, sue for, or
otherwise attempt to collect any such Indebtedness of the Borrower to such
Guarantor until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, any Guarantor shall collect or
receive any amounts in respect of such indebtedness, such amounts shall be
collected and received by such Guarantor as trustee for the Agent Banks and
be paid over to the Agent for the benefit of the Agent and the Banks on
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account of the Obligations without affecting in any manner the liability of
such Guarantor under the other provisions of its Guaranty. Notwithstanding
any other provision of this Section 29, each Guarantor hereby waives all
rights of subrogation against the Borrower until the Obligations have been
fully satisfied and discharged. Each Guarantor hereby acknowledges that the
waiver contained in the preceding sentence (the "Subrogation Waiver") is
given as an inducement to the Agent and the Banks to consummate the
transactions contemplated by this Credit Agreement, the other Loan Documents
and any other agreement referred to herein and, in consideration of the
willingness of the Agent and the Banks to consummate said transactions, each
Guarantor agrees that it shall not in any way amend or modify the Subrogation
Waiver without the prior written consent of the Banks. Each Guarantor
further acknowledges that the Subrogation Waiver is made for the benefit of
the Banks and the Agent, whether a party hereto on the date hereof or
becoming a party hereto thereafter, whether the claim of any such Bank or the
Agent against the Borrower is direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise. The
Subrogation Waiver and the provisions of this section shall survive the
expiration or termination of the Credit Agreement and the other Loan
Documents.
29.8. CONCERNING JOINT AND SEVERAL LIABILITY OF THE GUARANTORS.
(a) Each of the Guarantors is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Banks under
this Credit Agreement, for the mutual benefit, directly and indirectly, of
each of the Guarantors and in consideration of the undertakings of each
other Guarantor to accept joint and several liability for the Guaranteed
Obligations.
(b) Each of the Guarantors, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the Borrower and the other
Guarantors, with respect to the payment and performance of all of the
Guaranteed Obligations (including, without limitation, any Guaranteed
Obligations arising under this Section 29), it being the intention of the
parties hereto that all the Guaranteed Obligations shall be the joint and
several obligations of each of the Borrower and the Guarantors without
preferences or distinction among them.
(c) If and to the extent that the Borrower or any Guarantor shall
fail to make any payment with respect to any of the Guaranteed Obligations
as and when due or to perform any of the Guaranteed Obligations in
accordance with the terms thereof, then in each such event the other
Guarantors will make such payment with respect to, or perform, such
Guaranteed Obligation.
(d) The Guaranteed Obligations of TRC, PRI and PMC shall be limited
in recourse to the Equity Interests in the Borrower owned by each such
Person. The Guaranteed Obligations of each of the other Guarantors under
the provisions of this Section 29 constitute full recourse obligations of
each of such Guarantors enforceable against each such Person to the full
extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other circumstance
whatsoever.
(e) Except as otherwise expressly provided in this Credit Agreement,
each of the Guarantors hereby waives notice of acceptance of its joint and
several liability, notice of any Loans made or Letters of Credit issued
under this Agreement, notice of any action at any time taken or omitted by
the Agent or the Banks under or in respect of any of the Guaranteed
Obligations, and, generally, to the extent permitted by applicable law, all
demands, notices and other formalities of every kind in connection with
this Credit Agreement. Each of the Guarantors hereby assents to, and
waives notice of, any
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extension or postponement of the time for the payment of any of the
Guaranteed Obligations, the acceptance of any payment of any
of the Guaranteed Obligations, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by the Agent
or the Banks at any time or times in respect of any default by any of the
Borrower or the Guarantors in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by the Agent or the Banks in respect of any of the
Guaranteed Obligations, and the taking, addition, substitution or release,
in whole or in part, at any time or times, of any security for any of the
Guaranteed Obligations or the addition, substitution or release, in whole
or in part, of any of the Borrower or the Guarantors. Without limiting the
generality of the foregoing, each of the Guarantors assents to any other
action or delay in acting or failure to act on the part of the Banks or the
Agent with respect to the failure by any of the Borrower or the Guarantors
to comply with any of its respective Guaranteed Obligations, including,
without limitation, any failure strictly or diligently to assert any right
or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this Section
29, afford grounds for terminating, discharging or relieving any of the
Borrower or the Guarantors, in whole or in part, from any of its Guaranteed
Obligations hereunder, it being the intention of each of the Guarantors
that, so long as any of the Obligations hereunder remain unsatisfied, the
Guaranteed Obligations of such Guarantors under this Section 29 shall not
be discharged except by performance and then only to the extent of such
performance. The Guaranteed Obligations of each of the Guarantors under
this Section 29 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any of the Borrower or the Guarantors or
the Banks or the Agent. The joint and several liability of the Guarantors
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, consolidation, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of
the Borrower or any of the Guarantors or any of the Banks or the Agent.
(f) Each Guarantor shall be liable under this Credit Agreement only
for the maximum amount of such liabilities that can be incurred under
applicable law without rendering this Credit Agreement, as it relates to
such Guarantor, voidable under applicable law relating to fraudulent
conveyance and fraudulent transfer, and not for any greater amount.
Accordingly, if any provisions of this Credit Agreement creating any
obligation of any Guarantor in favor of any Bank or the Agent shall be
declared to be invalid or unenforceable in any respect or to any extent, it
is the stated intention and agreement of the Guarantors, the Agent, and the
Banks that any balance of the obligation created by such provision and all
other obligations of the Guarantors to the Banks or the Agent created by
other provisions of this Credit Agreement shall remain valid and
enforceable, and that all sums not in excess of those permitted under
applicable law shall remain fully collectible by the Banks and the Agent
from the Guarantors.
(g) The provisions of this Section 29 are made for the benefit of the
Agent and the Banks and their successors and assigns, and may be enforced
in good faith by them from time to time against any or all of the
Guarantors as often as occasion therefor may arise and without requirement
on the part of the Agent or the Banks first to marshal any of their claims
or to exercise any of their rights against the Borrower or any other
Guarantors or to exhaust any remedies available to them against the
Borrower or any other Guarantors or to resort to any other source or means
of obtaining payment of any of the obligations hereunder or to elect any
other remedy. The provisions of this Section 29 shall remain in effect
until all of the Guaranteed Obligations shall have been paid in full or
otherwise fully satisfied and the Commitments have expired. If at any
time, any payment, or any part thereof, made in respect of any of the
Guaranteed Obligations, is
<PAGE>
-71-
rescinded or must otherwise be restored or returned by the Banks, or the
Agent upon the insolvency, bankruptcy or reorganization of the Borrower or
any of the Guarantors, or otherwise, the provisions of this Section 29 will
forthwith be reinstated in effect, as though such payment had not been
made.
29.9. NEW GUARANTORS. In the event that, after the Closing Date, the
Borrower or any Guarantor acquires or initiates the incorporation of a new
wholly-owned Subsidiary of the Borrower, such Subsidiary shall concurrently
with such event or as soon as practicable thereafter execute and deliver to
the Agent an instrument of joinder and accession, in form and substance
satisfactory to the Agent and the Banks, pursuant to which such newly-created
or acquired wholly-owned Subsidiary shall join this Credit Agreement, and
shall accede to all of the rights and obligations of a Guarantor hereunder
and thereunder, and, pursuant thereto shall, among other things, guaranty the
complete payment and performance of the Guaranteed Obligations, make the
waivers set forth herein (including, without limitation, those set forth in
Section 29.6 hereof). Further, such Subsidiary shall execute and/or deliver
to the Agent such other documentation as the Agent may reasonably request in
furtherance of the intent of this Section 29.9, including, without
limitation, documentation of the type required to be supplied by the initial
Guarantors as a condition precedent to the initial Loans made hereunder
pursuant to Section 12 hereof.
29.10. LIMITATION ON LIABILITY. Notwithstanding anything to the contrary
set forth herein, the liability of TRC, PRI and PMC under this Guaranty shall
be limited in recourse to the Equity Interests of the Borrower owned by such
Person.
30. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Credit Agreement in
any jurisdiction.
31. RIGHT TO PUBLICIZE.
The Borrower and each of the Guarantors hereby acknowledges that the
Agent will have the right to publicize the transactions contemplated hereby
by means of a tombstone advertisement or other customary advertisement in
newspapers and other periodicals. The Agent agrees to provide the Borrower
and each of the Guarantors with the opportunity to review any such tombstone
advertisement prior to publication thereof and to provide reasonable comments
as to the accuracy and contents thereof.
<PAGE>
-72-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management Company, Inc., its
General Partner
By:____________________________________
Name:
Title:
THE RESTAURANT COMPANY, as Guarantor
By:____________________________________
Name:
Title:
PERKINS RESTAURANTS, INC., as Guarantor
By:____________________________________
Name:
Title:
PERKINS MANAGEMENT COMPANY, INC., as
Guarantor
By:____________________________________
Name:
Title:
PERKINS FINANCE CORP., as Guarantor
By:____________________________________
Name:
Title:
<PAGE>
-73-
BANKBOSTON, N.A., individually and as
Agent
By:____________________________________
Rodney L. Guinn
Division Executive
NATIONSBANK, N.A., individually and as
Syndication Agent
By:____________________________________
Name:
Title:
BANK OF AMERICA, FSB
By:____________________________________
Name:
Title:
FIRST AMERICAN NATIONAL BANK
By:____________________________________
Name:
Title:
SANWA BUSINESS CREDIT CORPORATION
By:____________________________________
Name:
Title:
BARNETT BANK, N.A.
By:____________________________________
Name:
Title:
<PAGE>
- -------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
Issuers
-----------------------
SERIES A AND SERIES B
10 1/8% SENIOR NOTES DUE 2007
-----------------------
INDENTURE
Dated as of December 22, 1997
-----------------------
STATE STREET BANK AND TRUST COMPANY
Trustee
-----------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- -----------------
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
<PAGE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . .15
Section 1.03.. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . .17
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . .17
Section 2.02. Execution and Authentication . . . . . . . . . . . . .18
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . .19
Section 2.04. Paying Agent to Hold Money in Trust. . . . . . . . . .19
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . .19
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . .19
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . .31
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . .31
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . .32
Section 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . .32
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . .32
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . .32
ARTICLE 3. REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . .33
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . .33
Section 3.02. Selection of Notes to Be Redeemed. . . . . . . . . . .33
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . .33
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . .34
i
<PAGE>
Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . .34
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . .34
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . .34
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . .35
Section 3.09. Offer to Purchase by Application of Excess Proceeds. .35
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . .37
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . .37
Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . .38
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . .38
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . .39
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . .39
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . .39
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . .44
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . .45
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . .45
Section 4.13. Corporate Existence. . . . . . . . . . . . . . . . . .45
Section 4.14. Offer to Repurchase Upon Change of Control . . . . . .46
Section 4.15. Restrictions on Activities of Finance Corp . . . . . .46
Section 4.16. Limitation on Sale and Leaseback Transactions. . . . .47
Section 4.17. Limitation on Issuances and Sales of Capital Stock of
Wholly-Owned restricted Subsidiaries . . . . . . . . . . . . . . . .47
Section 4.18. Line Of Business . . . . . . . . . . . . . . . . . . .47
Section 4.19. Payments for Consent . . . . . . . . . . . . . . . . .47
Section 4.20. Additional Subsidiary Guarantees . . . . . . . . . . .48
ii
<PAGE>
ARTICLE 5. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . .48
Section 5.02. Successor Corporation Substituted. . . . . . . . . . .48
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . .49
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . .49
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . .50
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . .51
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . .51
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . .51
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . .51
Section 6.07. Rights of Holders of Notes to Receive Payment. . . . .52
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . .52
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . .52
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . .53
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . .53
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . .53
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . .54
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . .55
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . .55
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . .55
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . .55
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . .56
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . .56
Section 7.09. Successor Trustee by Merger, etc.. . . . . . . . . . .57
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . .57
iii
<PAGE>
Section 7.11. Preferential Collection of Claims Against Issuers. . .58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . .58
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.02. Legal Defeasance and Discharge.. . . . . . . . . . . .58
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . .58
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . .59
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. . . . . . . . . . . .60
Section 8.06. Repayment to Issuers . . . . . . . . . . . . . . . . .60
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . .61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . . . . . . . .61
Section 9.01. Without Consent of Holders of Notes. . . . . . . . . .61
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . .62
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . .63
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . .63
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . .63
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . . .64
ARTICLE 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.01. Trust Indenture Act Controls. . . . . . . . . . . . .64
Section 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.03. Communication by Holders of Notes with Other
Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . .65
Section 10.04. Certificate and Opinion as to Conditions Precedent. .65
Section 10.05. Statements Required in Certificate or Opinion . . . .65
Section 10.06. Rules by Trustee and Agents . . . . . . . . . . . . .66
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders . . . . . . . . . . . . . . . . . . . . .66
Section 10.08. Governing Law . . . . . . . . . . . . . . . . . . . .66
iv
<PAGE>
Section 10.09. No Adverse Interpretation of Other Agreements . . . .66
Section 10.10. Successors. . . . . . . . . . . . . . . . . . . . . .66
Section 10.11. Severability. . . . . . . . . . . . . . . . . . . . .67
Section 10.12. Counterpart Originals . . . . . . . . . . . . . . . .67
Section 10.13. Table of Contents, Headings, etc. . . . . . . . . . .67
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
Exhibit E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT
GUARANTOR
v
<PAGE>
INDENTURE dated as of December 22, 1997 between Perkins Family
Restaurants, L.P., a Delaware limited partnership (the "Company") and Perkins
Finance Corp. ("Finance Corp." and, together with the Company, the "Issuers")
and State Street Bank and Trust Company, as trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 10 1/8%
Series A Senior Notes due 2007 (the "Series A Notes") and the 101/8% Series B
Senior Notes due 2007 (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 of the Notes sold in reliance on Rule 144A.
"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.
"ADDITIONAL NOTES" means up to $20 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"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).
1
<PAGE>
"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 director, 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.
"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 New 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.
"CEDEL" means Cedel Bank, SA.
"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 TRC or a Related
Party, (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 TRC and its Related Parties, 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
Company entitling the owners thereof to 35% or more of the income or profits
of the Company, (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) prior
to the
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reorganization of the Company as a corporation, the first day on which the
Company ceases to own 100% of the outstanding Equity Interests of Finance
Corp.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Perkins Family Restaurants, L.P., and any and
all successors thereto.
"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 taxes based
on income or profits or the Tax Amount of such Person and its Subsidiaries
for such period, to the extent that such provision for taxes or Tax Amount
was included in computing such Consolidated Net Income, 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) 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) non-cash 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 and only
if a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Subsidiary without prior approval (that
has not been obtained), 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 stockholders.
"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, less the Tax Amount of such Person for such Period;
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
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) 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, (iv) the
cumulative effect
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of a change in accounting principles shall be excluded and (v) the Net Income
(but not loss) of any Unrestricted Subsidiary shall be excluded, whether or
not distributed to the Company or one of its Subsidiaries.
"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
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 for election to
such Board of Directors by TRC or one of its Related Parties.
"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 Issuers.
"CREDIT FACILITIES" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New 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.
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"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 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 INDEBTEDNESS" means up to $10.0 million in aggregate
principal amount of Indebtedness of the Company (other than Indebtedness
under the New Credit Facility) in existence on the date of this Indenture.
"FIXED CHARGES" means, with respect to any person for any
period, 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
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 (a) all
dividend payments, whether or not in cash, on any series of preferred equity
of such
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Person or any of its Restricted Subsidiaries, times (b) 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
(or, in the case of a Person that is a partnership or a limited liability
company, the combined federal, state and local income tax rate that was or
would have been utilized to calculate the Tax Amount of such Person),
expressed as a decimal, 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 (iii) 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.
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"GUARANTORS" means any Subsidiary of the Company that executes
a Guarantee in accordance with the provisions of this Indenture, and its
respective successors and assigns.
"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.
"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.
"INITIAL NOTES" means $130,000,000 in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"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.
"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.
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"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 Issuers 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 or
Tax Distributions 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 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 or Tax Distributions 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 or Tax Distributions
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.
"NEW CREDIT FACILITY" means the Credit Agreement expected to be
dated as of December 22, 1997 among the Company, 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).
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"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) 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 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 Issuers.
"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 Issuers 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
Section 10.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Issuers,
any Subsidiary of the Company or the Trustee.
"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 INVESTMENTS" means (a) any Investment in the Company
or in a Wholly-Owned Restricted Subsidiary of the Company that is a
Guarantor (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 and a
Guarantor 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 that is a
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Guarantor 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 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 Company; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Company or any Restricted Subsidiary of 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 or any Restricted
Subsidiary of 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 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
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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).
"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.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of December 22, 1997, by and among the Issuers and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time and, with respect to any
Additional Notes, one or more registration rights agreements between the
Issuers and the other parties thereto, as such agreement(s) may be amended,
modified or supplemented from time to time, relating to rights given by the
Issuers to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"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 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 of the Notes initially sold in reliance on
Rule 903 of Regulation S.
"RELATED PARTY" with respect to TRC means (A) any 25% or
greater stockholder (including each of Donald N. Smith, Harrah's
Entertainment, Inc. (and its subsidiaries) and The Equitable Life Assurance
Society of the United States) or 80% (or more) owned Subsidiary of TRC or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of TRC and/or such other Persons
referred to in the immediately preceding clause (A).
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"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 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.
"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
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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).
"SUBSIDIARY GUARANTEE" means the Guarantee by each Guarantor of
the Issuers' payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"TAX AMOUNT" means, with respect to any Person for any period,
the aggregate combined federal, state, local and foreign income taxes
(including estimated taxes) actually payable by partners or owners of such
Person in respect of such partners' or owners' Taxable Income for such
period, and aggregate state and local franchise taxes. Notwithstanding
anything to the contrary, Tax Amount shall not include taxes payable as a
result of recognizing gain from such Person's reorganization as or change in
the status to a corporation or attributable to its Taxable Income for any
taxable year commencing prior to January 1, 1997.
"TAX DISTRIBUTION" means a distribution in respect of taxes to
the partners of the Company pursuant to clause (vii) of the third paragraph
of Section 4.07 of this Indenture.
"TAXABLE INCOME" means, with respect to any Person for any
period, the taxable income or loss of such Person for such period for
federal, state, foreign or local income tax purposes; PROVIDED, that (i) all
items of gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss,
(ii) any basis adjustment made in connection with an election under Section
754 of the Code shall be disregarded and (iii) such taxable income shall be
increased or such taxable loss shall be decreased by the amount of any
interest expense incurred by such Person that is not treated as deductible
for federal income tax purposes by a partner or owner of such person.
"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.
"TRC" means The Restaurant Company.
"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 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 DEFINITIVE NOTE" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than
Finance Corp.) 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
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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 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; and provided, further, that, to
the extent applicable, the Company shall cause such Subsidiary to comply with
the provisions of Section 4.20 of this Indenture.
"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.
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SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- -------
"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
"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 and the Subsidiary Guarantees means the
Issuers and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
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:
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(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.
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 in denominations
of $1,000 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
Issuers 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 of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount 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 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 Bank, duly executed by the
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Issuers 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 Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the
aggregate principal amount 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 Issuers. 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 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.
(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
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank 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 Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for each of the Issuers 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 Issuers signed
by an Officer of each Issuer (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4
of the Notes. The aggregate principal amount 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 Issuers 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 Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers 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 Issuers 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
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additional paying agent. The Issuers may change any Paying Agent or
Registrar without notice to any Holder. The Issuers shall notify the Trustee
in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail 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 Issuers initially appoint The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Issuers initially appoint 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 Issuers 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 principal, premium or Liquidated Damages, if any, or interest on
the Notes, and will notify the Trustee of any default by the Issuers 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
Issuers 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 either 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 Issuers 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 Issuers 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 Issuers for Definitive Notes if (i) the
Issuers deliver 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 Issuers within 120 days after
the date of such notice from the Depositary or (ii) the Issuers in their sole
discretion determine 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 Issuers 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
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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
or for the account or benefit of a U.S. Person (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 Issuers 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
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Securities Act, the Trustee shall adjust the principal amount 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:
(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 Issuers;
(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
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(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 Issuers 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 equal to the
aggregate principal amount 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:
(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;
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(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 of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Issuers shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. 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.
(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 Issuers;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
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(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 of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Issuers shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. 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 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) if 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
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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 (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 Restricted Definitive Note is being
transferred to the Issuers 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
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 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 Issuers;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
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(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 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 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 Issuers 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 equal to the
principal amount of Definitive Notes so transferred.
(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).
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(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 Issuers;
(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
(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 Issuers 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
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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 thereof 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 Issuers 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 equal to the principal amount 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 Issuers, and accepted for exchange in the Exchange Offer and (ii)
Definitive Notes in an aggregate principal amount equal to the principal
amount 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 of the applicable Restricted
Global Notes to be reduced accordingly, and the Issuers 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.
(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 EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS
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
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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 ISSUERS SO REQUEST), (2) TO ONE
OF THE ISSUERS 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 subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to 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 ISSUERS OR THEIR 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 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
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take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount 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 Issuers shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon the Issuers' 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 Issuers
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 Issuers, 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 Issuers 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 Issuers 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 principal of and interest on such Notes and for all
other purposes, and none of the Trustee, any Agent or the Issuers
shall be affected by notice to the contrary.
(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.
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SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Issuers and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Issuers 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 Issuers, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Issuers to protect the
Issuers, the Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Note is replaced. The Issuers may charge
for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Issuers 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 Issuers or
an Affiliate of the Issuers 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 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 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.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Issuers 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 Issuers consider appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the
Issuers shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes.
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Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers 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 Issuers. The Issuers 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 Issuers default 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 Issuers 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 Issuers 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 Issuers (or, upon the written request of
the Issuers, the Trustee in the name and at the expense of the Issuers) 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 Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, they shall furnish to the
Trustee, at least 30 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 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 or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased 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 Issuers in writing of the
Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples
of
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$1,000; 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, 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 Issuers 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 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
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 Issuers default in making such redemption
payment, 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 Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at its expense; PROVIDED, HOWEVER, that
the Issuers shall have delivered to the Trustee, at least 45 days prior 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 Issuers
shall deposit with the Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Notes
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to be redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Issuers any money deposited with the Trustee or the Paying
Agent by the Issuers in excess of the amounts necessary to pay the redemption
price of, and accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, 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 Issuers to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal 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 Issuers
shall issue and, upon the Issuers' written request, the Trustee shall
authenticate for the Holder at the expense of the Issuers, a new Note equal
in principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Issuers shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to December 15, 2002. Thereafter, the Issuers 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) 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 December 15 of
the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 .................................... 105.063%
2003 .................................... 103.375%
2004 .................................... 101.688%
2005 and thereafter ..................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time on or prior to December 15, 2000, the Issuers may on one or
more occasions redeem Notes with the net cash proceeds of one or more public
offerings of the Company's equity securities or the equity securities of any
of the Company's direct or indirect parents (to the extent such net proceeds
have been contributed to the Company as common equity capital), at a
redemption price equal to 110.125% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any; PROVIDED that at
least 65% of the principal amount of Notes originally issued remain
outstanding immediately after the occurrence of such redemption (excluding
Notes held by the Company or any of its respective Subsidiaries) and that
such redemption shall occur within 60 days of the date of the closing of any
such public offering.
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(c) 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.
The Issuers shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuers
shall be required to commence an offer to all Holders to purchase Notes (an
"ASSET SALE OFFER"), they 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 Issuers shall purchase the principal 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 Issuers 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 accrue interest;
(d) that, unless the Issuers default in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(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 Issuers, the
Depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
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(g) that Holders shall be entitled to withdraw their election if
the Issuers, 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 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 principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, 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 to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers 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
Issuers in accordance with the terms of this Section 3.09. The Issuers, 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 Issuers for purchase, and
the Issuers shall promptly issue a new Note, and the Trustee, upon written
request from the Issuers shall authenticate and mail or deliver such new Note
to such Holder, in a principal amount equal to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Issuers to the Holder thereof. The Issuers 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.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. 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 Issuers in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Issuers 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 Issuers shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue 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
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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 Issuers 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 Issuers in respect of the Notes and this Indenture
may be served. The Issuers 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 Issuers 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 Issuers 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 Issuers of their obligation to maintain an office or agency in
the Borough of Manhattan, the City of New York for such purposes. The
Issuers 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 Issuers hereby designate the Corporate Trust Office of the
Trustee as one such office or agency of the Issuers 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 Issuers 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 required 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 Issuers shall at all
times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Issuers 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 Issuers and each Guarantor (to the extent that such
Guarantor is so required under the TIA) 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
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has been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their 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 Issuers have kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and are 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 Issuers are taking or propose 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 Issuers
are taking or propose 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 either 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 Issuers 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 Issuers are 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.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuers and each of the Guarantors covenant (to the extent
that they may lawfully do so) that they 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 Issuers and each of the Guarantors (to the extent that
they may lawfully do so) hereby expressly waive all benefit or advantage of
any such law, and covenant that they 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
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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) the Company would, 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, have been
permitted 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 (viii) 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 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.
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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 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 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) distributions to partners
or owners of the Company in an aggregate amount during or with respect to any
fiscal period commencing after December 31, 1996, not to exceed the Tax
Amount for such period or for such prior 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 Notes not
to exceed, in the aggregate, $85.0 million, to finance the purchase of the
Company's limited partnership interests from the public holders of such
units, as set forth in the Offering Memorandum under the caption "Use of
Proceeds" and (ix) additional Restricted Payments not to exceed $5.0 million
after the date of this 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 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 RESTRICTIONS 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 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
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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; and (ix) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary
course of business.
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 the Company may incur Indebtedness
(including Acquired Debt) or issue Disqualified Interests and any of the
Company's Restricted Subsidiaries that is a Guarantor may incur Indebtedness
or issue preferred Equity Interests (including Disqualified Interests) if, in
each case, the Fixed Charge 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 four-quarter period.
The Company shall not incur any Indebtedness (nor will the
Guarantors guarantee any such 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 apply to the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by
the Guarantors) 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;
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(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iii) the incurrence by the Issuers (and the Guarantee thereof
by the Guarantors) 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 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
(other than intercompany Indebtedness) 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 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 of the Guarantors of
Indebtedness of the Company or 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
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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 or
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, 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. 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
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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 may apply such Net Proceeds (a) to permanently reduce
Indebtedness under the New Credit Facility (and to correspondingly reduce
commitments with respect thereto), 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. 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 Issuers
shall commence a PRO RATA Asset Sale Offer pursuant to Section 3.09 hereof to
purchase the maximum principal amount 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 principal amount 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 amount 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.
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 of 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 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) transactions permitted under Section 4.07 hereof shall not be deemed
Affiliate Transactions.
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SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, 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 partnership 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 Issuers shall
make an offer (a "CHANGE OF CONTROL OFFER") to each Holder to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes at a purchase price each equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest 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 Issuers 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 accrue interest; (4) that, unless the
Issuers default in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease 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 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 to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof. The Issuers 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.
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(b) On the Change of Control Payment Date, the Issuers 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 of Notes or portions
thereof being purchased by the Issuers. 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 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 of $1,000 or an integral multiple thereof. The Issuers
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. RESTRICTIONS ON ACTIVITIES OF FINANCE CORP.
Finance Corp. shall not hold any material assets, become liable
for any material obligations (other than its indemnification and contribution
obligations pursuant to the Purchase Agreement and the Registration Rights
Agreement) or engage in any significant business activities; PROVIDED that
Finance Corp. may be a co-obligator with respect to Indebtedness if the
Company is the primary obligor with respect to such Indebtedness and the net
proceeds of such Indebtedness are received by the Company or one of the
Company's Restricted Subsidiaries other than Finance Corp.
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 may enter into a sale and leaseback transaction if
(i) the Company 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) 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 Company 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.
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SECTION 4.18. LINE OF BUSINESS.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent
as would not be material to the Company and its 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.
SECTION 4.20. ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Subsidiaries shall acquire or
create another Subsidiary after the date of this Indenture, then such newly
acquired or created Subsidiary shall become a Guarantor by executing a
Supplemental Indenture in the form attached hereto as Exhibit E and deliver
an Opinion of Counsel to the Trustee to the effect that such Supplemental
Indenture has been duly authorized, executed and delivered by such Subsidiary
and constitutes a valid and binding obligation of such Subsidiary,
enforceable against such Subsidiary in accordance with its terms (subject to
customary exceptions). The provisions of this Section 4.20 shall not apply
to (i) any Subsidiary organized outside of the United States and its
territories or (ii) any Subsidiary that has properly been designated as an
Unrestricted Subsidiary in accordance with this Indenture for so long as it
continues to constitute an Unrestricted Subsidiary.
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 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
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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 hereof.
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 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 Issuers default 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 Issuers default in the payment when due of 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 fail to comply with any
of the provisions of Section 4.07, 4.09, 4.10, 4.14 or 5.01 hereof;
(d) the Company or any of its Subsidiaries fail to observe or
perform any other covenant, representation, warranty or other agreement in
this Indenture or the Notes for 30 days after notice to the Issuers by the
Trustee or the Holders of at least 25% in aggregate principal amount 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 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 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;
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(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; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee
is held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under such Guarantor's Subsidiary Guarantee.
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
of the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) or (h) of
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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, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount 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 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 Issuers with the
intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers 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 December 15, 2002 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Issuers with the intention of avoiding
the prohibition on redemption of the Notes prior to December 15, 2002, then
the premium payable for purposes of this paragraph for the period beginning
on the date hereof and ending on December 15, 2002 shall be 105.063% of the
amount 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 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 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 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 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 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 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
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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 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 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 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 Issuers for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue 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.
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 Issuers (or any other obligor
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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 deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
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 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 principal, premium and Liquidated Damages,
if any and interest, respectively; and
THIRD: to the Issuers 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 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 Issuers.
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 Issuers shall be sufficient if
signed by an Officer of the Issuers.
(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 Issuers or any
Affiliate of the Issuers 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 Issuers' use of the proceeds from the
Notes or any money paid to the Issuers or upon the Issuers' 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
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occurs. Except in the case of a Default or Event of Default in payment of
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 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). The 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 Issuers and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Issuers shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers 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 Issuers 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 Issuers 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 Issuers (including this Section 7.07) and defending itself
against any claim (whether asserted by the Issuers 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 Issuers promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers shall not relieve
the Issuers of its obligations hereunder. The Issuers shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Issuers shall pay the reasonable fees and expenses
of such counsel. The Issuers need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Issuers' 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.
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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.
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 Issuers. The Holders of
Notes of a majority in principal amount of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Issuers in writing.
The Issuers 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 Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Issuers.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers, or the Holders of Notes of at least 10% in principal amount 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 Issuers. 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 Issuers' obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
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 ISSUERS.
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 Issuers 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 Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Issuers 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
Issuers 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 Issuers, 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 Issuers'
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 Issuers' obligations in connection therewith and (d) this
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Article Eight. Subject to compliance with this Article Eight, the Issuers
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Issuers 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
Issuers 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 Issuers' 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 Issuers 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
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Issuers 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
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that
57
<PAGE>
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;
(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 Issuers or
any of its Subsidiaries is a party or by which the Issuers or any of its
Subsidiaries is bound;
(f) the Issuers 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 Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over any other creditors of the Issuers or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuers; and
(h) the Issuers 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 Issuers
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 Issuers 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 Issuers from time to time upon the
request of the Issuers 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
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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.
SECTION 8.06. REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuers, 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 Issuers on its request or (if then held by
the Issuers) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a secured creditor, look only to the Issuers for payment
thereof, and all liability of the Trustee or such Paying Agent with respect
to such trust money, and all liability of the Issuers 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 Issuers 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 Issuers.
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 Issuers' 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 Issuers makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations,
the Issuers 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 Issuers,
the Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees 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 Issuers' or a Guarantor's
obligations to the Holders of the Notes by a successor to the Issuers or a
Guarantor pursuant to Article 5 hereof;
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<PAGE>
(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;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture
and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Issuers 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 Issuers and
the Guarantors, if any, 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 Issuers and
the Trustee may amend or supplement this Indenture (including Sections 3.09,
4.10 and 4.14 hereof), and the Subsidiary Guarantees and the Notes may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes (including Additional Notes, if
any) 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 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, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes,
if any) 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 Issuers 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 Issuers 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.
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After an amendment, supplement or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers 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 of the Notes
(including Additional Notes, if any) then outstanding voting as a single
class may waive compliance in a particular instance by the Issuers 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 of Notes whose Holders must consent
to an amendment, supplement or waiver;
(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 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 of the then outstanding Notes (including Additional Notes,
if any) 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); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
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.
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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
Issuers 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.
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 Issuers 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 Issuers, any Guarantor or
the Trustee to the others is duly 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 Issuers:
c/o Perkins Family Restaurants, L.P.
6075 Popular Ave. Suite 800
Memphis, Tennessee 38119-4709
Telecopier No.: (901) 766-6482
Attention: Steven R. McClellan, Donald F. Wiseman
62
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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) 986-7920
Attention: Steve Cimalore
The Issuers, any Guarantor 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 Issuers 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 Issuers, 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 Issuers to the Trustee
to take any action under this Indenture, the Issuers shall furnish to the
Trustee:
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(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;
(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 Issuers, as such, shall have any
liability for any obligations of the Issuers 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, 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.
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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 Issuers 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 Issuers 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.
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.
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]
65
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SIGNATURES
Dated as of December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By: /s/ Steven R. McClellan
-------------------------------
Name:
Title:
By: /s/ Donald F. Wiseman
-------------------------------
Name:
Title:
PERKINS FINANCE CORP.
By: /s/ Steven R. McClellan
-------------------------------
Name:
Title:
Attest: /s/ Donald F. Wiseman
- ---------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Steven Cimalore
-------------------------------
Name: STEVEN CIMALORE
Title: VICE PRSIDENT
Attest:
- ---------------------------------
<PAGE>
EXHIBIT A-1
(Face of Note)
10 1/8% Series A Senior Notes due 2007
No._____
CUSIP NO._________ $_____________
PERKINS FAMILY RESTAURANTS, L.P.
and
PERKINS FINANCE CORP.
promise to pay to______________________________________________
or registered assigns,
the principal sum of___________________________________________
Dollars on December 15, 2007
Interest Payment Dates: June 15, and December 15 of each year,
commencing December 15, 1998
Record Dates: June 1, and December 1
Dated: December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
PERKINS FINANCE CORP.
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:
--------------------------------
A1-1
<PAGE>
(Back of Note)
10 1/8% Series A Senior Notes due 2007
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 ISSUERS (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUERS 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 ISSUERS 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 ISSUERS SO REQUEST), (2) TO ONE OF THE ISSUERS 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.
A1-2
<PAGE>
1. INTEREST. Perkins Family Restaurants, L.P., a Delaware
limited partnership (the "Company") and Perkins Finance Corp. ("Finance
Corp.," and together with the Company, the "Issuers") promise to pay interest
on the principal amount of the Notes at 10 1/8% per annum from December 22,
1998 until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The
Issuers will pay interest and Liquidated Damages, if any, semi-annually on
June 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
PROVIDED that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the
first Interest Payment Date shall be June 15, 1998. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time
on demand at a rate that is 1% per annum in excess of the rate then in
effect; they 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 Issuers 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 June 15 or
December 15 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 principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Issuers
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuers, 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 Issuers 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 of Connecticut, N.A. the Trustee under the Indenture, will
act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to any Holder. The Issuers or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE The Issuers issued the Notes under an Indenture
dated as of December 22, 1997 ("Indenture") between the Issuers 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
Issuers limited to $150 million in aggregate principal amount, of which $100
million will be issued on the date hereof.
5. OPTIONAL REDEMPTION.
A1-3
<PAGE>
(a) Except as set forth in subparagraph (b) of this Paragraph 5,
the Issuers shall not have the option to redeem the Notes prior to December
15, 2002. Thereafter, the Issuers 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) 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 December 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 . . . . . . . . . . . . . . . . . . 105.063%
2003 . . . . . . . . . . . . . . . . . . 103.375%
2004 . . . . . . . . . . . . . . . . . . 101.688%
2005 and thereafter. . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to December 15, 2000, the Issuers may redeem
Notes with the net cash proceeds of one or more public offerings of the
Company's equity securities of the equity securities of any of the Company's
direct or indirect parents (to the extent such net proceeds have been
contributed to the Company as common equity capital) at a redemption price
equal to 110.125% of the principal amount thereof; PROVIDED that at least 65%
in aggregate principal amount of the Notes originally issued remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 60 days of the date of the closing of such public
offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest 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 Issuers 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 Issuers shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest 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
amount of Notes (including any Additional Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Issuers (or such
Subsidiary) may use such deficiency for
A1-4
<PAGE>
general corporate purposes. If the aggregate principal amount 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 Issuers 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 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date 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 and integral
multiples of $1,000. 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 Issuers may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Issuers 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 Issuers 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 the Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees 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 Issuers' or Guarantor'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, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act, to provide
for the Issuance of Additional Notes in accordance with the limitations set
forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Notes.
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 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 Issuers to comply with Section 4.07, 4.09, 4.10, 4.14 or
5.01 of the Indenture; (iv) failure by the Issuers for 60 days after notice
to the Issuers by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with certain other
A1-5
<PAGE>
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Issuers 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; (vii) certain events of bankruptcy or insolvency with
respect to the Issuers or any of its Material Subsidiaries (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor or any Person acting
on its behalf shall deny or disaffirm its obligations under such Guarantor's
Subsidiary Guarantee. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount 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 further 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 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 principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount 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 of, the Notes. The Issuers is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Issuers
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 ISSUERS. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Issuers or its Affiliates, and may otherwise
deal with the Issuers 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 Issuers, as such, shall not
have any liability for any obligations of the Issuers 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 December 22, 1997, between the
Issuers and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
A1-6
<PAGE>
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
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 Issuers 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:
Perkins Family Restaurants, L.P.
6075 Popular Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Steven R. McClellan
A1-7
<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 Issuers. 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.
A1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
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
Issuers pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
------------ -----------------------
(Sign exactly as your name appears on
the Note)
Tax Identification No:
----------------
Signature Guarantee.
A1-9
<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>
<CAPTION>
Principal Amount
Amount of decrease of
in Amount of increase this Global Note Signature of
Principal Amount in Principal Amount following such authorized officer
of of decrease (or of Trustee or
Date of Exchange this Global Note this Global Note increase) Note Custodian
- ---------------- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
10 1/8% Series A Senior Notes due 2007
No.
------
CUSIP NO. $
--------- -----------
PERKINS FAMILY RESTAURANTS, L.P.
and
PERKINS FINANCE CORP.
promise to pay to
-----------------------------------------------------
or registered assigns,
the principal sum of
--------------------------------------------------
Dollars on: December 15, 2007
Interest Payment Dates: June 15 and December 15 of each year,
commencing June 15, 1998
Record Dates: June 1, and December 1
Dated: December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
PERKINS FINANCE CORP.
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:
------------------------------
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10 1/8% Series A Senior Notes due 2007
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.
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 ISSUERS (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUERS 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 NOTE (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 NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS
THAT (A) SUCH NOTE 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 OF RULE 144A UNDER THE 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 ISSUERS SO REQUESTS), (2) TO ONE
OF THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT
A2-2
<PAGE>
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE 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. Perkins Family Restaurants, L.P., a Delaware limited
partnership (the "Company") and Perkins Finance Corp. ("Finance Corp." and,
together with the Company, the "Issuers"), promise to pay interest on the
principal amount of this Note at 10 1/8% per annum from December 22, 1998
until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The
Issuers will pay interest and Liquidated Damages, if any, semi-annually on
June 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
PROVIDED that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the
first Interest Payment Date shall be June 15, 1998. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time
on demand at a rate that is 1% per annum in excess of the rate then in
effect; they 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.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Issuers 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 June 1 or
December 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 principal, premium, interest and
Liquidated Damages at the office or agency of the Issuers maintained for such
purpose within or without the City and State of New York, or, at the option
of the Issuers, 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 Issuers 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 of Connecticut, N.A., the Trustee under the Indenture, will act
as Paying Agent and Registrar. The Issuers
A2-3
<PAGE>
may change any Paying Agent or Registrar without notice to any Holder. The
Issuers or any of its Subsidiaries may act in any such capacity.
4. INDENTURE The Issuers issued the Notes under an Indenture dated
as of December 22, 1997 ("Indenture") between the Issuers 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 Issuers
limited to $150 million in aggregate principal amount, of which $100 million
will be issued on the date hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Issuers shall not have the option to redeem the Notes prior to December 15,
2002. Thereafter, the Issuers 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) 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 December 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 ............................ 105.063%
2003 ............................ 103.375%
2004 ............................ 101.688%
2005 and thereafter.............. 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to December 15, 2000, the Issuers may redeem
Notes with the net cash proceeds of one or more public offerings of the
Company's equity securities of the equity securities of any of the Company's
direct or indirect parents (to the extent such net proceeds have been
contributed to the Company as common equity capital) at a redemption price
equal to 110.125% of the principal amount thereof; PROVIDED that at least 65%
in aggregate principal amount of the Notes originally issued remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 60 days of the date of the closing of such public
offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (in either case,
A2-4
<PAGE>
the "Change of Control Payment"). Within 10 days following any Change of
Control, the Issuers 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 Issuers shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest 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
amount of Notes (including any Additional Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Issuers (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount 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 Issuers 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 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date 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 and integral multiples of
$1,000. 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 Issuers may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Issuers 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 Issuers 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 the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Subsidiary
Guarantees 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
Issuers' or Guarantor'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
A2-5
<PAGE>
under the Indenture of any such Holder, to comply with the requirements of
the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the
Indenture, or to allow any Guarantor to execute a supplemental indenture to
the Indenture and/or a Subsidiary Guarantee with respect to the Notes.
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 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 Issuers to comply with Section 4.07, 4.09, 4.10, 4.14 or
5.01 of the Indenture; (iv) failure by the Issuers for 60 days after notice
to the Issuers by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with certain other agreements in the
Indenture, the Notes; (v) default under certain other agreements relating to
Indebtedness of the Issuers 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; (vii)
certain events of bankruptcy or insolvency with respect to the Issuers or any
of its Material Subsidiaries (viii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount 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 further
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 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 principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount 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 of, the Notes. The Issuers is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Issuers 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 ISSUERS. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or its Affiliates, and may otherwise deal with the
Issuers 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 Issuers, as such, shall not
have any liability for any obligations of the Issuers 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.
A2-6
<PAGE>
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 December 22, 1997, between the
Issuers 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 Issuers have
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 Issuers 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:
Perkins Family Restaurants, L.P.
6075 Popular Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Steven R. McClellan
A2-7
<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 Issuers. The agent may substitute
another to act for him.
Date:
------------------
Your Signature:
----------------------------
(Sign exactly as your name appears on this Note)
Signature Guarantee.
A2-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant
to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
-------------------- ------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
----------
Signature Guarantee.
A2-9
<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>
<CAPTION>
Principal Amount
Amount of Amount of increase of this
decrease in in Principal Amount Global Note Signature of
Principal Amount of following such authorized officer
of this Global Note decrease (or of Trustee or Note
Date of Exchange this Global Note ---------------- increase) Custodian
- ---------------- ---------------- -------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
c/o Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of December
22, 1997 (the "INDENTURE"), between Perkins Family Restaurants and Perkins
Finance Corp., as issuers (the "ISSUERS"), 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 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
B-1
<PAGE>
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 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 Issuers
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.
B-2
<PAGE>
(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 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 Issuers.
-----------------------------
[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
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
c/o Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes due 2007
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of December
___, 1997 (the "INDENTURE"), between Perkins Family Restaurants, L.P. (the
"COMPANY") and Perkins Finance Corp. ("FINANCE CORP." and, together with the
Company, the "ISSUERS"), 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
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, 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
C-1
<PAGE>
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 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, 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, 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
C-2
<PAGE>
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-3
<PAGE>
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuers.
-----------------------------
[Insert Name of Owner]
By:
--------------------------
Name:
Title:
Dated: ________________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes Due 2007
Reference is hereby made to the Indenture, dated as of
December ___, 1997 (the "INDENTURE"), between Perkins Family Restaurants,
L.P. (the "Company") and Perkins Finance Corp. ("Finance Corp." and, together
with the Company, the "Issuers"), 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 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 forth 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 one of the
Issuers 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 Issuers a signed letter substantially in the
form of this letter and an Opinion of Counsel in form reasonably acceptable
to the Issuers 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.
D-1
<PAGE>
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 Issuers such certifications, legal opinions and other information as
you and the Issuers 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 Issuers 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: __________________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as
of ________________, among __________________ (the "GUARANTEEING
SUBSIDIARY"), a subsidiary of PERKINS FAMILY RESTAURANTS, L.P. (or its
permitted successor), a Delaware limited partnership (the "COMPANY"), PERKINS
FINANCE CORP. ("FINANCE CORP" and, together with the Company, the "ISSUER",
the other Guarantors (as defined in the Indenture referred to herein, if any)
and STATE STREET BANK AND TRUST COMPANY, as trustee under the indenture
referred to below (the "TRUSTEE").
W I T N E S S E T H
WHEREAS, the Issuers have heretofore executed and delivered to
the Trustee an indenture (the "INDENTURE"), dated as of December 1997
providing for the issuance of an aggregate principal amount of up to
$100,000,000 in aggregate principal amount of__% Senior Notes due 2007 (the
"NOTES");
WHEREAS, the Indenture provides that under certain circumstances
the Guaranteeing Subsidiary shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiary shall
unconditionally guarantee all of the Issuers' Obligations under the Notes and
the Indenture on the terms and conditions set forth herein and therein (the
"SUBSIDIARY GUARANTEE"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary
hereby agrees to comply with and become liable for any obligations of the
Guarantors under the Indenture and as follows:
(a) To jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Notes or
the obligations of the Issuers hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on
the overdue principal of and interest on the Notes, if
any, if lawful, and all other obligations of the
Issuers to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof;
and
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<PAGE>
(ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that
same will be promptly paid in full when due or
performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Issuers, any action
to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuers, any
right to require a proceeding first against the Issuers,
protest, notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except
by complete performance of the obligations contained in the
Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Issuers, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either the Issuers or the Guarantors,
any amount paid by either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect
of any obligations guaranteed hereby until payment in full
of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due
and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders
under the Guarantee.
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<PAGE>
(i) The obligations of the Guarantor under its Subsidiary
Guarantee shall be limited to the maximum amount as will,
after giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant under
any applicable Bankruptcy or fraudulent conveyance laws, and
after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such
other Guarantor under the Indenture or its Subsidiary
Guarantee, result in the obligations of such Guarantor under
its Subsidiary Guarantee not constituting a fraudulent
transfer or conveyance.
3 EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary
agrees that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) the Person formed by or surviving any such consolidation
or merger (if other than a Guarantor or the Issuers)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee,
under the Notes, the Indenture and the Subsidiary Guarantee
on the terms set forth herein or therein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists;
(iii) the Guaranteeing Subsidiary, or any Person formed by or
surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect
to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately
preceding the transaction; and
(iv) the Company would be permitted, immediately after giving
effect to such transaction, 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 the Indenture.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon all of the Subsidiary's issuable
hereunder which theretofore shall not have been signed by the
Issuers and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
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<PAGE>
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with
or into the Issuers or another Guarantor, or shall prevent
any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Issuers or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all to the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under
its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such
sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Issuers to the Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was
made by the Issuers in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from
its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Issuers or any Guaranteeing Subsidiary under the Notes,
any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Subsidiary 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.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
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.
8. COUNTERPARTS The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
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<PAGE>
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10 THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Issuers.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Indenture to be duly executed and attested, all as of the
date first above written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By:
---------------------------------
Name:
Title:
PERKINS FAMILY RESTAURANTS, L.P.
By: PERKINS MANAGEMENT COMPANY, INC.
Its general partner
By:
---------------------------------
Name:
Title:
PERKINS FINANCE CORP.
By:
---------------------------------
Name:
Title:
[EXISTING GUARANTORS, IF ANY ]
By:
---------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, N.A.
By:
--------------------------------
Name:
Title:
<PAGE>
AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT, dated as of April 14, 1994 (together
with all supplements, annexes, exhibits and schedules hereto hereinafter
referred to as the "Lease", between GENERAL ELECTRIC CAPITAL CORPORATION,
with an CORPORATION, with an office at 44-2 Old Ridgebury Road Danbury, Ct
06810 (hereinafter called, together with its successors and assigns, if any,
"Lessor") and TRC Realty Co., a corporation organized and existing under
the laws of the State of Vermont with its mailing address and chief place of
business at 7 Burlington Sq., 6th Floor, Burlington, VT 05401 (hereinafter
called "Lessee").
W I T N E S S E T H :
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor
agrees to Lessee, and Lessee agrees to lease from Lessor, the aircraft,
including the airframe, engines and all appurtenant equipment (together
hereinafter the "Aircraft") described in Annex A.
(b) The obligation of Lessor to purchase the Aircraft from the
manufacturer or supplier thereof ("Supplier") and to lease the same to Lessee
hereunder shall be subject to the Commencement Date of the Lease, as that
term is hereinafter defined in Section II, occurring on or prior to the Last
Delivery Date specified in Annex B, on the representations and warranties of
Lessee contained herein being true and accurate as of the Commencement Date
and further conditioned on receipt by Lessor, on or prior to the Commencement
Date, of each of the following documents in form and substance satisfactory
to Lessor: (i) a copy of this Lease executed by Lessee, (ii) unless Lessor
shall have delivered its purchase order for such Aircraft, the Purchase
Documents(s) Assignment and Consent in the form of Annex C, with copies of
the purchase order or other purchase documents attached thereto; (iii) copies
of insurance policies or, at Lessor's option, such other evidence of
insurance which complies with the requirements of Section X, (iv) evidence of
Lessee's reservation of an N number for the Aircraft together with an
assignment of the rights thereto to Lessor; (v) evidence that the Aircraft
has been duly certified as to type and airworthiness by the Federal Aviation
Administration ("FAA"); (vi) evidence that FAA counsel has received in escrow
the executed bill of sale and AC Form 8050-1 Aircraft Registration Form
(except for the pink copy which shall be available to be placed on the
Aircraft upon acceptance thereof), and an executed duplicate of this Lease
all in proper form for filing with the FAA; (vii) resolution of Lessee
authorizing this Lease in the form of Annex D; (viii) completed survey with
respect to the Aircraft in accordance with subsection (c) hereof and (ix)
such other documents as Lessor may reasonably request. Lessor's obligation to
lease the Aircraft hereunder is further conditioned upon (aa) the cost to
Lessor of the acquisition of the Aircraft not exceeding the Capitalized
Lessor's Cost stated on Annex a; (bb) upon delivery of the aircraft, Lessee's
execution and delivery to Lessor of a Certificate of Acceptance in the form
of annex E; and (dd) filing of all necessary documents with, and the
acceptance thereof by, the FAA.
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<PAGE>
(c) The survey required by I(b)(viii) hereof will be undertaken at
Lessee's expense by a consultant named by Lessor and shall include (i) a
complete inventory of the Aircraft, including without limitation engines,
spare parts and avionics; (ii) review of all operating and maintenance logs
(including any computerized program under which the Aircraft has been
maintained); (iii) physical inspection of the Aircraft (including a
demonstration flight)
(d) Lessor hereby appoints Lessee its agent for inspection and
acceptance of the Aircraft from the Supplier. Subject to the aforestated
conditions, upon execution by Lessee of the Certificate of Acceptance, the
Aircraft described thereon shall be deemed to have been delivered to, and
irrevocably accepted by, Lessee for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent ("Rent") payable hereunder and Lessee's right to use the
Aircraft shall commence on the date of execution by Lessee of the Certificate
of Acceptance ("Commencement Date"). The term ("Term") of this Lease shall
commence on the Commencement Date and shall continue, unless earlier
terminated pursuant to the provisions hereof, until and including the
Expiration Date stated in Annex B. If any term is extended or renewed, the
word "Term" shall be deemed to refer to all extended or renewal terms, and
all provisions of this Lease shall apply during any such extension or renewal
terms, except as may be otherwise specifically provided in writing.
(b) Rent shall be paid to Lessor at its address stated above, except as
otherwise directed by Lessor. Payments of Rent shall be in the amount,
payable at such intervals and shall be due in accordance with subsections (c)
through (d) hereof and the provisions of Annex B. (Each payment of Rent is
hereinafter referred to as a "Rent Payment".) If one or more Advance Rent is
payable, such Advance Rent shall be (i) set forth on Annex B and due in
accordance with the provisions of Annex B, and (ii) when received by Lessor,
applied to the first Basic Term Rent Payment and the balance, if any, to the
final Rent Payment(s), in inverse order of maturity. In no event shall any
Advance Rent or any other Rent Payment be refunded to Lessee. If Rent is not
paid within fifteen (15) days of its due date, Lessee agrees to pay a late
charge of five cents (5) per dollar on, and in addition to, the amount of
such Rent but not exceeding the lawful maximum, if any.
(c) For the period from and including the Commencement Date to the
Basic Term Commencement Date ("Interim Period") stated in Annex B, Lessee
shall pay as Rent ("Interim Rent") for the Aircraft, the product of the Daily
Lease Rate Factor stated in Annex B times the Capitalized Lessor's Cost of
same stated in Annex A times the number of days in the Interim Period.
Interim Rent shall be due on the date stated in Annex B.
(d) Commencing on the First Basic Rent Date stated in Annex B and
thereafter as stated in Annex B (each, a "Rent Payment Date") during the
Basic Term, Lessee shall pay as Rent ("Basic Term Rent") the product of the
Basic Term Lease Rate Factor stated in Annex B times the Capitalized Lessor's
Cost stated in Annex A.
III. RENT ADJUSTMENT:
(a) The periodic rent payments in Annex B have been calculated on the
assumption (which, as between Lessor and Lessee, is mutual) that the maximum
effective corporate income tax rate (exclusive of any minimum tax rate) for
calendar-year taxpayers ("Effective Rate") will be thirty-five percent (35%)
each year during the Term of this Lease.
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<PAGE>
(b) If, solely as a result of Congressional enactment of any law
(including, without limitation, any modification of, an amendment or addition
to, the Internal Revenue Code of 1986, as amended (the "Code"), the Effective
Rate is higher than thirty-five percent (35%) for any year during the lease
Term, then Lessor shall have the right to increase such rent payments by
requiring payment of a single additional sum equal to the product of (i) the
Effective Rate (expressed as a decimal) for such year less .35 (or, in the
event that any adjustment has been made hereunder for any previous year, the
Effective Rate (expressed as a decimal) used in calculating the next previous
adjustment) times (ii) the adjusted Termination Value. The adjusted
Termination Value shall be the Termination Value (calculated as of the first
rental due in the year for which such adjustment is being made) less the
product of the Tax Benefits as defined in Article XV, Paragraph (b) that
would be allowable under Section 168 of the Code (as of the first day of the
year for which such adjustment is being made and all subsequent years for
which such adjustment is being made). Lessee shall pay to Lessor the full
amount of the additional rent payment on the later of (i) receipt of notice
or (ii) the first day of the year for which such adjustment is being made.
(c) Lessee's obligations under this Section III shall survive any
expiration or termination of this lease.
IV. TAXES: Except as provided in Section III and XV(c), Lessee shall have
no liability for taxes imposed by the United States of America or any State
or political subdivision thereof which are on or measured by the net income
of Lessor. Lessee shall report (to the extent that it is legally permissible)
and pay promptly all other taxes, fees and assessments due, imposed, assessed
or levied against the Aircraft (or the purchase, ownership, delivery,
leasing, possession, use or operation thereof), this Lease (or any rentals or
receipts hereunder), Lessor or Lessee by any foreign, federal, state or local
government or taxing authority during or related to the Term of this Lease,
including, without limitation, all license and registration fees, and all
sales, use, personal property, excise, gross receipts, franchise, stamp or
other taxes, imposts, duties and charges, together with any penalties, fines
or interest thereon (all hereinafter called "Taxes"). In the event that
Lessor receives any billing for Taxes, Lessor shall promptly forward to
Lessee any such bills. Lessee shall (a) reimburse Lessor upon receipt of
written request for reimbursement for any Taxes charged to or assessed
against Lessor, (b) on request of Lessor, submit to Lessor written evidence
of Lessee's payment of Taxes, (c) on all reports or returns show the
ownership of the Aircraft by Lessor, and (d) send a copy thereof to Lessor.
V. REPORTS: Lessee will provide Lessor with the following in writing
within the time periods specified: (a) notice of tax or other lien which
attaches to the Aircraft within ten (10) days of Lessee's obtaining knowledge
of such attachment and such additional information reasonably related thereto
with respect to the tax or lien forthwith upon request of Lessor; (b) The
balance sheet and profit and loss statement of Lessee's parent company,
Tennessee Restaurant Company, within one hundred twenty (120) days of the
close of each fiscal year of Tennessee Restaurant Company, and any further
financial information or reports, upon request; (c) notice to Lessor of the
Aircrafts' location, and, the location of all information, logs, documents
and records regarding or in respect to the Aircraft and its use, maintenance
and/or condition, immediately upon request; (d) notice to Lessor of the
relocation of the Aircraft's primary hangar location, ten (10) days prior to
any relocation;
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<PAGE>
(e) notice of loss or damage to the Aircraft (where the estimated
repair costs would exceed 10% of the Aircraft's then fair market value)
within ten (10) days of such loss or damage; (f) notice of any accident
involving the Aircraft causing personal injury or property damage within ten
(10) days of such accident; (g) copies of the insurance policies or other
evidence of insurance required by the terms hereof, promptly upon request by
Lessor; (h) copies of all information, logs, documents and records regarding
or in respect to the Aircraft and its use, maintenance and/or condition,
within twenty (20) days of such request; (i) a certificate of the authorized
officer of Lessee stating that he has reviewed the activities of Lessee and
that, to the best of his knowledge, there exists no default (as described in
Section XII) or event which with notice or lapse of time (or both) would
become such a default: (j) such information as may be required to enable
Lessor to file any reports required by any governmental authority as a result
of Lessor's ownership of the Aircraft, promptly upon request of Lessor; (k)
copies of manufacturer's maintenance service program contract for the
airframe or engines, promptly upon request; (l) evidence of Lessee's
compliance with FAA airworthiness directives and advisory circulars and of
compliance with other maintenance provisions of Section VII hereof and the
return provisions of Section XI, upon request of Lessor; and (m) such other
reports as Lessor may reasonably request.
VI. DELIVERY, REGISTRATION, USE AND OPERATION:
(a) The Aircraft shall be delivered directly from the Supplier to
Lessee.
(b) Lessee, at its own cost and expense, shall cause the Aircraft to be
duly registered in the name of Lessor under the U.S. Federal Aviation Act and
shall not register the Aircraft under the laws of any other country.
(c) The possession, use and operation of the Aircraft shall be at the
sole risk and expense of Lessee. Lessee agrees that the Aircraft will be used
and operated in compliance with any and all statutes, laws, ordinances,
regulations and standards or directives issued by any governmental agency
applicable to the use or operation thereof, in compliance with any
airworthiness certificate, license or registration relating to the Aircraft
issued by any agency and in a manner that does not modify or impair any
existing warranties on the Aircraft or any part thereof. Lessee will operate
the Aircraft predominantly in the conduct of its business and not operate or
permit the Aircraft to be operated (i) in a manner wherein the predominance
of use during any consecutive twelve month period would be for a purpose
other thant transportation for Lessee or its Affiliates, which is hereinafter
defined to mean any entity or person that controls, is controlled by or is
under common control with the Lessee, or in a manner, for any time period,
such that Lessor or a third party shall be deemed to have "operational
control" of the Aircraft, or (ii) for the carriage of persons or property for
hire or the transport of mail or contraband. The Aircraft will, at all times
be operated by duly qualified pilots holding at least a valid commercial
airman certificate and instrument rating and any other certificate, rating,
type rating or endorsement appropriate to the Aircraft, purpose of flight,
condition of flight or as otherwise required by the Federal Aviation
Regulations ("FAR"). Pilots shall be employed, paid and contracted for by
Lessee or its Affiliates, shall meet all recency of flight requirements and
shall meet the requirements established and specified by the insurance
policies required hereunder the the FAA. The primary hangar location of the
Aircraft shall be as stated in annex B. Lessee shall not relocate the primary
hangar location to a hangar location outside the United States.
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<PAGE>
(d) Lessee agrees no to operate or locate the Aircraft in (i) any area
of hostilities, (i) any country or jurisdiction that does not maintain full
diplomatic relations with the United States of America, (iii) any area which
is not covered by any insurance policy required hereunder, or (iv) any
country that is the subject of sanctions under the U.S. International
Economic emergency Powers Act or U.N. Security Council directives (presently
Haiti, Iraq, Libya and the Federal Republic of Yugoslavia (Serbia and
Montenegro)). Lessee also agrees not to operate or locate the aircraft in any
country restricted under the U.S. Trading with the Enemy Act and the U.S.
Export Administration Act except as may be permitted by operating in
accordance with the conditions specified by the U.S. Export Administration
Regulations, General License GATS (15 CFR Part 771.19) (presently Cuba, Iran,
North Korea, sudan, syria and Vietnam). The engines set forth on annex A
shall be used only on the airframe described in Annex A and shall only be
removed for maintenance in accordance with the provisions hereof.
VII. MAINTENANCE:
(a) Lessee agrees that the Aircraft will be maintained in compliance
with any and all statutes, laws, ordinances, regulations and standards or
directives issued by any governmental agency applicable to the maintenance
thereof, in compliance with any airworthiness certificate, license or
registration relating to the Aircraft issued by any agency and in a manner
that does not modify or impair any existing warranties on the Aircraft or any
part thereof.
(b) Lessee shall maintain, inspect, service, repair, overhaul and test
the Aircraft (including each engine of same) in accordance with (i) all
maintenance manuals initially furnished with the Aircraft, including any
subsequent amendments or supplements to such manuals issued by the
manufacturer from time to time, (ii) all recommended "Service Bulletins"
issued, supplied, or available by or through the manufacturer and/or the
manufacturer of any engine or part with respect to the Aircraft, and (iii)
all airworthiness directives and advisory circulars issued by the FAA or
similar regulatory agency having jurisdictional authority, and causing
compliance to such directives or circulars to be completed through corrective
modification in lieu of operating manual restrictions. Lessee shall maintain
all records, logs and other materials required by the manufacturer thereof
for enforcement of any warranties or by the FAA. All maintenance procedures
required hereby shall be undertaken and completed in accordance with the
manufacturer's recommended procedures, and by properly trained, licensed, and
certificated maintenance sources and maintenance personnel, so as to keep the
Aircraft and each engine in as good operating condition as when delivered to
Lessee hereunder, ordinary wear and tear excepted, and so as to keep the
Aircraft in such operating condition as may be necessary to enable the
airworthiness certification of such Aircraft to be maintained in good
standing at all times under the FAA.
(c) Lessee agrees, at its own cost and expense, to (i) cause the
Aircraft and each engine thereon to be kept numbered with the identification
or serial number therefor as specified annex A; (ii) prominently display on
the Aircraft that N number, and only that N number, specified in Annex A;
(iii) notify Lessor in writing thirty (30) days prior to making any change in
the configuration (other than changes in configuration mandated by the FAA),
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appearance and coloring of the Aircraft from that in effect at the time the
Aircraft is accepted by Lessee hereunder, and in the event of such change or
modification of con uration, coloring or apperance to restore, upon
request of Lessor, the Aircraft to the configuration, coloring or appearance
in effect on the Commencement Date or, at Lessor's option to pay to Lessor an
amount equal to the reasonable cost of such restoration, (iv) affix and
maintain inside the Aircraft adjacent to the airworthiness certificate and on
each engine a metal nameplate bearing the Aircraft marking specified in annex
A and such other markings or writings as from time to time may be required by
law or otherwise deemed necessary by Lessor in order to protect its title to
the Aircraft and its rights hereunder. Lessee will not place the Aircraft in
operation or exercise any control or dominion over the same until such
Aircraft marking has been placed thereon. Lessee will replace promptly any
such Aircraft marking which may be removed, defaced or destroyed.
(d) Lessee shall be entitled from time to time during the Term of this
lease to acquire and install on the Aircraft at Lessee's expense, any
additional accessory device or equipment as Lessee may desire (each such
accessory, device or equipment, an "Addition"), but only so long as such
Addition (i) is ancillary to the Aircraft; (ii) is not required to render the
Aircraft complete for its intended use by Lessee; (iii) does not alter or
impair the originally intended function or use of the Aircraft; and (iv) can
be readily removed without causing material damage. Title to each Addition
which is not removed by Lessee prior to the return of the Aircraft to Lessor
shall vest in Lessor upon such return. Lessee shall repair all damage to the
Aircraft resulting from the installation or removal of any Addition so as to
restore the Aircraft to its condition prior to installation, ordinary wear
and tear excepted.
(e) Any alteration or modification (each an "Alteration") with respect
to the Aircraft that may at any time during the Term of this Lease be
required to comply with any applicable law or any governmental rule or
regulation shall be made at the expense of Lessee. Any repair made by Lessee
of or upon the Aircraft or replacement parts, including any replacement
engine, installed thereon in the course of repairing or maintaining the
Aircraft, or any Alteration required by law or any governmental rule or
regulation, shall be deemed an accession, and title thereto shall be
immediately vested in Lessor without cost or expense to Lessor.
(f) Except as permitted under this Section VII, Lessee will not modify
the Aircraft or affix or remove any accessory to the Aircraft leased
hereunder.
VIII. LIENS, SUBLEASE AND ASSIGNMENT:
(a) LESSEE SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER THE AIRCRAFT,
ANY ENGINE OR ANY PART THEREOF, LESSOR'S TITLE OR ITS RIGHTS UNDER THIS LEASE
AND SHALL NOT SUBLET OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE OR
PART THEREOF OR ENTER INTO ANY INTERCHANGE AGREEMENT WITHOUT THE WRITTEN
CONSENT OF LESSOR WHICH WILL NOT BE UNREASSONABLY WITHHELD; PROVIDED,
HOWEVER, THAT LESSEE MAY ASSIGN ITS RIGHTS IN THE AIRCRAFT AND THIS LEASE TO
TENNESSEE RESTAURANT COMPANY UPON GIVING LESSOR NOT LESS THAN FORTY-FIVE (45)
DAYS PRIOR WRITTEN NOTICE OF SUCH ASSIGNMENT, AND IN SUCH EVENT LESSEE AND
TENNESSEE RESTAURANT COMPANY WILL SIGN SUCH ASSIGNMENT DOCUMENTATION AS
LESSOR MAY REASONABLY REQUEST. Lessee shall not permit any engine to be used
on any other Aircraft. Lessee shall keep the Aircraft each engine and any
part thereof free and clear of all liens and encumbrances other than those
which result from (i) the respective rights of Lessor and Lessee as herein
provided; (ii) liens arising from the acts of Lessor; (iii) liens for taxes
not yet due; and (iv) inchoate materialmen's, mechanics',
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ILLEGIBLE, employees or other like liens arising from the ordinary course of
business of Lessee for sums not yet delinquent or being contested in good
faith (and for the payment of which adequate assurances in Lessor's judgment
have been provided Lessor).
(b) Lessor and any assignee of Lessor may assign this Lease, or any
party hereof and/or the Aircraft subject hereto provided that such assignment
shall be subject to this Lease and the rights of the Lessee under it. Lessee
hereby waives and agrees not to assert against any such assignee, or
assignee's assigns, any defense, set-off, recoupment claim or counterclaim
which Lessee has or may at any time have against Lessor for any reason
whatsoever.
IX. LOSS, DAMAGE AND STIPULATED LOSS VALUE: Lessee hereby assumes and
shall bear the entire risk of any loss, theft, confiscation, expropriation,
requisition, damage to, or destruction of, the Aircraft, any engine or part
thereof from any cause whatsoever. Lessee shall promptly and fully notify
Lessor in writing if the Aircraft, or any engine thereto shall be or become
worn out, lost, stolen, confiscated, expropriated, requisitioned, destroyed,
irreparably damaged or permanently rendered unfit for use from any cause
whatsoever (such occurrences being hereinafter called "Casualty
Occurrences"). In the event that, in the opinion of Lessor, a Casualty
Occurrence has occurred which affects only the engine(s) of the Aircraft,
then Lessee, at its own cost and expense, shall replace such engine with an
engine acceptable to Lessor and shall cause title to such engine to be
transferred to Lessor for lease to Lessee hereunder. Upon transfer of title
to Lessor of such engine(s), such engine shall be subject to the terms and
conditions of this Lease, and Lessee shall execute whatever documents or
filings Lessor deems necessary and appropriate in connection with the
substitution of such replacement engine for the original engine. In the event
that, in the opinion of Lessor, a Casualty Occurrence has occurred in respect
to the Aircraft in its entirety, on the Rent Payment Date next succeeding a
Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of
(a) the Stipulated Loss Value as set forth in Annex F calculated as of the
Rent Payment Date immediately preceding such Casualty Occurrence; and (b) all
Rent and other amounts which are due hereunder as of the Payment Date. Upon
payment of all sums due hereunder, the Terms of this Lease as to the Aircraft
shall terminate and Lessor shall be entitled to recover possession of the
salvage thereof.
X. INSURANCE: Lessee shall secure and maintain in effect at its own
expense throughout the Term hereof insurance against such hazards and for
such risks as Lessor may direct. All such insurance shall be with companies
satisfactory to Lessor. Without limiting the generality of the foregoing,
Lessee shall maintain (a) breach of warranty insurance, (b) liability
insurance covering public liability and property, cargo and environmental
damage (against hazards and risks as is generally available in the industry
with respect to like Aircraft), in amounts not less than twenty (20) million
U.S. dollars with any single occurrence, (c) all-risk aircraft hull and
engine insurance (including, without limitation, foreign object damage
insurance) in an amount which is not less than the Stipulated Loss Value, and
(d) confiscation and war risk insurance. All insurance shall name the Lessor
as owner of the Aircraft and as loss payee and additional insured (without
responsibility for premiums) and shall provide that any cancellation or
substantial change in coverage shall not be effective as to the Lessor for
thirty (30) days after receipt by Lessor of written notice from such
insurer(s) of such cancellation or change (or in the case of war risk such
lesser period as customarily available), shall insure Lessor's interest
regardless of any breach or violation by Lessee of any warranties,
declarations or conditions in such policies, shall include a severability of
interest clause providing that such policy shall operate in
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the same manner as if there were a separate policy covering each insured,
shall waive any right of set-off against Lessee or Lessor, and shall waive
any rights of subrogation against Lessor. Such insurance shall be primary and
not be subject to any offset by any other insurance carried by Lessor or
Lessee. Upon the occurrence of an Event of Default, Lessee hereby appoints
Lessor as Lessee's attorney-in-fact to make proof of loss and claim for and
to receive payment of and to execute or endorse all documents, checks or
drafts in connection with all policies of insurance in respect of the
Aircraft. Any expense of adjusting or collecting insurance proceeds shall be
borne by Lessee. Lessor may, at its option, apply proceeds of insurance, in
whole or in part, to (i) repair or replace the Aircraft or any part thereof
or (ii) satisfy any obligation of Lessee to Lessor hereunder. Any balance
remaining (taking into account salvage of the Aircraft) which is above Fair
Market Value, as defined in Section XIX, as of the date of the loss shall be
returned to Lessee.
XI. RETURN OF AIRCRAFT:
(a) Upon the expiration or termination of this Lease, Lessee, at its
own expense, will return the Aircraft and shall deliver all logs, manuals and
data, including without limitation inspection, modification and overhaul
records required to be maintained with respect thereto under this Lease or
under the applicable rules and regulations of the FAA and under the
manufacturer's recommended maintenance program, along with a currently
effective FAA airworthiness certificate to Lessor to any location within the
continental United States as Lessor shall direct. Lessee shall, upon request,
assign to Lessor its rights under any manufacturer's maintenance service
contract or extended warranty for the Aircraft, any engine or part thereof.
All expenses for return of the Aircraft and delivery of the aforementioned
logs, manuals and data shall be borne by Lessee. The Aircraft shall be
returned in the condition in which the Aircraft is required to be maintained
pursuant to Section VII hereof, but with all logos or other identifying marks
of Lessee removed. Additionally, the Lessee (i) shall have had completed
within thirty (30) days prior to return, the next required annual inspection
on the Aircraft, and the next periodic inspection on each engine; (ii) shall
assure that each engine shall have available operating hours until both the
next scheduled "hot section" inspection and next scheduled major overhaul of
not less than 50% of the total operating hours respectively available between
such hot section inspections or major overhauls; and (iii) shall assure that
the airframe shall have at least: (aa) one-half the available operating
hours; and (bb) one-half the available operating months until the next
schedule major airframe inspection allowable between major airframe
inspections.
(b) Upon the return of the Aircraft: (i) each fuel tank shall contain
the same quantity of fuel as was contained in such tanks when such Aircraft
was delivered to Lessee, (which shall be presumed to be 50 percent (50%) of
full capacity unless otherwise specified in the purchase order or other
purchase documents or, in the case of differences in such quantity, an
appropriate adjustment will be made by payment at the then current market
price of fuel.
(c) Upon return of the Aircraft, Lessor shall arrange for the
inspection of same within one hundred and twenty (120) days of return to
determine if the Aircraft has been maintained and returned in accordance with
the provisions hereof. Lessee shall be responsible for the cost of such
inspection and shall pay Lessor such amount as additional Rent within ten
(10) days of demand for same. Lessor shall promptly provide Lessee with a
copy of the invoice and the inspection report. In the event that the results
of such inspection indicate that the Aircraft, any engine thereto or part
thereof, has not been
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maintained or returned in accordance with the provisions hereof, Lessee shall
pay to Lessor within thirty (30) days of demand, as liquidated damages, the
estimated cost ("Estimated Cost") of servicing or repairing the Aircraft,
engine or part. The Estimated Cost shall be determined as follows: Each of
Lessee and Lessor shall obtain one quote, from a qualified, unaffiliated
entity as to the cost of performing such service or repairs. Lessee shall
bear the cost, if any, incurred by Lessor in obtaining such quotes. If such
quotes are not the same, and the parties cannot agree on an Estimated Cost
the parties shall select an independent appraiser to determine the Estimated
Cost, which appraisal shall be final and binding on both parties.
(d) If Lessee fails to return the Aircraft on termination or
expiration of the Term, Lessor shall be entitled to damages equal to the
higher of (i) the Rent for the Aircraft, pro-rated on a per diem basis, for
each day the Aircraft is retained in violation of the provisions hereof; or
(ii) the daily fair market rental for the Aircraft at termination or
expiration, as applicable. Such damages for retention of the Aircraft after
termination or expiration of the Term shall not be interpreted as an
extension or reinstatement of the Term.
(e) All of Lessor's rights contained in this Section shall survive the
expiration or other termination of this Lease.
XII. EVENTS OF DEFAULT: The term "Event of Default", wherever used herein,
shall mean any of the following events under this Lease, whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary,
or come about or be effected by operation of law, or be pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation or any administrative or governmental body: (a) Lessee shall
fail to make any payment of Rent within ten (10) days after receipt of
written notice the same shall become due; or (b) Lessee shall fail to keep in
fully force and effect insurance required under this Lease; or (c) Lessee
shall or shall attempt to (except as expressly permitted by the provisions of
this Lease) remove, sell, transfer, encumber, part with possession of, assign
or sublet the Aircraft, any engine or any part thereof, use the Aircraft for
an illegal purpose, or permit the same to occur; or (d) Lessee shall fail to
perform or observe any covenant, condition or agreement not included within
(a), (b) or (c) above which is required to be performed or observed by it
under this Lease or any agreement, document or certificate delivered by
Lessee in connection herewith, and such failure shall continue for twenty
(20) days after receipt of written notice thereof from Lessor to Lessee; or
(e) any representation or warranty made by Lessee in this Lease or any
agreement, document or certificate delivered by Lessee in connection herewith
or pursuant hereto shall prove to have been incorrect in any material respect
when any such representation or warranty was made or given (or, if a
continuing representation or warranty, at any material time); or (f) Lessee
shall generally fail to pay its debts as they become due or shall file a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or hereafter
in effect) or an answer admitting the material allegations of a petition
filed against Lessee in any such proceeding, or Lessee shall, by voluntary
petition, answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law (other than a law
which does not provide for or permit the readjustment or alteration of
Lessee's obligations hereunder) providing for the reorganization or
liquidation of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or (g) a petition is filed
against Lessee in a proceeding under applicable bankruptcy laws or other
insolvency laws (other than any law which does not provide for or permit any
readjustment or alteration of Lessee's obligations hereunder in each case),
as now or
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hereafter in effect, and is not withdrawn or dismissed within ninety (90)
days thereafter, or if, under the provisions of any law (other than any law
which does not provide for or permit any readjustment or alteration of
Lessee's obligations hereunder in each case) providing for reorganization or
liquidation of corporations which may apply to Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of Lessee or of
any substantial part of its property and such jurisdiction, custody or
control shall remain in force unrelinquished, unstayed or unterminated for a
period of sixty (60) days; or (h) Lessee breaches or is in default beyond
notice and reasonable cure period, if any, under any other agreement by and
between Lessor and Lessee; or (i) there is a material adverse change in the
financial condition of Lessee from the time of execution hereof.
XIII. REMEDIES:
(a) Upon the occurrence of any Event of Default and so long as the same
shall be continuing, Lessor may, at its option, at any time thereafter,
exercise one or more of the following remedies, as Lessor in its sole
discretion shall lawfully elect: (i) demand that Lessee forthwith pay as
liquidated damages, for loss of a bargain and not as a penalty, an amount
equal to the Stipulated Loss Value of the Aircraft, computed as of the Basic
Rent Date immediately preceding such demand together with all Rent and other
amounts due and payable for all periods up to and including the Basic Rent
Date following the date on which Lessor made its demand for liquidated
damages; (ii) demand that Lessee pay all amounts due for failure to maintain
or return the Aircraft as provided herein and cause Lessee to assign to
Lessor Lessee's rights under any manufacturer's service program contract or
any extended warranty contract in force for the Aircraft; (iii) proceed by
appropriate court action, either at law or in equity, to enforce the
performance by Lessee of the applicable covenants of this Lease or to recover
damages for breach hereof; (iv) by notice in writing terminate this Lease,
whereupon all rights of Lessee to use of the Aircraft or any part thereof
shall absolutely cease and terminate, and Lessee shall forthwith return the
Aircraft in accordance with Section XI, but Lessee shall remain liable as
provided in Section XI; (v) request Lessee to return the Aircraft to a
designated location in accordance with Section XI; (vi) enter the premises,
with or without legal process, where the Aircraft is believed to be and take
possession thereof; (vii) sell or otherwise dispose of the Aircraft at
private or public sale, in bulk or in parcels, with or without notice, and
without having the Aircraft present at the place of sale; (viii) lease or
keep idle all or part of the Aircraft; (ix) use Lessee's premises for storage
pending lease or sale or for holding a sale without liability for rent or
costs; (x) collect from Lessee all costs, charges and expenses, including
reasonable legal fees and disbursements, incurred by Lessor by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto; (xi) in the case of a failure of Lessee to comply with any
provision of this Lease, Lessor may effect such compliance, in whole or in
part, and collect from Lessee as additional Rent, all monies spent and
expenses incurred or assumed by Lessor in effecting such compliance; and/or
(xii) declare any default under the terms of this Lease to be a default under
any other agreement between Lessor and Lessee. Lessor shall, at all times,
act in a commercially reasonable manner with regard to any disposition of the
Aircraft pursuant to this Paragraph (a).
(b) The foregoing remedies are cumulative, and any or all thereof may
be exercised in lieu of or in addition to each other or any remedies at law,
in equity, or under statute.
(c) Lessor shall have the right to any proceeds of sale, lease or
other disposition of the Aircraft, if any, and shall have the right to apply
same in
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the following order of priorities: (i) to pay all of Lessor's costs, charges
and expenses incurred enforcing its rights hereunder or in taking,
removing, holding, repairing, selling, leasing or otherwise disposing of the
Aircraft; then, (ii) to the extent not previously paid by Lessee, to pay
Lessor all sums due from Lessee hereunder; then (iii) to reimburse to Lessee
any sums previously paid by Lessee as liquidated damages; and (iv) any
surplus shall be retained by Lessor.
(d) Waiver of any default shall not be a waiver of any other or
subsequent default. Lessor's effecting compliance in accordance with
sub-section (a)(xi) hereof shall not constitute a waiver of an Event of
Default. The failure or delay of Lessor in exercising any rights granted it
hereunder upon any occurrence of any of the contingencies set forth herein
shall not constitute a waiver of any such right upon the continuation or
recurrence of any such contingencies or similar contingencies and any single
or partial exercise of any particular right by Lessor shall not exhaust the
same or constitute a waiver of any other right provided for in this Lease.
XIV. NET LEASE; NO SET-OFF, ETC: This Lease is a net lease. Lessee's
obligation to pay Rent and other amounts due hereunder shall be absolute and
unconditional. Lessee shall not be entitled to any abatement or reduction of,
or set-offs against, said Rent or other amounts, including, without
limitation, those arising or allegedly arising out of claims (present or
future, alleged or actual, and including claims arising out of strict tort of
Lessor) of Lessee against Lessor under this Lease or otherwise. Except as
otherwise expressly stated in Sections IX, XVIII and XIX herein, nor shall
this Lease terminate or the obligations of Lessee be affected by reason of
any defect in or damage to, or loss of possession, use or destruction of, the
Aircraft from whatsoever cause. it is the intention of the parties that Rent
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
XV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor,
its agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including
reasonable legal expenses, of whatsoever kind and nature, in contract or tort
or otherwise, except for those caused solely by the gross negligence or
willful misconduct of Lessor, and including, but not limited to, Lessor's
strict liability in tort, arising out of (i) the selection, manufacture,
purchase, acceptance or rejection of Aircraft, the ownership of Aircraft
during the Term of this Lease, and the delivery, lease, possession,
maintenance, use, condition, return or operation of the Aircraft (including,
without limitation, latent and other defects, whether or not discoverable by
Lessor or Lessee and any claim for patent, trademark or copyright
infringement), or (ii) the condition of the Aircraft sold or disposed of
after use by Lessee, any sublessee or employees of Lessee; provided that the
foregoing indemnity shall not extend to any losses, damages, penalties,
injuries, claims, actions or suits to the extent attributable to acts or
events which occur after the Aircraft is no longer leased to the Lessee under
this Lease. Lessee shall, upon request, defend any actions based on, or
arising out of, any of the foregoing.
(b) Lessee hereby represents and warrants that (i) on the Commencement
Date, the Aircraft will qualify for all of the items of deduction and credit
specified in Annex B ("Tax Benefits") in the hands of Lessor (all references
to Lessor in this Section XV include Lessor and the consolidated taxpayer
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group of which Lessor is a member), and (ii) at no time during the Term of
this Lease will Lessor take or omit to take, nor will permit any such
sublessee or assignee to take or omit to take, any action (whether or not
such act or omission is otherwise permitted by Lessor or the provisions of
this Lease), which will result in the disqualification of the Aircraft for,
or recapture of, all or any portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warranty or
covenant of the Lessee contained in this Lease (i) tax counsel of Lessor
shall determine that Lessor is not entitled to claim on its federal income
tax return all or any portion of the Tax benefits with respect to any
Aircraft, or (ii) any such Tax Benefit claimed on the Federal income tax
return of Lessor is disallowed or adjusted by the Internal Revenue Service,
or (iii) any such Tax Benefit is recomputed or recaptured (any such
determination, disallowance, adjustment, recomputation or recapture being
hereinafter called a "Loss"), then Lessee shall pay to Lessor, as an indemnity
and as additional Rent, such amount as shall, in the reasonable opinion of
Lessor, cause Lessor's after-tax economic yields and cash flows, computed on
the same assumptions, including tax rates (unless any adjustment has been
made under Section III hereof, in which case the Effective Rate used in the
next preceding adjustment shall be substituted), as were utilized by Lessor
in originally evaluating the transaction (such yields and flows being
hereinafter called the "Net Economic Return") to equal the Net Economic
Return that would have been realized by Lessor if such loss had not occurred.
Such amount shall be payable on demand accompanied by a statement describing
in reasonable detail such Loss and the computation of such amount.
(d) All of Lessor's rights, privileges and indemnities contained in
this Section shall survive the expiration or other termination of this Lease
and the rights, privileges and indemnities contained herein are expressly
made for the benefit of, and shall be enforceable by Lessor, its successors
and assigns.
XVI. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE AIRCRAFT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES AND THAT LESSOR
IS LEASING THE AIRCRAFT IN AN "AS IS" CONDITION. LESSOR DOES NOT MAKE, HAS
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO
THE AIRCRAFT LEASED HEREUNDER OR ANY COMPONENT THEREOF, OR ANY ENGINE
INSTALLED THEREON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO
CONDITION, AIRWORTHINESS, DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF
MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following, except if
caused by the gross negligence or willful misconduct of Lessor (i) any
liability, loss or damage caused or alleged to be caused directly or
indirectly by any Aircraft, any inadequacy thereof, any deficiency or defect
(latent or otherwise) therein, or any other circumstance in connection
therewith; (ii) the use, operation or performance of any Aircraft or any
risks relating thereto; (iii) any interruption of service, loss of business
or anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of any
Aircraft. If, and so long as, no Event of Default exists under this Lease,
Lessee shall be, and hereby is, authorized during the Term to assert
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and enforce, at Lessee's sole cost and expense, from time to time, in the
name of and for the account of Lessor and/or Lessee, as their interests may
appear, whatever claims and rights Lessor may have against any Supplier of
the Equipment.
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and
warrants to Lessor that on the date hereof and at all times during the Term
hereof:
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Lease and all related documents (together, the "Documents") and
is duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdiction(s) where the Aircraft is
to have its primary hangar location, and any jurisdiction requiring such
qualifications.
(b) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from
any governmental authority or instrumentality with respect to the entry into
or performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result
in any breach of, constitute a default under or result in the creation of any
lien, charge, security interest or other encumbrance upon any Aircraft
pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement or other instrument (other than this Lease) to which Lessee is a
party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or
affecting Lessee, which will have a material adverse effect on the ability of
Lessee to fulfill its obligations under this Lease.
(f) The Aircraft is and will remain tangible personal property.
(g) Lessee has received a copy of the survey completed in accordance
with Section I hereof. Since the date thereof, there has not occurred any
material change in the configuration or condition of the Aircraft (except
such modifications or repairs specified in such survey as being necessary to
undertake) and neither engine has accrued more than fifty (50) operating
hours since the date of such survey.
(h) Each Balance Sheet and Statement of Income delivered to Lessor has
been prepared in accordance with generally accepted accounting principles,
and since the date of the most recent such Balance Sheet and Statement of
income, there has been no material adverse change.
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(i) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Lease) and Lessee is and will continue to be a
"Citizen of the United States" within the meaning of Section 101(16) of the
Federal Aviation Act. Unless Lessor has consented in writing, Lessee shall
not consolidate, reorganize or merge into any other corporation or entity or
sell, convey, transfer or lease all or substantially all of its property
during the Term hereof; provided that Lessee may merge or consolidate with or
into Tennessee Restaurant Company or assign its interests in the Aircraft and
this Lease to Tennessee Restaurant Company upon giving Lessor not less than
forty-five (45) days prior written notice thereof and in such event Lessee
and Tennessee Restaurant Company will sign such assignment documents as
lessor may reasonably request.
(j) The chief executive office or chief place of business (as either
of such terms is used in Article 9 of the uniform Commercial Code) of Lessee
is located at the address set forth above, and Lessee agrees to give Lessor
prior written notice of any relocation of said chief executive office or
chief place of business from its present location.
(k) A copy of this Lease, and a current and valid AC Form 8050-1 will
be kept on the Aircraft at all times during the Term of this Lease.
(l) Lessee has selected the Aircraft, manufacturer and vendor thereof,
and all maintenance facilities required thereby.
(m) Lessee shall maintain all logs, books and records (including any
computerized maintenance records) pertaining to the Aircraft and engines and
their maintenance during the Term in accordance with FAA rules and
regulations.
(n) Lessee shall not operate the Aircraft under Part 135 of the Federal
Aviation Regulations without the prior written approval of Lessor.
(o) Lessee shall notify the FAA forty-eight (48) hours prior to the
first flight of the Aircraft.
XVIII. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in Annex B),
Lessee may, so long as no Event of Default exists hereunder, terminate this
Lease upon at least ninety (90) days prior written notice to Lessor effective
on the Rent Payment Date ("Termination Date") specified in such notice, in
addition to other termination rights contained in Addendum No. 3 to Annex B.
(b) Lessee shall, and Lessor may, solicit cash bids for the Aircraft on
an AS IS, WHERE-IS basis without recourse to or warranty from Lessor, express
or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall, (i)
certify to Lessor any bids received by Lessee; and (ii) pay to Lessor, (a)
the Termination Value (calculated as of the Termination Date) for the
Aircraft; and (b) all Rent and other sums due and unpaid as of the
Termination Date. Neither Lessee nor its Affiliates shall be permitted to bid.
(c) Provided that all amounts due hereunder have been paid on the
Termination Date, Lessor shall (i) sell the Aircraft on an AS IS BASIS for
cash to the highest bidder; and (ii) refund the proceeds of such sale (net of
any related expenses) to Lessee up to the amount of the Termination Value
paid by Lessee. If such sale is not consummated, no termination shall occur
and Lessor shall refund the Termination Value (less any expenses incurred by
Lessor) to Lessee, but Lessee may solicit new bids and Lessee's election,
until the Aircraft is sold.
14
<PAGE>
(d) Notwithstanding the foregoing, Lessor may elect by written notice,
at any time prior to the Termination Date, not to sell the Aircraft. In that
event, on the Termination Date Lessee shall: (i) return the Aircraft (in
accordance with Section XI); and (ii) pay to Lessor all amounts required
under Section XVIII(b) less the amount of the highest bid certified by Lessee
to Lessor.
XIX. PURCHASE OPTION:
(a) So long as there is no Event of Default hereunder and the lease has
not been earlier terminated, Lessee may at Lease expiration, upon at least
ninety (90) but not more than one hundred and eighty (180) days prior written
notice to Lessor, purchase the Aircraft on an AS IS BASIS for cash equal to
its then Fair Market Value (plus all applicable sales taxes) in addition to
other purchase options contained in Addenda Nos. 1 and 2 to Annex 8.
(b) "Fair Market Value" shall mean the price which a willing buyer (who
is neither a lessee in possession nor a used equipment dealer) would pay for
the Aircraft in an arm's-length transaction to a willing seller under no
compulsion to sell; PROVIDED, HOWEVER, that in such determination: (i) the
Aircraft shall be assumed to be in the condition in which it is required to
be maintained and returned under this Lease; (ii) in the case of any
installed additions to the Aircraft, same shall be valued on an installed
basis; and (ii) costs of removal of the Aircraft from the current location
shall not be a deduction from such valuation. If Lessor and Lessee are unable
to agree on the Fair Market Value at least sixty (60) days before Lease
expiration, Lessor shall appoint an independent appraiser (reasonably
acceptable to Lessee) to determine Fair Market Value, and that determination
shall be final, binding and conclusive. Lessee shall bear all costs
associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it
provides Lessor with written notice of its irrevocable election to exercise
the same within fifteen (15) days after Fair market Value is determined (by
agreement or appraisal).
XX. MISCELLANEOUS:
(a) Unless and until Lessee exercises its rights under Section XVIII or
XIX above, nothing herein contained shall give or convey to Lessee any right,
title or interest in and to the Aircraft except as a lessee under this Lease.
Any cancellation or termination by Lessor, pursuant to the provisions of this
Lease, or any supplement or amendment hereto, or the lease of any Aircraft
hereunder, shall not release Lessee from any then outstanding obligations to
Lessor hereunder. All Aircraft shall at all times remain personal property of
Lessor regardless of the degree of its annexation to any real property and
shall not by reason of any installation in, or affixation to, real or
personal property become a part thereof.
(b) Time is of the essence of this Lease. Lessee agrees, upon Lessor's
request, to execute any instrument necessary or expedient for filing,
recording or perfecting the interest of Lessor. LESSEE HEREBY UNCONDITIONALLY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS,
15
<PAGE>
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION. In the event of litigation, this Lease may be filed as a written
consent to a trial by the court. All notices required to be given hereunder
shall be deemed adequately given if delivered in hand or sent by registered
or certified mail to the addressee at its address stated herein, or at such
other place as such addressee may have designated in writing. This Lease and
any Annexes hereto constitute the entire agreement of the parties with
respect to the subject matter hereof, and all Annexes referenced herein are
incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE
OR ANY WAIVER OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN
WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY HERETO.
(c) Excluding Rent, any other amount due hereunder and not paid to
Lessor within ten (10) days of receipt of notice that it is overdue shall
bear interest, both before and after any judgment or termination hereof, at
the lesser of eighteen percent (18%) per annum or the maximum rate allowed by
law. Any provisions in this Lease which are in conflict with any statute, law
or applicable rule shall be deemed omitted, modified or altered to conform
thereto.
XXI. TRUTH-IN-LEASING:
(a) LESSEE HAS REVIEWED THE AIRCRAFT'S MAINTENANCE AND OPERATION LOGS
SINCE ITS DATE OF MANUFACTURE AND HAS FOUND THAT THE AIRCRAFT HAS BEEN
MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS.
LESSEE CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE
MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION
REGULATIONS.
(b) LESSEE CERTIFIES THAT LESSEE, AND NOT LESSOR, IS RESPONSIBLE FOR
OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE DURING THE TERM HEREOF.
LESSEE FURTHER CERTIFIES THAT LESSEE UNDERSTANDS ITS RESPONSIBILITY FOR
COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
(c) LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED
UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE
CONDUCTED UNDER THIS LEASE. LESSEE UNDERSTANDS THAT AN EXPLANATION OF FACTORS
BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN
BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE, GENERAL
AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT OFFICE.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Lease to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation TRC Realty Co.
- ------------------------------------ ---------------------------------------
By: /s/ Michael Hornby By: /s/ signature
-------------------------------- ---------------------------------------
Title: Region Credit Analyst Title: Vice President
----------------------------- --------------------------------
16
<PAGE>
ANNEX A
DESCRIPTION OF AIRCRAFT, LESSOR'S COST, AND AIRCRAFT MARKINGS
1. DESCRIPTION
ONE (1) USED 1992, BEECHJET 400A Aircraft which consists of the following
components:
(a) Airframe bearing FAA Registration Mark N 998GP and Manufacturer's Serial
No. RK-32;
(b) TWO, (2) PRATT & WHITNEY JT-15D-5 engines bearing Manufacturer's Serial
Nos. PCE-100248 and PCE-100245, respectively (each of which has 750 or more
rated takeoff horsepower or the equivalent of such horsepower);
(c) Standard accessories and optional equipment and such other items fitted
or installed on the Aircraft and set forth hereinafter:
AVIONICS PACKAGE:
Three Tube EFIS
Collins Pro Line IV all digital package
Collins FMS 850 flight management with data Base
Dual Collins AHC-85E AHRS
Dual Collins ADC-850 air data computer with altitude encoder
Collins APS-85 autopilot
Collins AAP-850 altitude awareness control
Rosemont probe
Collins CMA-764 VLF omega long range NAV
Collins WXR-850 doppler turbulence avoidance radar
Dual Collins VHF-422A Comms
Dual Collins VIR-432 Navs
Collins ADF-462 ADF receiver
Dual market beacons
Dual glide slopes
Dual Collins DME-442 distance measuring equipment
Dual Collins TDR-94 mode "S" transponders
Collins ALT-55B radar altimeter
Collins SDU-640A RMI
J.E.T. standby horizon
Dual digital clocks with timers
Fairchild A100A CVR
Wulfsberg Elitefone VI
Passenger briefing system
Flight hour meter
Cabin display -- true airspeed, altitude, temperature and time
Engine synchronizer
FEATURES:
Supplemental Freon Air Modifications (Hangar One); 400A Aft baggage
compartment extension (Hangar One); Fresh 400 inspection.
19
<PAGE>
INTERIOR:
Freon air conditioning
Seven place cabin: 6 chairs (3 swiveling) and belted
Flushing toilet
6 drawer refreshment cabinet
3 drawer pyramid cabinet with flitephone
2 folding tables
Aft. vanity with water tank
Dual cockpit relief robes
Custom ice/cooler cabinet
Panasonic AG-513 television/VCR
Pioneer CDX-M4O CD player
Pioneer GM-800 4 channel amplifier
Pioneer DEX-M400 cordless remote control unite
Headliner: oyster ultrasuede
Cabin chairs: Light gray with English elm trim
Sidewalls: light gray with blue accent
EXTERIOR:
Overall: Matterhorn white, March 1994
Stripe: Yellow and Blue Stripes
Tail logo lights, Wing ice lights
(d) Those items of Lessee Furnished Equipment described in a bill of sale or
bills of sale therefor (copies of which are appended hereto), delivered by
Lessee to Lessor which constitute appliances and equipment which will be
installed on the Aircraft;
(e) Sales Tax $266,000.00; State of Illinois (to be paid directly by Lessee.)
Capitalized Lessor's Cost $3,800,000.00
II. Aircraft Markings (referenced in Section VII of Lease)
(a) Four-by-six inch plaque to be maintained in cockpit and affixed in
conspicuous position stating:
GENERAL ELECTRIC CAPITAL CORPORATION,
Owner and Lessor. TRC REALTY CO.
Lessee under a certain Lease dated as
of 4-14, 1994, has operational control
of this aircraft.
(b) Similar markings shall be permanently affixed to each engine.
Initials:
Lessee: [cad 157]SIGNATURE[cad 179]
Lessor: [cad 157]SIGNATURE[cad 179]
20
<PAGE>
ANNEX B
SCHEDULE OF FINANCIAL TERMS
(10-year Basic Lease Term)
<TABLE>
<S> <C> <C>
Basic Term Commencement Date: 4-14-94
Basic Term: One Hundred Twenty (120) months
-------------------------------
Advance Rent: (a) Amount: $190,000.00
-------------------------------
(b) Due Date: Upon Acceptance
-------------------------------
Interim Rent: Due Date: N/A
-------------------------------
First Basic Rent Date: 4-14-94
----------------------------------------------
Basic Rent Dates: 14th of each month thereafter
----------------------------------------------
First Termination Date: Thirty-Six (36) months after the
----------------------------------------------
Basic Term Commencement Date
----------------------------------------------
Early Purchase Option Date(s): Thirty-Six (36) months and
----------------------------------------------
Sixty (60) months
----------------------------------------------
(Please refer Addendum No. 1 and
----------------------------------------------
Addendum No. 2)
----------------------------------------------
Cancellation Option: Please refer to Addendum No. 3
----------------------------------------------
Last Basic Rent Date: 3-14-04
----------------------------------------------
Expiration Date: 4-14-04
----------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Daily Lease Rate Factor: Factor Rental No.
-------------------- -----------------
0.16667% 1
-------------------- -----------------
0.02965% 2-60
-------------------- -----------------
0.03164% 61-120
-------------------- -----------------
Basic Term Lease Rate Factor(s): Factor Rental No.
-------------------- -----------------
5.00000% 1
-------------------- -----------------
0.88947% 2-60
-------------------- -----------------
0.94915% 61-120
-------------------- -----------------
Primary Hangar Location: Palwaukee Municipal Airport
----------------------------------------------
Wheeling, IL 60090
----------------------------------------------
Last Delivery Date: December 31, 1994
----------------------------------------------
Tax Benefits: 200% declining balance method, switching to
----------------------------------------------
straight line method for the first taxable
----------------------------------------------
year for which using the straight line method
----------------------------------------------
with respect to the adjusted basis as of the
----------------------------------------------
beginning of such year will yield a larger
----------------------------------------------
allowance.
----------------------------------------------
Recovery Period: Five (5) years.
----------------------------------------------
Basis: 100% of Capitalize Lessor's Cost
----------------------------------------------
</TABLE>
Initials:
Lessee:
Lessor:
21
<PAGE>
ANNEX C
PURCHASE DOCUMENT(S) ASSIGNMENT AND CONSENT
THIS PURCHASE DOCUMENT(S) ASSIGNMENT ("Assignment") is dated as
of 4-14-94 by and between GENERAL ELECTRIC CAPITAL CORPORATION (the "Lessor")
and TRC REALTY CO. (the "Lessee").
W I T N E S S E T H :
Lessor and Lessee have entered into an Aircraft Lease dated as of
4-14-94 (the "Lease") pursuant to which Lessee has agreed to lease from
Lessor the Aircraft referred to therein. (All terms used herein which are not
otherwise defined shall have the meaning ascribed to them in the Lease.)
Lessee desires to lease rather than purchase the Aircraft and Lessor is
willing to acquire certain of Lessee's rights and interests under the
purchase order(s) or purchase contracts (hereinafter either referred to as
the "Purchase Documents") which Lessee has heretofore issued to the
Supplier(s) of such Aircraft.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, Lessor and Lessee hereby agree as follows:
SECTION I. ASSIGNMENT:
(a) Lessee does hereby assign and set over to Lessor all of Lessee's
rights and interests in and to such Aircraft and the Purchase Documents,
description of such Purchase Documents is attached hereto as Schedule I, as
the same relate to such Aircraft including, without limitation, in such
assignment (i) the right to purchase the Aircraft pursuant to the Purchase
Documents, and the right to take title to such Aircraft and to be named the
purchaser in the bill of sale for such Aircraft, (ii) all claims for damages
in respect of the Aircraft purchased by Lessor arising as a result of any
default by the Supplier thereof under the related Purchase Documents,
including, without limitation, all warranty and indemnity provisions
contained in such Purchase Documents, and all claims arising thereunder, in
respect of such Aircraft, and (iii) any and all rights of Lessee to compel
performance of the terms of such Purchase Documents.
(b) If, and so long as, no default or event which, with notice and the
lapse of time or both, would constitute a default under the Lease has
occurred and is continuing, Lessee shall be, and is hereby authorized on
behalf of Lessor in the name of Lessee to exercise all rights and powers of
the purchaser under all Purchase Documents with respect to such Aircraft and
to retain any recovery or benefit resulting from the enforcement of any
warranty, indemnity or right to damages under the Purchase Documents or
otherwise existing against the Supplier in respect of such Aircraft.
(c) Lessor agrees that it will promptly provide Lessee all notices and
communications it receives in connection with the Aircraft.
22
<PAGE>
SECTION 2. CONTINUING LIABILITY OF LESSEE:
It is expressly agreed that, anything herein contained to the contrary
notwithstanding: (a) Lessee shall at all times remain liable to the Supplier
to perform all of the duties and obligations of the purchaser under the
Purchase Documents to the same extent as if this Agreement had not been
executed, (b) the execution of this Agreement shall not modify any
contractual rights of the Supplier under the Purchase Documents and the
liabilities of the Supplier under the Purchase Documents shall be to the same
extent and continue as if this Agreement had not been executed, (c) the
exercise by the Lessor of any of the rights assigned hereunder shall not
release Lessee from any of its duties or obligations to the Supplier under
the Purchase Documents, and (d) Lessor shall not have any obligation or
liability under the Purchase Documents by reason of, or arising out of, this
Agreement or be obligated to perform any of the obligations or duties of
Lessee under the Purchase Documents or to make any payment (other than under
the terms and conditions set forth in the Lease) or to make any inquiry of
the sufficiency of or authorization for any payment received by any Supplier
or to present or file any claim or to take any other action to collect or
enforce any claim for any payment assigned hereunder.
IN WITNESS WHEREOF, Lessee has caused this Assignment to be executed
this 14th day of April, 1994 by its duly authorized representative.
LESSEE: TRC REALTY CO.
<TABLE>
<S> <C> <C>
BY: [SIGNATURE]
------------------------------------
TITLE: [SIGNATURE]
------------------------------------
DATE: 4-14-94
------------------------------------
</TABLE>
The foregoing Assignment is hereby accepted this 14th day of April, 1994.
LESSOR: GENERAL ELECTRIC CAPITAL CORPORATION
<TABLE>
<S> <C>
BY: [SIGNATURE]
- ------------------------------------
TITLE: [SIGNATURE]
- ------------------------------------
DATE: 4-14-94
- ------------------------------------
</TABLE>
CONSENT AND AGREEMENT
Supplier hereby consents ("Consent") to the above Assignment and agrees
not to asset any claims against Lessor or Lessee inconsistent with such
Assignment. Supplier agrees that the Purchase Documents are hereby amended as
necessary to provide as follows:
(a) Title to and risk of loss of the Aircraft shall pass to Lessor upon
Lessee's execution of the Certificate of Acceptance for such Aircraft; and
(b) Supplier hereby waives and discharges any security interest, lien
or other encumbrance in or upon the Aircraft and agrees
3
<PAGE>
to execute such
documents as Lessor may request evidencing the release of any such
encumbrance and the conveyance of title thereto to Lessor.
(c) Supplier agrees that on and after the date this Consent is executed
it will not make any addition to or delete any items from the Purchase
Documents referred to in the Assignment without the prior written consent of
both Lessor and Lessee.
IN WITNESS WHEREOF, the undersigned has caused this Consent to be
executed this _____ day of April, 1994 by its duly authorized representative.
SUPPLIER:
<TABLE>
<S> <C> <C>
Jet Trading International, Inc.
------------------------------------
BY: [SIGNATURE]
------------------------------------
TITLE: [SIGNATURE]
------------------------------------
DATE:
------------------------------------
</TABLE>
4
<PAGE>
Schedule No. 1
to
Annex C
to
Aircraft Lease
PURCHASE DOCUMENTS
1. Aircraft Purchase Agreement between TRC REALTY CO. and JET TRADING
INTERNATIONAL, INC. dated as of 4-14, 1994.
2. Manufacturer's Full Warranty Bill of Sale to Lessor dated 4-14, 1994.
3. FAA Bill of Sale.
1
<PAGE>
ANNEX E
CERTIFICATE OF ACCEPTANCE
under
AIRCRAFT LEASE dated as of 4-14 , 1994 (the "Lease"), between
GENERAL ELECTRIC CAPITAL CORPORATION, as lessor (the "Lessor"), and TRC
Realty Co., as lessee (the "Lessee").
A. THE AIRCRAFT: Lessee hereby certifies that the Aircraft as set forth
and described in Schedule I hereto has been delivered to Lessee, inspected by
Lessee, found to be in good order and fully equipped to operate as required
under applicable law for its intended purpose, and is, on the date as set
forth below, and fully and finally accepted under the Lease.
B. REPRESENTATIONS BY LESSEE: Lessee hereby represents and warrants to
Lessor that on the date hereof:
(1) The representations and warranties of Lessee set forth in the
Lease and all certificates and opinions delivered in connection
therewith were true and correct in all respects when made and are
true and correct as of the date hereof.
(2) Lessee has satisfied or complied with all conditions precedent
and requirements set forth in the Lease, and the Commitment Letter
(if any), which are required to be or to have been satisfied or
complied with on or prior to the date hereof.
(3) No Default or Event of Default under the Lease has occurred and
is continuing on the date hereof.
(4) Lessee has obtained, and there are in full force and effect,
such insurance policies with respect to the Aircraft, as such term
is defined in the Lease, as are required to be obtained under the
terms of the Lease.
(5) Lessee has furnished no equipment for the Aircraft other than
as sold to Lessor and as stated on Schedule 1 hereto or permitted as
an Addition thereto pursuant to the Lease.
Date and Delivery of Acceptance: 4-14-94
-------------
IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to
be duly executed by its officers thereunto duly authorized.
TRC Realty Co.
---------------------------
By: /s/ signature
-----------------------
Title: Vice President
--------------------
Date: 4-14-94
---------------------
28
<PAGE>
PURCHASE DOCUMENTS:
1. Aircraft Purchase Agreement between TRC Realty Co. and Jet Trading
International, Inc. dated as of 4-14 , 1994.
2. Manufacturer's Full Warranty Bill of Sale to Lessor dated 4-14-94, 1994.
3. FAA Bill of Sale
<PAGE>
ANNEX F
STIPULATED LOSS AND TERMINATION VALUES
The Stipulated Loss and Termination Value of the Aircraft shall be the
percentage of Capitalized Lessor's Cost of the Aircraft* set forth opposite
the applicable rent payment.
*Capitalized Lessor's Cost $3,800,000.00.
<TABLE>
<CAPTION>
Interim Period and
Basic Rent Stipulated Loss Termination
Payment Number Value Value
- --------------- -------------- -----------
<S> <C> <C>
41 87.546 87.546
42 87.120 87.120
43 86.690 86.690
44 86.255 86.255
45 85.816 85.816
46 85.371 85.371
47 84.922 84,922
48 84.468 84.468
49 84.009 84.009
50 83.546 84.546
51 83.077 83.077
52 82.603 82.603
53 82.125 82.125
54 81.641 81.641
55 81.153 81.153
56 80.660 80.660
57 80.161 80.161
58 79.658 79.658
59 79.150 79.150
60 78.637 78.637
61 78.121 78.121
62 77.542 77.542
63 76.959 76.959
64 76.373 76.373
65 75.782 75,782
66 75.187 75.187
67 74.588 74.588
68 73.984 73.984
69 73.377 73.377
70 72.766 72.766
71 72.150 72.150
72 71.528 71.528
73 70.904 70.904
74 70.279 70.279
75 69.653 69.653
76 69.025 69.025
77 68.391 68.391
78 67.755 67.755
79 67.118 67.118
80 66.476 66.476
</TABLE>
Page 2 of 3
41
<PAGE>
ANNEX F
STIPULATED LOSS AND TERMINATION VALUES
The Stipulated Loss and Termination Value of the Aircraft shall be the
percentage of Capitalized Lessor's Cost of the Aircraft* set forth opposite
the applicable rent payment.
*Capitalized Lessor's Cost $3,800,000.00.
<TABLE>
<CAPTION>
Interim Period and
Basic Rent Stipulated Loss Termination
Payment Number Value Value
- --------------- -------------- -----------
<S> <C> <C>
81 65.831 65.831
82 65.185 65.185
83 64.533 64.533
84 63.876 63.876
85 63.217 63.217
86 62.556 62.556
87 61.893 61.893
88 61.228 61.228
89 60.558 60.558
90 59.885 59.855
91 59.211 59.211
92 58.531 58.531
93 57.849 57.849
94 57.165 57.165
95 56.476 56.476
96 55.780 55.780
97 55.082 55.082
98 54.383 54.383
99 53.681 53.681
100 52.977 52.977
101 52.267 52.267
102 51.555 51.555
103 50.841 50.841
104 50.121 50.121
105 49.399 49.399
106 48.675 48.675
107 47.944 47.944
108 47.207 47.207
109 46.469 46.469
110 45.727 45.727
111 44.984 44.984
112 44.238 44.238
113 43.486 43.486
114 42.732 42.732
115 41.975 41.975
116 41.212 41.212
117 40.447 40.447
118 39.679 39.679
119 38.905 38.905
120 38.124 38.124
</TABLE>
Initials:
Lessee: [Signature]
Lessor:
Page 3 of 3
42
<PAGE>
LETTER OF CREDIT AGREEMENT
THIS LETTER OF CREDIT AGREEMENT, dated 4-14, 1994 ("Agreement"), between TRC
REALTY CO., a CORPORATION organized and existing under the laws of the State
of VERMONT ("Lessee"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
Corporation ("Lessor").
RECITALS:
WHEREAS, Lessee desires to lease from Lessor certain equipment or other
property (collectively, "Equipment") pursuant to a Aircraft Lease Agreement
dated as of 4-14, 1994 (said Aircraft Lease Agreement together all present
and future schedules thereto, as the same may be from time to time extended,
amended, restated or otherwise modified, being hereinafter collectively
referred to as the "Lease"); and
WHEREAS, Lessor is unwilling to lease the Equipment to Lessee unless and
until Lessee provides Lessor with certain additional assurances in the form
of a letter of credit as hereinafter described;
NOW, THEREFORE, in consideration of the above premises and promises
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Concurrently with the execution of this Agreement, Lessee shall, at
its sole cost and expense and as additional security for the prompt payment
and performance of all of its obligations (whether now existing or hereafter
arising) under the Lease, deliver or cause to be delivered to Lessor an
irrevocable standby letter of credit ("Letter of Credit") which shall be (i)
in the amount of THREE HUNDRED EIGHTY THOUSAND AND 00/100 US Dollars (US
$380,000.00), (ii) issued by The First National Bank of Boston or other such
bank which is acceptable to Lessor in its reasonable discretion, (iii)
substantially in the form of EXHIBIT A attached hereto (or in such other form
as may be acceptable to Lessor in its sole discretion), and (iv) for an
initial term of one year with automatic annual renewals thereafter (without
amendment except for extension of the then current expiry date by an
additional year) until Lessee has received written notice from Lessor to the
effect that the Letter of Credit is being released in its entirety. After all
of Lessee's obligations under the Lease have been indefeasibly paid and
performed in full, Lessor shall, upon the request of Lessee, release the
Letter of Credit and provide Lessee with a written notice to that effect. If
requested by Lessor, the Letter of Credit shall, at Lessee's sole cost and
expense, be accompanied by an opinion of counsel regarding its due
authorization, execution, and enforceability (which opinion shall be in form
and substance, and from counsel, acceptable to Lessor in its sole discretion).
2. Lessee shall be in default under this Agreement and the Lease if
for any reason whatsoever: (a) Lessor fails to receive the Letter of Credit
in the time and manner required herein; (b) the Letter of Credit is not
automatically renewed as required herein; (c) Lessor receives any notice to
the effect that the Letter of Credit will not be automatically renewed as
required herein; or (d) Lessee otherwise breaches any of its obligations
hereunder. The foregoing events of default are in addition to, not in lieu
of, those set forth in the Lease.
3. Upon the occurrence of any default under this Agreement or an Event
of Default under the Lease, or upon the filing of any petition by or against
Lessee under any bankruptcy, insolvency or similar laws, then in any such
event and at any time
33
<PAGE>
thereafter Lessor shall have the right, with or without notice to or demand
upon Lessee, to draw upon the Letter of Credit, by presenting to the issuer
one or more sight drafts and any other necessary documents, and to receive
(in a lump sum or in several sums from time to time at the sole discretion of
Lessor) and retain an amount not to exceed, in the aggregate, that available
under the Letter of Credit.
4. If Lessor draws on the Letter of Credit, the proceeds received by
Lessor therefrom shall be applied: first, towards costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Lessor in connection with such draw or in otherwise enforcing its
rights and remedies hereunder; and thereafter, towards any rent or other sums
of any kind then due and unpaid by Debtor under the Lease (in accordance with
the priorities contemplated thereby). Any excess proceeds may be held by
Lessor as cash collateral (commingled with its own funds and without any need
to pay interest or income thereon) for any further obligations of Lessee
under the Lease. Once all obligations of Lessee under the Lease have been
indefeasibly paid and performed in full, any remaining excess proceeds from
the Letter of Credit shall be remitted by Lessor to Lessee. In any event,
Lessee shall remain liable for any deficiency under the Lease.
5. Lessor's rights and remedies under this Agreement (including,
without limitation, the right to draw upon the Letter of Credit), the Lease
or otherwise are cumulative and may be exercised singularly or concurrently.
Neither any failure nor delay on the part of Lessor to draw upon the Letter
of Credit or to exercise any other rights or remedies shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or
remedy howsoever arising. Under no circumstances shall Lessor be deemed or
construed to have waived its right to draw upon the Letter of Credit or to
exercise any of its other rights or remedies unless such waiver is in writing
and executed by a duly authorized representative of Lessor. A waiver of any
right or remedy on any one occasion shall not operate as a waiver of such
right or remedy on any future occasion or as a waiver of any other right or
remedy.
6. LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, THE
LETTER OF CREDIT, THE LEASE, ANY DOCUMENTS RELATING HERETO OR THERETO, ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN THEM. The scope of
this waiver is intended to be all encompassing of any and all disputes that
may be filed in any court (including, without limitation, contract claims,
tort claims, breach of duty claims, and all other common law and statutory
claims). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LETTER OF
CREDIT, THE LEASE OR ANY DOCUMENTS RELATING HERETO OR THERETO. In the event
of litigation, this Agreement may be filed as a written consent to trial by
the court.
7. Any notices to be given in connection herewith shall be delivered
in the manner contemplated by the Lease. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof,
and supersedes all prior understandings (whether written, verbal, implied or
otherwise) with respect thereto. None of the terms hereof may be amended,
waived or otherwise modified except pursuant to a written instrument duly
executed by the party to be charged. Lessor may assign its rights hereunder
34
<PAGE>
at any time, but Lessee may not do so without the prior written consent of
Lessor, except that Lessee shall have the right to assign this Agreement to
any of its Affiliates as defined in the Aircraft Master Lease. This Agreement
shall be binding upon, and shall inure to the benefit of, Lessor, Lessee, and
their respective successors and permitted assigns.
IN WITNESS WHEREOF, Lessee and Lessor have caused their duly authorized
representatives to execute and delivery this Agreement on the year and day
first above written.
<TABLE>
<S> <C>
LESSEE: LESSOR:
- --------------------------------------- ------------------------------------
TRC REALTY CO. GENERAL ELECTRIC CAPITAL CORPORATION
</TABLE>
<TABLE>
<S> <C> <C> <C>
By: SIGNATURE By: SIGNATURE
---------------------------------- -------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Title: SIGNATURE Title: SIGNATURE
------------------------------- ------------------------------
</TABLE>
35
<PAGE>
ADDENDUM NO. 1
TO ANNEX B
TO AIRCRAFT LEASE AGREEMENT
DATED AS OF 4-14, 1994
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above referenced
Annex B (the "SCHEDULE") to the above referenced lease (the "LEASE"),
between General Electric Corporation ("LESSOR") and TRC REALTY CO. ("LESSEE")
and is hereby incorporated unto the Schedule as though fully set forth
therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
For purposes of this Schedule only, the Lease is amended by adding the
following thereto:
EARLY PURCHASE OPTION.
(a) Provided that the Lease has not been earlier terminated and
provided further that no Event of Default is continuing. Lessee may, UPON AT
LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF
LESSEE'S IRREVOCABLE ELECTION TO EXERCISE SUCH OPTION, purchase all (but not
less than all) of the Equipment listed and described in this Schedule on the
rent payment date (the "EARLY PURCHASE DATE") which is 60 months from the
Basic Term Commencement Date of the Schedule for a price equal to
$2,968,598.00 (the "FMV EARLY OPTION PRICE"), plus all applicable sales taxes
on an AS IS BASIS. Lessor and Lessee agree that the FMV Early Option Price is
a reasonable prediction of the Fair Market Value (as such term is defined in
Section XIX(b) hereof) of the Equipment at the time the option is
exercisable. Lessor and Lessee agree that if Lessee makes any non-severable
improvement to the Equipment which increases the value of the Equipment and
is not required or permitted or permitted by Sections VII or XI of the Lease
prior to lease expiration, then at the time of such option being exercised,
Lessor and Lessee shall adjust the purchase price to reflect any addition to
the price anticipated to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein as the "EARLY PURCHASE
OPTION").
(b) If Lessee exercises its Early Purchase Option with respect to the
Equipment issued hereunder, then on the Early Purchase Option Date. Lessee
shall pay to Lessor any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early Option Price, plus
all applicable sales taxes, to Lessor in cash.
Except as expressly modified hereby, all terms and provisions of the
Lease shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease or the Equipment until executed on behalf
of Lessor and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation TRAC Realty Co.
By: /s/ Michael Hornby By: /s/ Michael P. Donahoe
-------------------------------- ------------------------------
Name: Michael Hornby Name: Michael P. Donahoe
-------------------------------- ------------------------------
Title: Region Credit Analyst Title: Vice-President
-------------------------------- ------------------------------
Attest:
By: Larry W. Browne
------------------------------
Name:
------------------------------
<PAGE>
ADDENDUM NO. 2
TO ANNEX B
TO AIRCRAFT LEASE AGREEMENT
DATED AS OF 4-14, 1994
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above referenced
Annex B (the "Scheduler") to the above referenced lease (the "Lease"),
between General Electric Corporation ("Lessor") and TRC REALTY CO. ("Lessee")
and is hereby incorporated unto the Schedule as though fully set forth
therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
For purposes of this Schedule only, the Lease is amended by adding the
following thereto:
EARLY PURCHASE OPTION.
(a) Provided that the Lease has not been earlier terminated and
provided that no Event of Default is continuing. Lessee may, UPON AT
LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF
LESSEE'S IRREVOCABLE ELECTION TO EXERCISE SUCH OPTION, purchase all (but not
less than all) of the Equipment listed and described in this Schedule on the
rent payment date (the "Early Purchase Date") which is 36 months from the
Basic Term Commencement Date of the Schedule for a price equal to
$3,435,200.00 (the "FMV Early Option Price"), plus all applicable sales taxes
on an AS IS BASIS. Lessor and Lessee agree that the FMV Early Option Price is
a reasonable prediction of the Fair Market Value (as such term is defined in
Section XIX(b) hereof) of the Equipment at the time the option is
exercisable. Lessor and Lessee agree that if Lessee makes any non-severable
improvement to the Equipment which increases the value of the Equipment and
is not required or permitted or permitted by Sections VII or XI of the Lease
prior to lease expiration, then at the time of such option being exercised,
Lessor and Lessee shall adjust the purchase price to reflect any addition to
the price anticipated to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein as the "Early Purchase
Option").
(b) If Lessee exercises its Early Purchase Option with respect to the
Equipment issued hereunder, then on the Early Purchase Option Date. Lessee
shall pay to Lessor any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early Option Price, plus
all applicable sales taxes, to Lessor in cash.
Except as expressly modified hereby, all terms and provisions of the
Lease shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease or the Equipment until executed on behalf
of Lessor and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the date first above
written.
<TABLE>
<S> <C> <C> <C>
LESSOR: LESSEE:
General Electric Capital Corporation TRAC REALTY CO.
By: [SIGNATURE] By: [SIGNATURE]
-------------------------------- ------------------------------
Name: /s/ MICHAEL HORNBY Name: [SIGNATURE]
-------------------------------- ------------------------------
Title: Region Credit Analyst Title: Vice President
-------------------------------- ------------------------------
Attest:
By: [SIGNATURE]
-------------------------------- ------------------------------
Name:
-------------------------------- ------------------------------
</TABLE>
<PAGE>
ADDENDUM NO. 3
TO ANNEX B
TO AIRCRAFT LEASE AGREEMENT
DATED AS OF 4-14, 1994
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above referenced
Annex B (the "SCHEDULE") to the above referenced lease (the "LEASE"),
between General Electric Capital Corporation ("LESSOR") and TRC REALTY CO.
("LESSEE") and is hereby incorporated unto the Schedule as though fully set
forth therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
For purposes of this Schedule only, the Lease is amended by adding the
following to the end thereof:
CANCELLATION OPTION:
(a) So long as no Event of Default is continuing hereunder and
expressly provided that all of the terms and conditions of this Section are
fulfilled. Lessee may cancel the Agreement as to all (but not less than all)
of the Equipment on this Schedule as of any one of the Cancellation Dates set
forth below (each, a "CANCELLATION DATE") upon at least 90 days prior written
notice (the "NOTICE DATE") to Lessor (which notice shall be irrevocable and
shall be sent to the attention of Lessor's Asset Management Organization, 44
Old Ridgebury Road, Danbury, CT 06810-5105). Such notice shall state the
Cancellation Date which shall apply. If all of the terms and conditions of
the Section are not fulfilled, this Lease shall continue in full force and
effect and Lessee shall continue to be liable for all obligations thereunder,
including, without limitation, the obligations to continue paying rent.
(b) Prior to the Cancellation Date, Lease shall
(i) pay to Lessor, as additional rent, (A) the Cancellation Value
(set forth below for the applicable Cancellation Date) for the
Equipment, plus (B) all rent and all other sums due and unpaid as of the
Cancellation Date (including, but not limited to, any Rent payment due
and payable on the Cancellation Date and any sales taxes and property
taxes); and
(ii) return the Equipment in full compliance with Section XI of
this Lease, such compliance being independently verified by an
independent appraiser selected by Lessor (reasonably to Lessee) to
determine that the Equipment is in such compliance, which determination
shall be final, binding and conclusive. Lessee shall bear all costs
associated with such appraiser's determination and such costs, if any,
to cause the Equipment to be in full compliance with Section XI of the
Lease on or prior to such Cancellation Date.
(c) The Cancellation Dates and the applicable Cancellation Values are
as set forth below:
CANCELLATION DATES CANCELLATION VALUES
Month(x) $468,598.00
(d) Lease shall, from the applicable Notice Date through the
Cancellation Date.
(i) continue to comply with all of the terms and conditions of the
Lease, including, but not limited to, Lessee's obligation to pay rent,
and
(ii) make the Equipment available to Lessor in such a manner as to allow
Lessor to market and demonstrate the Equipment to potential purchasers
or lessees from such premises at no cost to Lessor, PROVIDED, HOWEVER,
that, subject to Lessor's right to market and demonstrate the Equipment
to potential purchasers or lessees from time to time. Lessee may still
use the Equipment until the Cancellation Date.
(e) Lease shall, from the applicable Cancellation Date through the
earlier of the date the Equipment is sold by Lessor to a third party or
30 days following the Cancellation Date, comply with the following terms
and conditions:
(i) continue to provide insurance for the Equipment, at Lessee's own
expense, in compliance with the terms found in Section X or the
Agreement, and
(ii) make the Equipment available to Lessor and/or allow Lessor to store
the Equipment at Lessee's premises, in such a manner as to allow Lessor
to market and demonstrate the Equipment to potential purchasers or
lessees from such premises at no cost to Lessor.
(f) The proceeds of any sale or re-lease of the Equipment after Lessee
has exercised its Cancellation Option shall be for the sole benefit of
Lessor and Lessee shall have no interest in or any claim upon any of
such proceeds.
Except as expressly modified hereby, all terms and provisions of the
Lease shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease of the Equipment until executed on behalf
of Lessor and Lessee by authorized representatives of Lessor and Lessee.
<PAGE>
AIRCRAFT REIMBURSEMENT AGREEMENT
This Agreement is dated January 16, 1995, effective as of April 14,
1994, between Perkins Restaurants Operating Company, L.P., a Delaware limited
partnership ("Perkins"), and TRC Realty Co., a Vermont corporation ("Lessee").
R E C I T A L S
- - - - - - - -
Lessee has entered into that certain Aircraft Lease Agreement dated as
of April 14, 1994 (as amended, supplemented or modified from time to time,
the "Lease") with General Electric Capital Corporation ("Lessor") providing
for the lease by Lessee from the Lessor of a certain Beechjet 400A aircraft,
FAA Registration Mark N998GP and Manufacturer's Serial Number RK-32, together
with two Pratt & Whitney JT-15D-5 engines and related accessories and
optional equipment (collectively, the "Aircraft"). Perkins is an Affiliate of
Lessee, will be using the Aircraft in its business from time to time as
permitted by the Lease, and desires under this Agreement to provide for its
reimbursement of Lessee for certain costs and expenses of its use of the
Aircraft.
It is hereby agreed as follows:
1. Terms used with initial capital letters in this Agreement and not
otherwise defined shall have the respective meanings given thereto in the
Lease. The following terms when used in this Agreement shall have the
meanings indicated below:
"Contract User" shall mean Perkins and any other
Affiliate of Lessee which has entered into an Aircraft
Reimbursement Agreement with Lessee on substantially the same
terms and conditions as are contained in this Agreement.
"Fixed Costs" shall mean, with respect to any month,
those costs and expenses associated with the possession and
use of the Aircraft for such month of the type which are
reflected as "Fixed Costs" on Exhibit A hereto.
"Usage Share" shall mean, with respect to each Contract
User, such Contract User's share (expressed as a percentage)
of the usage of the Aircraft by all Contract Users during the
preceding month, which share
<PAGE>
shall be determined by dividing the number of hours of use of
the Aircraft by such Contract User during such month by the
total number of hours of use of the Aircraft during such
month by all Contract Users.
"Variable Expenses" shall mean, with respect to any
month, all costs and expenses incurred in connection with the
possession and use of the Aircraft during such month other
than Fixed Costs, and shall include, without limitation,
those costs and expenses of the type which are reflected as
"Variable Expenses" on Exhibit A.
2. Lessee agrees to make the Aircraft available for use by Perkins
on request, subject to the availability of the Aircraft and Lessee's
customary scheduling requirements. Lessee will use its best efforts to make
the Aircraft available roughly proportionate to Perkins' Fixed Costs
reimbursement obligation set forth in Section 4(a) of this Agreement. It is
understood and agreed, however, that Lessee shall be and remain solely
responsible for the possession and use of the Aircraft and for the payment
and performance of all obligations under the Lease, and Perkins shall have no
responsibility or obligation with respect thereto except for the
reimbursement of costs as provided for in Section 4(a) of this Agreement.
3. This Agreement shall be for a term commencing on April 14, 1994
and continuing to and through the Term of the Lease.
4. (a) Perkins shall reimburse Lessee monthly an amount equal to the
sum of (a) one-half (1/2) of the Fixed Costs of the Aircraft for the
preceding month, and (b) its Usage Share of the Variable Expenses of the
Aircraft for the preceding month; provided, however, that if there are more
than two Contract Users at any time during the term of this Agreement, the
denominator in the fraction in the foregoing clause (a) shall be increased to
the total number of Contract Users.
(b) For the purposes of this Agreement, Fixed Costs and Variable
Expenses shall be Lessee's fully allocated costs, as determined by Lessee
from its books and records in accordance with generally accepted accounting
principles. The gross receipts received by Lessee with respect to any month
from the use of the Aircraft by a person other than a Contract User shall be
credited to Fixed Costs or Variable Expenses for such month in such
consistent manner as Lessee shall in good faith deem appropriate. All
determinations of hourly use of the Aircraft by Perkins for each month shall
be made by Lessee in accordance with its books and records.
2
<PAGE>
(c) The Lessee will bill Perkins monthly, promptly after the last day
of the month, for the amount of its reimbursement amount for the Aircraft for
the preceding month, which bill will be due and payable within ten (10) days.
5. It is understood and agreed that at all times the operation of
the Aircraft shall be under the exclusive control of the Lessee and its
employees, who shall at all times be properly qualified and licensed as
required by the Lease. The Lessee shall at all times maintain a policy or
policies of insurance on the Aircraft, its ownership, use and operation as
required under the Lease, naming Perkins as an additional insured. The Lessee
hereby agrees to indemnify, defend, and save and keep harmless, Perkins, its
partners, agents, employees, successors and assigns from any and all losses,
damages, penalties, injuries, claims, actions and suits, including reasonable
legal expenses, of whatsoever kind and nature, in contract or tort or
otherwise, except for those caused by the negligence or willful misconduct of
Perkins, arising out of the ownership or operation of the Aircraft.
6. Lessee shall maintain all books and records as required by
Federal Aviation Regulations and the manufacturer of the Aircraft and shall
maintain a log of the operation of the Aircraft in such detail as shall
enable Perkins to accurately report for income taxes under applicable
Internal Revenue Service regulations. Lessee, if requested by Perkins,
shall permit Perkins to audit its books and records relating to the costs and
Aircraft usage being reimbursed hereunder.
7. Nothing herein contained shall be construed as constituting a
partnership, joint venture or agency between Lessee and Perkins.
8. Each party hereto intends that this Agreement shall not benefit
or create any right or cause of action in or on behalf of any person other
than the parties hereto.
9. All terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and the respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either party hereto without the written consent of the other
party (which consent shall not be unreasonably withheld).
3
<PAGE>
10. This Agreement shall be governed by the laws of the State of
Illinois.
In witness whereof, the parties have signed this Agreement as of the
date first above written.
PERKINS RESTAURANTS OPERATING
COMPANY, L.P.
By: Perkins Management Company,
Inc., General Partner
By: ________________________
Its: Executive Vice President
------------------------
TRC REALTY CO.
By: ____________________________
Its: Chairman, President & CEO
---------------------------
4
<PAGE>
EXHIBIT A
TRC REALTY CO.
AIRCRAFT REIMBURSEMENT ALLOCATION
FIXED COSTS
- -----------
Lease Payments
Pilot (Salaries & Benefits)
Pilot Relocation
Hangar Rental
Property Taxes
Letter of Credit Fees
Set Up Expenses
Other Fees
Dues & Subscriptions
Supplies
Telephone
Amortization
Insurance
VARIABLE EXPENSES
- -----------------
Fuel
Maintenance
Engine
Landing Fees
Pilot Travel Expenses
Catering Costs
-4-
<PAGE>
EXHIBIT 10.9
REVOLVING LOAN NOTE
MAXIMUM LOAN: JULY 20, 1998
$1,500,000 Memphis, TN
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
RESTAURANT COMPANY the principal amount of the lesser of (a) $1,500,000 or
(b) if less, the aggregate unpaid principal amount advanced to the
undersigned pursuant to this note, together with interest on all unpaid
principal and accrued but unpaid interest, at an annual rate of interest
equal to the "Prime Rate" as quoted from time to time under "Money Rates" in
the Wall Street Journal.
Interest shall accrue annually in arrears and be payable on December 31
of each year until maturity. Principal and accrued but unpaid interest shall
be due and payable on the earlier of (a) December 31, 2001, (b) within six
months of the date that the common stock owned by the undersigned of The
Restaurant Company, or any successor thereto, becomes freely transferable on
any national securities exchange or equivalent trading system, or (c) within
six months of the sale in a private transaction by the undersigned of such
stock resulting in gross proceeds of at least $7,500,000.
The undersigned waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this note.
This note and the obligations of the undersigned shall be governed and
construed in accordance with the laws of the State of Tennessee.
/s/ DONALD N. SMITH
--------------------------------
Donald N. Smith
<PAGE>
EXHIBIT 12
THE RESTAURANT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations before
income taxes, extraordinary items and
cumulative effect of change in accounting
principle.................................... $ 5,209 $ 4,922 $ 4,093 $ 6,208 $ 6,969 $ 2,833 $ 1,028
Adjustments:
Fixed charges:
Interest expense, net........................ 3,898 4,380 5,270 5,269 5,176 2,524 7,638
Interest income.............................. 417 396 406 246 80 103 147
Rental expense considered interest........... 1,960 2,277 2,197 2,277 2,542 1,176 1,307
Capitalized interest......................... 240 331 153 136 78 43 81
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges............................ 6,515 7,384 8,026 7,928 7,876 3,846 9,173
Minority interest in income of majority-owned
subsidiaries that have fixed charges......... 6,323 6,120 5,026 6,951 7,867 3,211 --
Capitalized interest........................... (240) (331) (153) (136) (78) (43) (81)
Amortization of Capitalized Interest........... 24 36 55 60 62 26 32
--------- --------- --------- --------- --------- --------- ---------
Earnings as adjusted............................. $ 17,831 $ 18,131 $ 17,047 $ 21,011 $ 22,696 $ 9,873 $ 10,152
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges............... 2.7x 2.5x 2.1x 2.7x 2.9x 2.6x 1.1x
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
PRO FORMA
-----------------------------------
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------- --------------------
1997 1997 1998
------------- --------- ---------
<S> <C> <C> <C>
Earnings:
Income (loss) from continuing operations before
income taxes, extraordinary items and
cumulative effect of change in accounting
principle.................................... $ 6,251 $ (206) $ 234
Adjustments:
Fixed charges:
Interest expense, net........................ 17,152 8,519 8,432
Interest income.............................. 80 103 147
Rental expense considered interest........... 2,542 1,176 1,307
Capitalized interest......................... 78 43 81
------------- --------- ---------
Total fixed charges............................ 19,852 9,841 9,967
Minority interest in income of majority-owned
subsidiaries that have fixed charges......... -- -- --
Capitalized interest........................... (78) (43) (81)
Amortization of Capitalized Interest........... 62 26 32
------------- --------- ---------
Earnings as adjusted............................. $ 26,087 $ 9,618 $ 10,152
------------- --------- ---------
------------- --------- ---------
Ratio of earnings to fixed charges............... 1.3x 1.0x 1.0x
------------- --------- ---------
------------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
Perkins Restaurants, Inc.
TRC Realty Co.
Perkins Management Company, Inc.
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
J.A. Joint Venture LLC (50%)
<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,
August 24, 1998.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
(THE RESTAURANT COMPANY)
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1254388
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
(6075 POPLAR AVENUE
SUITE 800
MEMPHIS, TENNESSEE 38117)
(Address of principal executive offices) (Zip Code)
(11 1/4% SENIOR DISCOUNT NOTES DUE 2008)
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for
the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the {AUGUST 13, 1998}.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by {THE
RESTAURANT COMPANY} of its {11 1/4% SENIOR DISCOUNT NOTES DUE 2008}, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
DATED: AUGUST 13, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business MARCH 31, 1998, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner of
Banks under General Laws, Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................................ 1,144,309
Interest-bearing balances ......................................................... 9,914,704
Securities ............................................................................. 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income .................... 6,433,627
Allowance for loan and lease losses ......................... 88,820
Allocated transfer risk reserve.............................. 0
Loans and leases, net of unearned income and allowances ........................... 6,344,807
Assets held in trading accounts ........................................................ 1, 117,547
Premises and fixed assets .............................................................. 453,576
Other real estate owned ................................................................ 100
Investments in unconsolidated subsidiaries ............................................. 44,985
Customers' liability to this bank on acceptances outstanding ........................... 66,149
Intangible assets ...................................................................... 263,249
Other assets............................................................................ 1,066,572
-----------
Total assets ........................................................................... 38,552,020
-----------
-----------
LIABILITIES
Deposits:
In domestic offices .............................................................. 9,266,492
Noninterest-bearing .............................. 6,824,432
Interest-bearing ................................. 2,442,060
In foreign offices and Edge subsidiary ........................................... 14,385,048
Noninterest-bearing .............................. 75,909
Interest-bearing ................................. 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .............................................. 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ...................... 171,783
Trading liabilities.................................................................... 1,078,189
Other borrowed money .................................................................. 406,583
Subordinated notes and debentures ..................................................... 0
Bank's liability on acceptances executed and outstanding .............................. 66,149
Other liabilities ..................................................................... 878,947
Total liabilities ..................................................................... 36,203,185
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus.......................................... 0
Common stock .......................................................................... 29,931
Surplus ............................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses) .......... 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities................. 18,136
Cumulative foreign currency translation adjustments .................................. (6,256)
Total equity capital .................................................................. 2,348,835
-----------
Total liabilities and equity capital .................................................. 38,552,020
-----------
-----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
LETTER OF TRANSMITTAL
FOR TENDERS OF
11-1/4% Series A Senior Discount Notes due 2007
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
Pursuant to the Prospectus
dated ________, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1998 (UNLESS EXTENDED) (THE "EXPIRATION DATE"). TENDERED OLD
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF
THE EXCHANGE OFFER.
DELIVER TO: State Street Bank and Trust Company, EXCHANGE AGENT:
BY REGISTERED OR
CERTIFIED MAIL: BY OVERNIGHT COURIER OR HAND:
State Street Bank State Street Bank *State Street Bank
and Trust Company and Trust Company and Trust Company
P.O. Box 778 Two International Place or 61 Broadway,
Boston, MA Boston, MA 02110 Concourse Level
02102-0078 Attn: _______________ Corporate Trust Window
Attn: ______________ New York, New York
10006
*ONLY DURING
BUSINESS HOURS
BY FACSIMILE FOR
ELIGIBLE
INSTITUTIONS:
(617) 664-5395
FOR CONFIRMATION
CALL:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated ________, 1998 (the "Prospectus"), of The Restaurant Company, a Delaware
corporation (the "Company"), and this Letter of Transmittal, which may be
amended from time to time (this "Letter"), which together constitute the
Company's offer (the "Exchange Offer") to exchange its 11-1/4% Series B Senior
Discount Notes due 2008 (the "New Notes") for a like Original Principal Amount
at Maturity of the Company's issued and outstanding 11-1/4% Series A Senior
Discount Notes due 2008 (the "Old Notes" and together with the New Notes, the
"Notes"), with the holders (each holder of Old Notes, a "Holder") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having an Original Principal Amount at Maturity equal to that
of the surrendered Old Note. Holders of Old Notes whose Old Notes are accepted
for exchange will not receive any payment in respect of such Old Notes otherwise
payable on any payment date the record date for which occurs on or after
consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Notes are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2. Delivery of this
Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreement dated May 18, 1998 among the Company and the original purchasers of
Old Notes (the "Registration Rights Agreements"), the Company will accept for
exchange any and all Old Notes validly tendered on or prior to 5:00 p.m., New
York City time, on _________, 1998 (unless the Exchange Offer is extended by the
Company) (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.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE COMPANY.
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 conditions. Please see the Prospectus under the section titled "The
Exchange Offer--Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of Old Notes in any jurisdiction in which the making or
acceptance of the Exchange Offer would not be in compliance with the laws of
such jurisdiction.
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional
copies of the Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent at the address listed above.
-2-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the Original Principal Amount
at Maturity of Old Notes indicated below under "Description of Old Notes," in
accordance with and upon the terms and subject to the conditions set forth in
the Prospectus, receipt of which is hereby acknowledged, and in this Letter of
Transmittal, for the purpose of exchanging the Old Notes designated herein held
by the undersigned and tendered hereby for a like Original Principal Amount at
Maturity of the New Notes. New Notes will be issued only in denominations of
Original Principal Amount at Maturity of $1,000 to each tendering Holder of Old
Notes whose Old Notes are accepted in the Exchange Offer. Holders may tender
all or a portion of their Old Notes pursuant to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Issuers all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Issuers (together with
all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Issuers.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned. Any tender of Old Notes hereunder
may be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter of Transmittal. See Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Issuers to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
The undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the Original Principal Amount at
Maturity of Old Notes to which this Letter of Transmittal relates, together with
the Original Principal Amount at Maturity of such Old
-3-
<PAGE>
Notes that the undersigned wishes to tender, should be indicated in the
appropriate boxes herein under "Description of Old Notes."
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of New Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreements and that, upon the issuance of the New Notes the Issuers will
have no further obligations or liabilities to the undersigned thereunder.
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer--Procedures
for Tendering Old Securities" and the Instructions hereto will constitute the
tendering Holder's acceptance of the terms and the conditions of the Exchange
Offer. The undersigned hereby represents and warrants to the Company that the
New Notes to be acquired by such Holder pursuant to the Exchange Offer are being
acquired in the ordinary course of such Holder's business, that such Holder has
no arrangement or understanding with any person to participate in the
distribution of the New Notes. The Company's acceptance for exchange of Old
Notes tendered pursuant to the Exchange Offer will constitute a binding
agreement between the tendering Holder and the Issuers upon the terms and
subject to the conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission") set forth in no-action letters issued to third parties in
other transactions substantially similar to the Exchange Offer, which lead the
Company to believe that the New Notes issued in exchange for the Old Notes
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 Company within the meaning of Rule 405 under the Securities
Act, (ii) an Initial Purchaser who acquired the Old Notes directly from the
Company 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 provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders are
not participating and have no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and 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 Company or
is engaged in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could 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. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange of Old
Notes, it represents that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of Section 2(11) of the Securities Act.
The undersigned understands that the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the New Notes
issued in consideration of Old Notes
-4-
<PAGE>
accepted for exchange, and/or any Old Notes not tendered or not accepted for
exchange (and accompanying documents, as appropriate), to the Holder(s) at
the address(es) appearing herein under "Description of Old Notes." In the
event that the Special Delivery Instructions are completed, please mail the
New Notes issued in consideration of Old Notes accepted for exchange, and/or
any Old Notes not tendered or not accepted for exchange, in the name of the
Holder(s) appearing herein under "Description of Old Notes," and send such
New Notes and/or Old Notes to the address(es) so indicated. Any transfer of
Old Notes to a different holder must be completed, according to the
provisions on transfer of Old Notes contained in the Indenture.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX BELOW.
-5-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad-15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
Institution") UNLESS (i) the Old Notes tendered hereby are tendered by the
Holder(s) of the Old Notes who has (have) not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) the Old
Notes are tendered for the account of an Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used: (i) by all
Holders who are not ATOP members, (ii) by Holders who are ATOP members but
choose not to use ATOP or (iii) if the Old Notes are to be tendered in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures." To validly tender
Old Notes, a Holder must physically deliver a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and all other required documents to the Exchange Agent at
its address set forth on the cover of this Letter of Transmittal prior to the
Expiration Date (as defined below) or the Holder must properly complete and duly
execute an ATOP ticket in accordance with DTC procedures. Otherwise, the Holder
must comply with the guaranteed delivery procedures set forth in the next
paragraph. Notwithstanding anything to the contrary in the Registration Rights
Agreements, the term "Expiration Date" means 5:00 p.m., New York City time, on
___________, 1998 (or such later date to which the Company may, in its sole
discretion, extend the Exchange Offer). If this Exchange Offer is extended, the
term "Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company expressly reserves the right, at any time or
from time to time, to extend the period of time during which the Exchange Offer
is open by giving oral (confirmed in writing) or written notice of such
extension to the Exchange Agent and by making a public announcement of such
extension prior to 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE ISSUERS OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made through
an Eligible Institution;(b) on or prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery (by telegram, facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes and the Original
Principal Amount at Maturity of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock Exchange
trading days after the Expiration Date, any documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and (c) all other documents required by the Letter of Transmittal are
received by the Exchange Agent within three New York Stock Exchange trading days
after the Expiration Date. See "The Exchange Offer--Guaranteed Delivery
Procedures" as set forth in the Prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity,
-6-
<PAGE>
such persons should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be so submitted.
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered Holder to tender on his
behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING
HOLDER, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed schedule attached
hereto.
4. WITHDRAWAL OF TENDER. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date; (ii) specify the name
of the person having tendered the Old Notes to be withdrawn; (iii) identify the
Old Notes to be withdrawn; and (iv) be (a) signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or (b)
accompanied by evidence satisfactory to the Company that the Holder withdrawing
such tender has succeeded to beneficial ownership of such Old Notes. If Old
Notes have been tendered pursuant to the ATOP procedure with DTC, any notice of
withdrawal must otherwise comply with the procedures of DTC. Old Notes properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer; PROVIDED, HOWEVER, that withdrawn Old Notes may be retendered by
again following one of the procedures described herein at any time prior to 5:00
p.m., New York City time, on the Expiration Date. All questions as to the
validity, form and eligibility (including time of receipt) of notice of
withdrawal will be determined by the Company, whose determinations will be final
and binding on all parties. Neither the Company, the Exchange Agent, nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. The Exchange Agent intends to use reasonable
efforts to give notification of such defects and irregularities.
5. PARTIAL TENDERS; PRO RATA EFFECT. Tenders of the Old Notes will be
accepted only in denominations of Original Principal Amount at Maturity of
$1,000, and any integral multiple thereof. If less than the entire Original
Principal Amount at Maturity evidenced by any Old Notes is to be tendered, fill
in the Original Principal Amount at Maturity that is to be tendered in the box
entitled "Principal Amount Tendered"
-7-
<PAGE>
below. The entire Original Principal Amount at Maturity of all Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name as written on the face of the certificate representing such Old Notes
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal and any necessary accompanying documents as there are
different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuers, proper evidence
satisfactory to the Issuers of their authority to so act must be submitted.
7. SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate in
the applicable box the name and address to which New Notes issued in
consideration of Old Notes accepted for exchange, or Old Notes for Original
Principal Amounts at Maturity not exchanged or not tendered, are to be sent, if
different from the name and address of the person signing this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive any of the specified conditions in the Exchange Offer, in whole at any
time or in part from time to time, in the case of any Old Notes tendered hereby.
See "The Exchange Offer--Conditions to the Exchange Offer" in the Prospectus.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes for Original Principal Amounts at
Maturity not exchanged are to be delivered to any person other than the Holder
of the Old Notes or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered Holder or any other persons)
will be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted, the amount of such transfer
taxes will be billed directly to such tendering Holder.
10. IRREGULARITIES. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, in its sole discretion, whose determination
shall be final and binding. The Company reserves the absolute right to reject
any or all tenders of any particular Old Notes that are not in proper form, or
the acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defect,
irregularity or condition of tender with regard to any particular Old Notes.
The Company's interpretation of the terms of, and conditions to, the Exchange
Offer (including the instructions herein) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders must be cured
within such time as the Company shall determine. Neither the Company nor the
Exchange Agent shall be under any duty to give notification of defects in such
tenders or shall incur any liability for failure to give such notification. The
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<PAGE>
Exchange Agent intends to use reasonable efforts to give notification of such
defects and irregularities. Tenders of Old Notes will not be deemed to have
been made until all defects and irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered
and as to which the irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holder, unless otherwise
provided by this Letter of Transmittal, as soon as practicable following the
Expiration Date.
11. PAYMENTS ON EXCHANGED OLD NOTES. Holders whose Old Notes are accepted
for exchange will not receive any payments thereon on the date of exchange. See
"The Exchange Offer--Acceptance of Old Notes for Exchange; Delivery of New
Notes" and "Description of Notes" as set forth in the Prospectus.
12. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
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<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1 and 7)
To be completed ONLY if the New Notes
issued in consideration of Old Notes
exchanged, or certificates for Old Notes in
an Original Principal Amount at Maturity
not surrendered for exchange are to be
mailed to someone other than the
undersigned or to the undersigned at an
address other than that below.
Mail to:
Name:______________________________________
(Please Print)
Address:___________________________________
(Zip Code)
DESCRIPTION OF OLD NOTES
(See Instructions 2 and 7)
Name(s) and Certificate(s)
Address(es) of (Attach additional signed list, if necessary)
Registered Holder(s)
(Please fill in, in blank)
- -------------------------------------------------------------------------------
--------------------------------------------------
Aggregate Original
Original Principal
Certificate Principal Amount at
Number(s)1 Amount at Maturity of
Maturity of Old Notes
Old Notes Tendered2
Evidenced by (must be
Certificate(s) integral
multiples of
$1,000)
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Total
--------------------------------------------------
1. Need not be completed if Old Notes are being tendered by book-entry
transfer.
2. Unless otherwise indicated, the entire Original Principal Amount at
Maturity of Old Notes evidenced by any certificate will be deemed to
have been tendered.
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<PAGE>
(Boxes below to be checked by Eligible Institutions only)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
DTC Account Number _______________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) __________________________________________
Window Ticket Number (if any) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of Institution which Guaranteed Delivery ____________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution ____________________________________________
DTC Account Number _______________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name __________________________________________________________________________
Address _______________________________________________________________________
_______________________________________________________________________________
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<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ____________________________________ ____________________
X ____________________________________ ____________________
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number: ______________________________________________
This box must be signed by registered holder(s) of Old Notes as their name(s)
appear(s) on certificate(s) for Old Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Letter
(including such opinions of counsel, certifications and other information as
may be required by the Issuers or the Trustee for the Old Notes to comply
with the restrictions on transfer applicable to the Old Notes). If signature
is by an attorney-in-fact, trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity,
such person must set forth his or her full title below.
Name(s) _______________________________________________________________________
_______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) _________________________________________________________
Address _______________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
Tax Identification or Social Security Number(s) _______________________________
_______________________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6 to determine if required)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
Name of Firm __________________________________________________________________
Title _________________________________________________________________________
Address _______________________________________________________________________
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