<PAGE> 1
Registration No. 333-09931
Rule 424(b)(2)
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 28, 1996)
4,000,000 Securities
WENDY'S FINANCING I
$2.50 Term Convertible Securities, Series A ("TECONS(SM)")
(Liquidation preference $50 per security) guaranteed to the extent set forth
herein by, and convertible into Common Stock of,
LOGO
WENDY'S INTERNATIONAL, INC.
The $2.50 Term Convertible Securities, Series A (the "TECONS" or "Trust
Preferred Securities"), liquidation preference $50 per security, offered hereby
are being issued by Wendy's Financing I, a statutory business trust created
under the laws of the State of Delaware ("Wendy's Financing" or the "Trust").
The TECONS offered hereby represent preferred undivided beneficial interests in
the assets of the Trust.
The TECONS have been approved for listing on the New York Stock Exchange under
the symbol "WEN PrT," subject to official notice of issuance.
(continued on following page)
SEE "RISK FACTORS" COMMENCING ON PAGE S-11 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMPENSATION(2) WENDY'S FINANCING(3)(4)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Per TECONS $50.00 (3) $50.00
- -----------------------------------------------------------------------------------------------------------
Total $200,000,000 (3) $200,000,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accumulated Distributions (as defined herein), if any, from September
20, 1996.
(2) Wendy's Financing and Wendy's have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) The Underwriting Agreement provides that Wendy's will pay to the
Underwriters, as compensation for their services, $1.125 per TECONS (or
$4,500,000 in the aggregate). See "Underwriting."
(4) Wendy's will pay expenses of the offering made hereby estimated at $400,000.
The TECONS are offered severally by the Underwriters, as specified herein,
subject to prior sale, when, as, and if accepted by the Underwriters, and
subject to various prior conditions, including their right to reject orders in
whole or in part, and subject to approval of certain legal matters by Davis Polk
& Wardwell, counsel for the Underwriters. It is expected that delivery of the
TECONS will be made only in book-entry form through the facilities of The
Depository Trust Company, as Depositary, on or about September 20, 1996, against
payment therefor in immediately available funds.
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
September 16, 1996
<PAGE> 2
(continued from previous page)
Wendy's International, Inc., an Ohio corporation ("Wendy's" or the "Company"),
will directly or indirectly own all the common securities (the "Trust Common
Securities," and together with the TECONS, the "Trust Securities"), representing
undivided beneficial interests in the assets of Wendy's Financing. Wendy's
Financing exists for the sole purpose of issuing the TECONS and Trust Common
Securities and investing the proceeds thereof in 5% Convertible Subordinated
Debentures due September 15, 2026 (the "Convertible Debentures") of Wendy's in
an aggregate principal amount equal to the aggregate liquidation amount of the
Trust Securities. The Convertible Debentures and the TECONS in respect of which
this Prospectus Supplement is being delivered are referred to herein as the
"Offered Securities." The Convertible Debentures when issued will be unsecured
obligations of Wendy's and will be subordinate and junior in right of payment to
certain other indebtedness of Wendy's as described herein. Upon a Declaration
Event of Default (as defined herein), the holders of TECONS will have a
preference over the holders of the Trust Common Securities with respect to
payment in respect of Distributions and payments upon redemption, liquidation
and otherwise.
Holders of the TECONS are entitled to receive cumulative cash Distributions at
an annual rate of $2.50 per TECONS accumulating from the first date that any
TECONS are issued and payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing December 15, 1996
("Distributions"). The payment of Distributions out of moneys held by Wendy's
Financing and payments on liquidations of Wendy's Financing or the redemption of
TECONS, as set forth below, are guaranteed by Wendy's (the "Guarantee") to the
extent described herein and under "Description of Trust Preferred Securities
Guarantees" in the accompanying Prospectus. The Guarantee covers payments of
Distributions and other payments on the TECONS only if and to the extent that
Wendy's Financing has funds available therefor, which will not be the case
unless Wendy's has made a payment of interest or principal or other payments on
the Convertible Debentures held by Wendy's Financing as its sole assets. The
Guarantee, when taken together with the obligations of Wendy's under the
Convertible Debentures and the Subordinated Indenture (as defined herein) and
its obligations under the Declaration, including its liabilities to pay costs,
expenses, debts and obligations of Wendy's Financing (other than with respect to
the Trust Securities), provides a full and unconditional guarantee of amounts
due on the TECONS. See "Risk Factors -- Rights Under the Guarantee."
The obligations of Wendy's under the Guarantee are subordinate and junior in
right of payment to all other liabilities of Wendy's and rank pari passu with
the most senior preferred stock issued, from time to time, if any, by Wendy's.
The obligations of Wendy's under the Convertible Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness (as
defined in the accompanying Prospectus) of Wendy's. The Convertible Debentures
purchased by the Trust may be subsequently distributed pro rata to holders of
the TECONS and Trust Common Securities in connection with the dissolution of the
Trust upon the occurrence of certain events.
Each TECONS is convertible in the manner described herein at the option of the
holder, at any time prior to the Conversion Expiration Date (as defined herein),
into common shares, without par value, of Wendy's ("Wendy's Common Stock"), at
the initial rate of 1.8932 shares of Wendy's Common Stock for each TECONS
(equivalent to an initial conversion price of $26.41 per share of Wendy's Common
Stock), subject to adjustment in certain circumstances. See "Description of the
TECONS -- Conversion Rights." The last reported sale price of Wendy's Common
Stock, which is reported under the symbol "WEN" on the New York Stock Exchange
Composite Tape, on September 16, 1996, was $21.13 per share.
The Distribution rate and the Distribution payment date and other payment dates
for the TECONS will correspond to the interest rate and interest payment date
and other payment dates for the Convertible Debentures, which will be the sole
assets of the Trust. As a result, if principal or interest is not paid on the
Convertible Debentures, no amounts will be paid on the TECONS. If Wendy's does
not make principal or interest payments on the Convertible Debentures, the Trust
will not have sufficient funds to make Distributions on the TECONS, in which
event, the Guarantee will not apply to such Distributions until the Trust has
sufficient funds available therefor.
So long as Wendy's shall not be in default in the payment of interest on the
Convertible Debentures, Wendy's has the right to defer payments of interest on
the Convertible Debentures from time to time for successive periods (each, an
"Extension Period") by extending the interest payment period on the Convertible
Debentures at any time for up to 20 consecutive quarters. If interest payments
are so deferred, Distributions to holders of the TECONS will also be deferred.
During such Extension Period, Distributions will continue to accumulate with
interest thereon (to the extent permitted by applicable law) at the Distribution
rate, compounded quarterly, and during any Extension Period, holders of TECONS
will be required to include deferred interest income in their gross income for
U.S. federal income tax purposes in advance of receipt of the cash Distributions
with respect to such deferred interest payments. There could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures. See "Risk Factors -- Option to Extend Interest Payment Period,"
"Description of the TECONS -- Distributions," "Description of the Convertible
Debentures -- Option to Extend Interest Payment Period" and "Certain Federal Tax
Consequences -- Original Issue Discount."
The Convertible Debentures are redeemable by Wendy's, in whole or in part, from
time to time, on or after September 17, 2000, at the prices set forth herein
(the "Redemption Price"), plus accrued and unpaid interest thereon to the date
fixed for redemption. In addition, in certain circumstances upon the occurrence
of a Special Event (as defined herein) the Convertible Debentures may be
redeemed by Wendy's at 100% of the principal amount thereof, plus accrued and
unpaid interest thereon. If Wendy's redeems the
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Convertible Debentures, the Trust shall redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Convertible Debentures so redeemed. See "Description of the TECONS -- Mandatory
Redemption." The outstanding TECONS will be redeemed upon maturity of the
Convertible Debentures. The Convertible Debentures mature on September 15, 2026.
Upon the occurrence of a Special Event arising from a change in law or a change
in legal interpretation, unless the Convertible Debentures are redeemed in the
limited circumstances described herein, the Trust may be dissolved (with the
consent of Wendy's), with the result that the Convertible Debentures would be
distributed to the holders of the TECONS, on a pro rata basis, in lieu of any
cash Distribution. See "Description of the TECONS -- Special Event Distribution;
Tax Event Redemption." If Wendy's declines to consent to such dissolution and
Distribution, Wendy's may incur an obligation to pay Additional Interest (as
defined herein). See "Description of the Convertible Debentures -- Additional
Interest."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the TECONS will be entitled to receive
for each TECONS a liquidation amount of $50 plus accumulated and unpaid
Distributions thereon (including interest thereon) to the date of payment,
unless, in connection with such dissolution in the case of a Special Event, the
Convertible Debentures are distributed to the holders of the TECONS. See
"Description of the TECONS -- Liquidation Distribution Upon Dissolution."
S-3
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE TECONS AND THE
WENDY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
No person is authorized to give any information or to make any representation
not contained or incorporated by reference in this Prospectus Supplement or the
accompanying Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by Wendy's
Financing, Wendy's or any Underwriter. Neither this Prospectus Supplement nor
the accompanying Prospectus constitutes an offer to sell or a solicitation of an
offer to buy any securities in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT PAGE
Safe Harbor Statement..................... S-5
Prospectus Supplement Summary............. S-6
Risk Factors.............................. S-11
The Company............................... S-14
Use of Proceeds........................... S-17
Price Range of Common Stock and
Dividends............................... S-17
Capitalization............................ S-18
Selected Consolidated Financial
Information............................. S-19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. S-21
Wendy's Financing I....................... S-22
Description of the TECONS................. S-23
Description of the Guarantee.............. S-35
Description of the Convertible
Debentures.............................. S-35
Effect of Obligations Under the
Convertible Debentures and the
Guarantee............................... S-40
Certain Federal Tax Consequences.......... S-41
Underwriting.............................. S-45
Legal Matters............................. S-46
PROSPECTUS PAGE
Available Information..................... 3
Incorporation of Certain Documents by
Reference............................... 3
The Company............................... 3
The Trusts................................ 4
Use of Proceeds........................... 4
Ratios of Earnings to Fixed Charges and of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends............... 5
Description of Debt Securities............ 5
Description of the Capital Stock.......... 14
Description of Warrants................... 16
Description of Trust Preferred
Securities.............................. 17
Description of Trust Preferred Securities
Guarantees.............................. 18
Plan of Distribution...................... 20
Experts................................... 21
Legal Matters............................. 21
</TABLE>
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SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those discussed in the statement. The Company desires to take
advantage of the "safe harbor" provisions of the Act. Certain information,
particularly information regarding future economic performance and finances and
plans and objectives of management, contained, or incorporated by reference, in
this Prospectus Supplement and the accompanying Prospectus, is forward-looking.
In some cases, information regarding certain important factors that could cause
actual results to differ materially from any such forward-looking statement
appear together with such statement. Also, the following factors, in addition to
other possible factors not listed, could affect the Company's actual results and
cause such results to differ materially from those expressed in forward-looking
statements:
Competition. The quick-service restaurant industry is intensely competitive
with respect to price, service, location, personnel, and type and quality of
food. The Company and its franchisees compete with international, regional and
local organizations primarily through the quality, variety and value perception
of food products offered. The number and location of units, quality and speed of
service, attractiveness of facilities and effectiveness of advertising and
marketing programs are also important factors. The Company anticipates that
intense competition will continue to focus on pricing, and certain of the
Company's competitors have substantially larger marketing budgets.
Economic, Market and Other Conditions. The quick-service restaurant industry is
affected by changes in national, regional and local economic conditions,
consumer preferences and spending patterns, demographic trends, consumer
perceptions of food safety, weather, traffic patterns and the type, number and
location of competing restaurants. Factors such as inflation, food costs, labor
and benefit costs, legal claims, and the availability of management and hourly
employees also affect restaurant operations and administrative expenses. The
ability of the Company and its franchisees to finance new restaurant
development, improvements and additions to existing restaurants and the
acquisition of restaurants from, and sale of restaurants to, franchisees, is
affected by economic conditions, including interest rates and other government
policies impacting land and construction costs and the cost and availability of
borrowed funds.
Importance of Locations. The success of Company and franchised restaurants is
dependent in substantial part on location. There can be no assurance that
current locations will continue to be attractive, as demographic patterns
change. It is possible the neighborhood or economic conditions where restaurants
are located could decline in the future, thus resulting in potentially reduced
sales in those locations.
Government Regulation. The Company and its franchisees are subject to various
federal, state and local laws affecting their business. The development and
operation of restaurants depend to a significant extent on the selection and
acquisition of suitable sites, which are subject to zoning, land use,
environmental, traffic and other regulations. Restaurant operations are also
subject to licensing and regulation by state and local departments relating to
health, sanitation and safety standards, federal and state labor laws (including
applicable minimum wage requirements, overtime, working and safety conditions,
and citizenship requirements), federal and state laws which prohibit
discrimination and other laws regulating the design and operation of facilities,
such as the Americans With Disabilities Act of 1990. The operation of the
Company's franchisee system is also subject to regulation enacted by a number of
states and rules promulgated by the Federal Trade Commission. The Company cannot
predict the effect on its operations, particularly on its relationship with
franchisees, of the future enactment of additional legislation regulating the
franchise relationship.
Growth Plans. The Company plans to significantly increase the number of
systemwide Wendy's and Tim Hortons restaurants open or under construction. There
can be no assurance that the Company or its franchisees will be able to achieve
growth objectives or that new restaurants opened or acquired will be profitable.
The opening and success of restaurants depends on various factors, including the
identification and availability of suitable and economically viable locations,
sales levels at existing restaurants, the negotiation of acceptable lease or
purchase terms for new locations, permitting and regulatory compliance, the
ability to meet construction schedules, the financial and other development
capabilities of franchisees, the ability of the Company to hire and train
qualified management personnel, and general economic and business conditions.
International Operations. The Company's business outside of the United States
is subject to a number of additional factors, including international economic
and political conditions, differing cultures and consumer preferences, currency
regulations and fluctuations, diverse government regulations and tax systems,
the availability and cost of land, construction costs and the availability of
experienced management and appropriate franchisees and joint venture partners.
Although the Company believes it has developed the support structure required
for international growth, there is no assurance that such growth will occur or
that international operations will be profitable.
S-5
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information included and incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus.
References to the Company or Wendy's herein should be read as referring to
Wendy's International, Inc. and its subsidiaries, except where the context
indicates otherwise.
THE COMPANY
Wendy's is the third largest quick-service restaurant chain in the world
featuring hamburgers. As of June 30, 1996, there were 4,778 Wendy's restaurants
open worldwide, of which 4,276 were located in the U.S. and 502 in 33 other
countries. Of the total restaurants, 3,457 were franchised and the remainder
were Company operated. Each Wendy's restaurant offers a relatively standard menu
featuring the Company's core products of hamburgers and chicken breast
sandwiches prepared according to customer specifications and salads in either a
prepared or salad bar format. Wendy's menu also includes chili, baked and french
fried potatoes, chicken nuggets, desserts, soft drinks and children's meals. In
addition, Wendy's restaurants sell a variety of promotional and test products on
a limited basis, and a breakfast menu is available at certain Wendy's
restaurants during the morning hours. Wendy's systemwide sales have grown from
$3.2 billion in 1991 to $4.5 billion in 1995.
In December 1995, Wendy's acquired Tim Hortons and related assets in a
transaction accounted for as a pooling of interests. Tim Hortons is the second
largest restaurant chain in Canada, with 1,277 units as of June 30, 1996, and it
is the largest chain specializing in coffee and fresh baked goods including
donuts, bagels, muffins, croissants and cookies as well as sandwiches and soups.
Tim Hortons leads the coffee and donut segment in Canada with a 46.6% share of
traffic. And, among all categories of quick-service restaurants in Canada, Tim
Hortons holds the second largest share of customer traffic. Tim Hortons
franchises the majority of its restaurants and it locates, develops and leases
restaurants to franchisees. In addition, Tim Hortons operates six warehouses
that sell and distribute dry goods to all of its restaurants. Tim Hortons' three
primary sources of operating income are from royalties and rents paid by
franchisees and from warehouse operations. Tim Hortons' systemwide sales have
grown from $308 million in 1991 to $541 million in 1995.
Management believes that Tim Hortons is an excellent complement to Wendy's
because consumers perceive both restaurant chains as delivering outstanding
quality, fresh food and good service. Although consumer perceptions are similar,
the Company believes that customers use these restaurants differently, and that
both core businesses can grow through cross-marketing and combination
restaurants. Tim Hortons operates primarily in the snack and breakfast day
parts, whereas approximately 74% of Wendy's sales occur during lunch and dinner.
In recent years, the Company has taken steps to broaden its base and to generate
growth in three separate areas. First, the Company has focused on expanding its
domestic Wendy's restaurant operations. Second, the Company has invested in
infrastructure and experienced management to accelerate the expansion of its
international Wendy's restaurant operations. Third, the Company acquired the
rapidly growing Tim Hortons chain in Canada and intends to continue expanding
its business both in Canada and the U.S.
Overall, the Company believes that its quality leadership positions and
conservative capitalization provide an effective platform to enable Wendy's to
realize its significant growth opportunities.
S-6
<PAGE> 7
THE OFFERING
SECURITIES OFFERED.................. 4,000,000 $2.50 Term Convertible
Securities, Series A ("TECONS" or "Trust
Preferred Securities").
THE ISSUER.......................... Wendy's Financing I, a Delaware business
trust. The sole assets of the Trust will
consist of the 5% Convertible Subordinated
Debentures due September 15, 2026 (the
"Convertible Debentures") of Wendy's.
GUARANTOR........................... Wendy's International, Inc., an Ohio
corporation.
DISTRIBUTIONS....................... Distributions on the TECONS will accumulate
from September 20, 1996 and will be payable
at an annual rate of $2.50 per TECONS.
Subject to the Distribution deferral
provisions described below, Distributions
will be payable quarterly in arrears on
each March 15, June 15, September 15 and
December 15, commencing December 15, 1996.
Because Distributions on the TECONS
constitute interest for U.S. federal income
tax purposes, corporate holders thereof
will not be entitled to a
dividends-received deduction.
DISTRIBUTION DEFERRAL PROVISIONS.... The ability of the Trust to pay
Distributions on the TECONS is solely
dependent on the receipt of interest
payments from Wendy's on the Convertible
Debentures. So long as Wendy's shall not be
in default in the payment of interest on
the Convertible Debentures, Wendy's has the
right to defer payments of interest on the
Convertible Debentures from time to time
for successive Extension Periods not
exceeding 20 consecutive quarters for each
such period. Quarterly Distributions on the
TECONS would be deferred by the Trust (but
would continue to accumulate quarterly and
would accrue interest) until the end of any
such Extension Period. Upon the termination
of an Extension Period, payment is due on
all accrued and unpaid amounts on the
Convertible Debentures and upon such
payment, the Trust would be required to pay
all accumulated and unpaid Distributions.
Wendy's will give notice of its deferral of
an interest payment to the Trust no later
than ten business days prior to the related
record date (unless the Institutional
Trustee (as defined herein) shall be the
sole holder of the Convertible Debentures
in which case notice will be given no later
than one business day prior to the related
record date). See "Risk Factors -- Option
to Extend Interest Payment Period,"
"Description of the
TECONS -- Distributions" and "Description
of the Convertible Debentures -- Option to
Extend Interest Payment Period." If a
deferral of an interest payment occurs, the
holders of the TECONS will continue to
accrue income for U.S. federal income tax
purposes in advance of any corresponding
cash Distribution. See "Risk
Factors -- Option to Extend Interest
Payment Period" and "Certain Federal Tax
Consequences -- Original Issue Discount."
RIGHTS UPON DEFERRAL OF
DISTRIBUTION........................ During any period in which interest
payments on the Convertible Debentures are
deferred, interest will accrue on the
Convertible Debentures (compounded
quarterly) and quarterly Distributions will
continue to accumulate with interest
thereon at the Distribution rate,
compounded quarterly. Wendy's has agreed,
among other things, not to declare or pay
any dividend on its capital stock during
any Extension Period. See "Risk
Factors -- Option to Extend Interest
Payment Period" and "Description of the
Convertible Debentures -- Option to Extend
Interest Payment Period."
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<PAGE> 8
CONVERSION RIGHTS................... Each TECONS is convertible at any time
prior to the close of business on September
15, 2026 (or, in the case of TECONS called
for redemption, prior to the close of
business on the Business Day prior to the
applicable redemption date) at the option
of the holder into shares of Wendy's Common
Stock, at the rate of 1.8932 shares of
Wendy's Common Stock for each TECONS
(equivalent to a conversion price of $26.41
per share of Wendy's Common Stock), subject
to adjustment in certain circumstances. The
last reported sale price of Wendy's Common
Stock on the New York Stock Exchange
Composite Tape on September 16, 1996, was
$21.13 per share. In connection with any
conversion of a TECONS, the Conversion
Agent (as defined herein) will exchange
such TECONS for the appropriate principal
amount of the Convertible Debentures held
by the Trust and immediately convert such
Convertible Debentures into Wendy's Common
Stock. No fractional shares of Wendy's
Common Stock will be issued as a result of
conversion, but in lieu thereof such
fractional interest will be paid by Wendy's
in cash. See "Description of the
TECONS -- Conversion Rights."
LIQUIDATION PREFERENCE.............. In the event of any liquidation of the
Trust, holders will be entitled to receive
$50 per TECONS plus an amount equal to any
accumulated and unpaid Distributions
thereon to the date of payment, unless
Convertible Debentures are distributed to
such holders. See "Description of the
TECONS -- Liquidation Distribution Upon
Dissolution."
REDEMPTION.......................... The Convertible Debentures will be
redeemable for cash, at the option of the
Company, in whole or in part, from time to
time on or after September 17, 2000, at the
prices specified herein. Upon any
redemption of the Convertible Debentures,
the TECONS will be redeemed at the
Redemption Price. The TECONS will not have
a stated maturity date, although they will
be subject to mandatory redemption upon the
repayment of the Convertible Debentures at
their stated maturity (September 15, 2026),
upon acceleration, earlier redemption or
otherwise. See "Description of the
TECONS -- Mandatory Redemption" and
"Description of the Convertible
Debentures -- Redemption at the Option of
Wendy's."
GUARANTEE........................... Wendy's will irrevocably and
unconditionally guarantee, on a
subordinated basis and to the extent set
forth herein, the payment in full of (i)
Distributions on the TECONS to the extent
the Trust has funds available therefor,
(ii) the amount payable upon redemption of
the TECONS to the extent the Trust has
funds available therefor and (iii)
generally, the liquidation preference of
the TECONS to the extent the Trust has
assets available for distribution to
holders of TECONS. The Guarantee will be
unsecured and will be subordinate and
junior in right of payment to all other
liabilities of Wendy's and will rank pari
passu in right of payment with the most
senior preferred stock issued, from time to
time, if any, by Wendy's.
VOTING RIGHTS....................... Generally, holders of the TECONS will not
have any voting rights. However, if an
Indenture Event of Default (as defined
herein) occurs and is continuing, the
holders of 25% of the aggregate liquidation
amount of the TECONS may direct the
Institutional Trustee to declare the
principal of and interest on the
Convertible Debentures immediately due and
payable. If (i) the Institutional Trustee
fails to enforce its rights under the
Convertible Debentures or (ii) Wendy's
defaults under the Guarantee with respect
to the TECONS, a record holder of the
TECONS may institute a legal proceeding
directly
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<PAGE> 9
against Wendy's to enforce the
Institutional Trustee's rights without
first instituting any legal proceeding
against the Institutional Trustee. See
"Description of the TECONS -- Voting
Rights."
SPECIAL EVENT DISTRIBUTION; TAX
EVENT REDEMPTION.................... Upon the occurrence of a Special Event,
except in certain limited circumstances,
Wendy's may cause the Trust to be dissolved
and cause the Convertible Debentures to be
distributed to the holders of the TECONS.
In the case of a Tax Event, Wendy's may
also elect to cause the TECONS to remain
outstanding and pay Additional Interest (as
defined herein), if any, on the Convertible
Debentures. In certain circumstances upon
the occurrence of a Tax Event, the
Convertible Debentures may be redeemed by
Wendy's at 100% of the principal amount
thereof plus accrued and unpaid interest
thereon. See "Description of the
TECONS -- Special Event Distribution; Tax
Event Redemption."
CONVERTIBLE SUBORDINATED DEBENTURES
OF WENDY'S.......................... The Convertible Debentures will mature on
September 15, 2026, and will bear interest
at the rate of 5% per annum, payable
quarterly in arrears. So long as Wendy's
shall not be in default in the payment of
interest on the Convertible Debentures,
Wendy's has the right to defer payments of
interest on the Convertible Debentures from
time to time for successive periods not
exceeding 20 consecutive quarters for each
such period; provided, that no such period
shall extend beyond the stated maturity
date of the Convertible Debentures. Prior
to the termination of any Extension Period
of less than 20 consecutive quarters,
Wendy's may further defer interest payments
provided the Extension Period, as further
extended, does not exceed 20 consecutive
quarters and does not extend beyond the
stated maturity date of the Convertible
Debentures. During any Extension Period no
interest shall be due, but such interest
shall continue to accrue and compound
quarterly. Upon the termination of the
Extension Period, payment is due on all
accrued and unpaid amounts. After the
payment of all amounts then due, Wendy's
may commence a new Extension Period,
subject to the conditions of this
paragraph. During any Extension Period,
Wendy's will be prohibited from paying
dividends on any of its capital stock and
making certain other restricted payments
until quarterly interest payments are
resumed and all amounts due on the
Convertible Debentures are made current.
The payment of the principal of and
interest on the Convertible Debentures will
be subordinated in right of payment to all
Senior Indebtedness of Wendy's and may not
be made if an Event of Default has occurred
and is continuing under the Senior
Indenture (as defined in the accompanying
Prospectus). As of June 30, 1996, the
Company had $241.1 million of Senior
Indebtedness outstanding. Neither the
Senior Indenture nor the Subordinated
Indenture, under which the Convertible
Debentures will be issued, limits the
aggregate amount of Senior Indebtedness
that may be issued by Wendy's. The
Convertible Debentures will have provisions
with respect to interest, optional
redemption and conversion into Wendy's
Common Stock and certain other terms
substantially similar or analogous to those
of the TECONS. See "Description of the
Convertible Debentures" and "Risk
Factors -- Ranking of Subordinate
Obligations Under the Guarantee and
Convertible Debentures."
USE OF PROCEEDS..................... All of the proceeds from the sale of the
TECONS will be invested by the Trust in
Convertible Debentures of Wendy's issued
pursuant to
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the Subordinated Indenture. After paying
the Underwriters' compensation and the
other expenses associated with this
offering, Wendy's will use the net proceeds
for general corporate purposes, including
the acquisition and/or development of
restaurants. See "Use of Proceeds."
NEW YORK STOCK EXCHANGE SYMBOL...... WEN PrT
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RISK FACTORS
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE
DEBENTURES
The obligations of Wendy's under the Guarantee are subordinate and junior in
right of payment to all liabilities of Wendy's and pari passu in right of
payment with the most senior preferred stock issued, from time to time, if any,
by Wendy's. The obligations of Wendy's under the Convertible Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of Wendy's. No payment of principal (including redemption payments,
if any), premium, if any, or interest on the Convertible Debentures may be made
if (i) any Senior Indebtedness of Wendy's is not paid when due and any
applicable grace period with respect to such default has ended with such default
not having been cured or waived or ceasing to exist, (ii) the maturity of any
Senior Indebtedness has been accelerated because of a default or (iii) an Event
of Default has occurred and is continuing under the Senior Indenture, permitting
the holders of securities issued thereunder to accelerate the maturity thereof
or demand payment in full. As of June 30, 1996, the Company had $241.1 million
of Senior Indebtedness outstanding. There are no terms in the TECONS, the
Convertible Debentures or the Guarantee that limit the ability of Wendy's to
incur additional indebtedness, including indebtedness that ranks senior to the
Convertible Debentures and the Guarantee, or to grant security interests to
secure outstanding or new indebtedness. See "Description of Trust Preferred
Securities Guarantees -- Status of the Trust Preferred Securities Guarantees"
and "Description of Debt Securities" in the accompanying Prospectus, and
"Description of the Convertible Debentures -- Subordination" herein.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Institutional Trustee will act as indenture trustee under the Guarantee for
the purposes of compliance with the provisions of the Trust Indenture Act (the
"Guarantee Trustee"). The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the TECONS.
Under the Guarantee, Wendy's guarantees the holders of the TECONS the payment of
(i) any accumulated and unpaid Distributions that are required to be paid on the
TECONS, to the extent the Trust has funds available therefor; (ii) the
Redemption Price, including all accumulated and unpaid Distributions with
respect to TECONS called for redemption by the Trust, to the extent the Trust
has funds available therefor; and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Convertible Debentures to the holders of TECONS or a
redemption of all the TECONS), the lesser of (a) the aggregate of the
liquidation amount and all accumulated and unpaid Distributions on the TECONS to
the date of the payment to the extent the Trust has funds available therefor or
(b) the amount of assets of the Trust remaining available for distribution to
holders of the TECONS in liquidation of the Trust. The holders of a majority in
liquidation amount of the TECONS have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. In addition, any record holder of TECONS
may institute a legal proceeding directly against Wendy's to enforce the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity if (i) the Institutional Trustee
fails to enforce its rights under the Convertible Debentures or (ii) Wendy's
defaults under the Guarantee with respect to the TECONS. If Wendy's were to
default on its obligation to pay amounts payable on the Convertible Debentures,
the Trust would lack available funds for the payment of Distributions or amounts
payable on redemption of the TECONS or otherwise, and, in such event, holders of
the TECONS would not be able to rely upon the Guarantee for payment of such
amounts. Instead, holders of the TECONS would rely on the enforcement (i) by the
Institutional Trustee of its rights as registered holder of the Convertible
Debentures against Wendy's pursuant to the terms of the Convertible Debentures
or (ii) by a holder of its rights of direct action against Wendy's to enforce
payments on the Convertible Debentures. See "Description of Trust Preferred
Securities Guarantees" and "Description of Debt Securities" in the accompanying
Prospectus. The Declaration (as defined herein) provides that each holder of
TECONS, by acceptance thereof, agrees to the provisions of the Guarantee,
including the subordination provisions thereof, and the Subordinated Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TECONS
If (i) Wendy's Financing fails to pay Distributions in full on the TECONS (other
than pursuant to a deferral) or (ii) a Declaration Event of Default (as defined
herein) occurs and is continuing, then the holders of TECONS would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the
Convertible Debentures against Wendy's. In addition, the holders of a majority
in liquidation amount of the TECONS will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Institutional Trustee or to direct the exercise of any trust or power conferred
upon the Institutional Trustee under the Declaration, including the right to
direct the Institutional Trustee to exercise the remedies available to it as a
holder of the Convertible Debentures. If the Institutional Trustee fails to
enforce its rights under the Convertible Debentures, a holder of TECONS, to the
extent permitted by law, may institute a legal proceeding directly against
Wendy's to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the
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failure of Wendy's to pay interest or principal on the Convertible Debentures on
the date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then the registered holder of the TECONS
may directly institute a proceeding for enforcement of payment to such holder of
the principal of or interest on the Convertible Debentures having a principal
amount equal to the aggregate liquidation amount of the TECONS of such holder (a
"Direct Action") on or after the respective due date specified in the
Convertible Debentures. In connection with such Direct Action, Wendy's will be
subrogated to the rights of such holder of TECONS under the Declaration to the
extent of any payment made by Wendy's to such holder of TECONS in such Direct
Action. The holders of TECONS will not be able to exercise any other remedy
available to the holders of the Convertible Debentures. See "Description of the
TECONS -- Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as Wendy's shall not be in default in the payment of interest on the
Convertible Debentures, Wendy's has the right under the Indenture to defer
payments of interest on the Convertible Debentures from time to time for
successive periods not exceeding 20 consecutive quarters for each such period;
provided that no such period shall extend beyond the stated maturity date of the
Convertible Debentures. As a consequence of such an extension, quarterly
Distributions on the TECONS would be deferred (but despite such deferral would
continue to accumulate with interest thereon at the Distribution rate,
compounded quarterly) by the Trust during any such Extension Period. During any
Extension Period and until quarterly interest payments are resumed and all
amounts due on the Convertible Debentures are made current, (a) Wendy's shall
not declare or pay dividends on, or make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) purchases or acquisitions of shares of
Wendy's Common Stock in connection with the satisfaction by Wendy's of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of Wendy's capital stock or the exchange or conversion of one
class or series of Wendy's capital stock for another class or series of Wendy's
capital stock , (iii) the purchase of fractional interests in shares of Wendy's
capital stock pursuant to the conversion or exchange provisions of such Wendy's
capital stock or the security being converted or exchanged or (iv) purchases or
acquisitions of shares of Wendy's Common Stock to be used in connection with
acquisitions of Wendy's Common Stock by shareholders pursuant to the Company's
dividend reinvestment plan), (b) Wendy's shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Wendy's that rank pari passu with or junior to the
Convertible Debentures and (c) Wendy's shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any Extension Period of less than 20 consecutive quarters,
Wendy's may further defer interest payments provided the Extension Period, as
further extended, does not exceed 20 consecutive quarters and does not extend
beyond the stated maturity date of the Convertible Debentures. During any
Extension Period no interest shall be due, but such interest shall continue to
accrue and compound quarterly. Upon the termination of the Extension Period,
payment is due on all accrued and unpaid amounts. After the payment of all
amounts then due, Wendy's may commence a new Extension Period, subject to the
conditions of this paragraph. See "Description of the TECONS -- Distributions"
and "Description of the Convertible Debentures -- Option to Extend Interest
Payment Period."
Should Wendy's exercise its right to defer payments of interest by extending the
interest payment period, each holder of TECONS will continue to accrue income
(as original issue discount ("OID")) in respect of the deferred and compounded
interest allocable to its TECONS for U.S. federal income tax purposes, which
interest will be allocated, but not distributed, to holders of record of TECONS.
As a result, each such holder of TECONS will recognize income for U.S. federal
income tax purposes in advance of the receipt of cash and will not receive the
cash from Wendy's Financing related to such income if such holder disposes of
its TECONS prior to the record date for the date on which Distributions of such
amounts are made. Wendy's has no current intention of exercising its right to
defer payments of interest by extending the interest payment period of the
Convertible Debentures. However, should Wendy's determine to exercise such right
in the future, the market price of the TECONS is likely to be adversely
affected. A holder that disposes of its TECONS during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its TECONS. In addition, as a result of the existence of the
right of Wendy's to defer interest payments, the market price of the TECONS
(which represent an undivided beneficial interest in the Convertible Debentures)
may be more volatile than other securities on which OID accrues that do not have
such rights. See "Certain Federal Tax Consequences -- Original Issue Discount."
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget Proposal,
the Treasury Department proposed legislation (the "Proposed Legislation") that,
among other things, would (i) treat as equity for U.S. federal income tax
purposes certain debt instruments with a maximum term of more than 20 years and
(ii) disallow interest deductions on certain convertible debt instruments or
defer interest deductions on certain debt instruments issued with original issue
discount. The Proposed Legislation is proposed to be effective for debt
instruments issued on or after December 7, 1995.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the
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<PAGE> 13
tax-writing committees of Congress, would have an effective date that is no
earlier than the date of "appropriate Congressional action." Based upon the
Joint Statement, it is expected that if the Proposed Legislation were enacted,
such legislation would not apply to the Convertible Debentures since they would
be issued prior to the date of any "appropriate Congressional action" or
otherwise qualify for transitional relief. However, there can be no assurances
that the effective date guidance contained in the Joint Statement will be
incorporated in the Proposed Legislation, if enacted, or that other legislation
enacted after the date hereof will not otherwise adversely affect the tax
treatment of the Convertible Debentures. If legislation were enacted that
adversely affects the tax treatment of the Convertible Debentures, there could
be a distribution of the Convertible Debentures to holders of the TECONS or, in
certain circumstances, the redemption of the Convertible Debentures by Wendy's
and the distribution by the Trustee of the resulting cash in redemption of the
TECONS. See "-- Special Event Distribution; Tax Event Redemption" and
"Description of the TECONS -- Special Event Distribution; Tax Event Redemption."
SPECIAL EVENT DISTRIBUTION; TAX EVENT REDEMPTION
Upon the occurrence of a Special Event, Wendy's Financing could be dissolved
(with the consent of Wendy's), except in the limited circumstance described
below, with the result that the Convertible Debentures would be distributed to
the holders of the Trust Securities in connection with the liquidation of the
Trust. In certain circumstances, Wendy's would have the right to redeem the
Convertible Debentures, in whole or in part, in lieu of a distribution of the
Convertible Debentures by the Trust, in which event the Trust would redeem the
Trust Securities on a pro rata basis to the same extent as the Convertible
Debentures are redeemed by Wendy's. See "Description of the TECONS -- Special
Event Distribution; Tax Event Redemption."
Under current U.S. federal income tax law, a distribution of Convertible
Debentures upon the dissolution of Wendy's Financing would not be a taxable
event to holders of the TECONS. Upon occurrence of a Special Event, however, a
dissolution of Wendy's Financing in which holders of the TECONS receive cash
would be a taxable event to such holders. See "Certain Federal Tax
Consequences -- Receipt of Convertible Debentures or Cash Upon Liquidation of
Wendy's Financing."
There can be no assurance as to the market prices for the TECONS or the
Convertible Debentures that may be distributed in exchange for TECONS if a
dissolution or liquidation of the Trust were to occur. Accordingly, the TECONS
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Convertible Debentures that a holder of TECONS may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the TECONS offered hereby. Because
holders of TECONS may receive Convertible Debentures upon the occurrence of a
Special Event, prospective purchasers of TECONS are also making an investment
decision with regard to the Convertible Debentures and should carefully review
all the information regarding the Convertible Debentures contained herein and in
the accompanying Prospectus. See "Description of the TECONS -- Special Event
Distribution; Tax Event Redemption" and "Description of the Convertible
Debentures -- General."
LIMITED VOTING RIGHTS
Holders of TECONS will have limited voting rights and will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
Wendy's Trustees, which voting rights are vested exclusively in the holder of
the Trust Common Securities. See "Description of the TECONS -- Voting Rights."
TRADING PRICE
The TECONS may trade at a price that does not fully reflect the value of accrued
but unpaid interest with respect to the underlying Convertible Debentures. A
holder who disposes of TECONS between record dates for payments of Distributions
thereon will be required to include accrued but unpaid interest on the
Convertible Debentures through the date of disposition in income as ordinary
income (i.e., OID), and to add such amount to the adjusted tax basis in the
holder's pro rata share of the underlying Convertible Debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for U.S. federal
income tax purposes. See "Certain Federal Tax Consequences -- Original Issue
Discount" and "-- Sales of TECONS."
NO PRIOR PUBLIC MARKET; POSSIBLE PRICE VOLATILITY OF TECONS
Prior to this offering, there has been no public market for the TECONS. There
can be no assurance that an active trading market for the TECONS will develop or
be sustained. If such a market were to develop, the TECONS could trade at prices
that may be higher or lower than their initial offering price depending upon
many factors, including prevailing interest rates, the Company's operating
results, the price of the Wendy's Common Stock and the markets for similar
securities.
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THE COMPANY
Wendy's is the third largest quick-service restaurant chain in the world
featuring hamburgers. As of June 30, 1996, there were 4,778 Wendy's restaurants
open worldwide, of which 4,276 were located in the U.S. and 502 in 33 other
countries. Of the total restaurants, 3,457 were franchised and the remainder
were Company operated. Each Wendy's restaurant offers a relatively standard menu
featuring the Company's core products of hamburgers and chicken breast
sandwiches prepared according to customer specifications and salads in either a
prepared or salad bar format. Wendy's menu also includes chili, baked and french
fried potatoes, chicken nuggets, desserts, soft drinks and children's meals. In
addition, Wendy's restaurants sell a variety of promotional and test products on
a limited basis, and a breakfast menu is available at certain Wendy's
restaurants during the morning hours. Wendy's systemwide sales have grown from
$3.2 billion in 1991 to $4.5 billion in 1995.
In December 1995, Wendy's acquired Tim Hortons and related assets in a
transaction accounted for as a pooling of interests. Tim Hortons is the second
largest restaurant chain in Canada, with 1,277 units as of June 30, 1996, and it
is the largest chain specializing in coffee and fresh baked goods including
donuts, bagels, muffins, croissants and cookies as well as sandwiches and soups.
Tim Hortons leads the coffee and donut segment in Canada with a 46.6% share of
traffic. And, among all categories of quick-service restaurants in Canada, Tim
Hortons holds the second largest share of customer traffic. Tim Hortons
franchises the majority of its restaurants and it locates, develops and leases
restaurants to franchisees. In addition, Tim Hortons operates six warehouses
that sell and distribute dry goods to all of its restaurants. Tim Hortons' three
primary sources of operating income are from royalties and rents paid by
franchisees and from warehouse operations. Tim Hortons' systemwide sales have
grown from $308 million in 1991 to $541 million in 1995.
Management believes that Tim Hortons is an excellent complement to Wendy's
because consumers perceive both restaurant chains as delivering outstanding
quality, fresh food and good service. Although consumer perceptions are similar,
the Company believes that customers use these restaurants differently, and that
both core businesses can grow through crossmarketing and combination
restaurants. Tim Hortons operates primarily in the snack and breakfast day
parts, whereas approximately 74% of Wendy's sales occur during lunch and dinner.
THREE MAJOR PLATFORMS FOR GROWTH
In recent years, the Company has taken steps to broaden its base and to generate
growth in three separate areas. First, the Company has focused on expanding its
domestic Wendy's restaurant operations. Second, the Company has invested in
infrastructure and experienced management to accelerate the expansion of its
international Wendy's restaurant operations. Third, the Company acquired the
rapidly growing Tim Hortons chain in Canada and intends to continue expanding
its business both in Canada and the U.S.
Overall, the Company believes that its quality leadership positions and
conservative capitalization provide an effective platform to enable Wendy's to
realize its significant growth opportunities.
WENDY'S AND TIM HORTONS DOMESTIC AND INTERNATIONAL GROWTH
NEW STORES OPENED FROM JANUARY 1, 1991 TO JUNE 30, 1996
<TABLE>
<CAPTION>
------------------------------------------------------
JUNE 30,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Wendy's domestic new restaurants:
Company........................................... 33 71 77 72 81 32
Franchised........................................ 66 105 131 176 182 62
Wendy's international new restaurants:
Company........................................... 1 3 2 4 17 5
Franchised........................................ 47 56 41 46 53 38
Tim Hortons new units(1)............................ 52 82 93 222 273 84
</TABLE>
(1) Includes restaurants, kiosks and carts.
Wendy's Domestic Operations
The Company has adhered to a consistent business strategy emphasizing its
leadership positions in food quality, restaurant atmosphere and menu variety,
while enhancing its convenience and value perception. Evidence of Wendy's
success is found in a survey conducted by Restaurant & Institutions magazine,
which named Wendy's America's "Favorite" hamburger chain 15 out of the last 16
years.
The Company's objectives are to exceed expectations every time a customer visits
one of its restaurants and to build and maintain its strong brand equity. The
Company exceeds customer expectations by focusing on fast, accurate and friendly
customer service and by maintaining clean and renovated facilities. The
Company's extensive crew and management training, incentive compensation and
award programs increase employee retention rates and experience levels while
enhancing attention to customer satisfaction. In addition, the Company's
restaurants are typically remodeled every five years.
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To further enhance customer service, Wendy's has, for the past two years, built
restaurants with two pick-up windows and multiple registers on the front counter
to speed service. The Company is currently retrofitting many older restaurants
by adding a second pick-up window and/or converting the front counter to include
multiple registers. The Company plans where practical to complete its retrofit
of older units by the end of 1996. As of the end of the second quarter of 1996,
approximately 655 of Wendy's 1,205 company-operated domestic restaurants
currently have a second drive-through window and/or multiple registers. In
addition, Wendy's pioneered "WenViewTM," a digital readout menu board at the
drive-through that enables customers to see their orders as they are recorded by
the register operator, improving order accuracy.
The Company believes it has an excellent relationship with its franchisees,
relative to other restaurant chains, which contributes to a uniform application
of its strategies and helps to attract strong candidates to become new
franchisees.
Marketing and New Product Introductions -- Wendy's employs a two-pronged
marketing strategy that focuses on strengthening the Wendy's brand while
simultaneously widening the association of value with Wendy's. The first part of
the strategy is addressed with advertising on national TV and with an array of
high-quality core products such as hamburgers, chicken breast sandwiches, salads
and promotional sandwiches based on existing hamburger and chicken products.
Examples of these products are the Smoky Bacon Cheeseburger and the Monterey
Ranch Chicken Sandwich. These unique offerings may appear on the menu three to
five times per year, supplemented by national television advertising and
successful items may be added to the standard menu. Wendy's has recently
announced the test of a new "Stuffed Pita" product. It is currently offered in
four variations (Classic Greek, Chicken Ranch, Chicken Caesar, and Veggie) in 11
test markets. Preliminary results have shown that the product increases
transactions and average check size and improves operating margins. The second
part of the marketing strategy is addressed by offering menu items that provide
every day value, such as the Super Value Menu, Combo Meals and the Kids' Meal.
The Company has consistently avoided discounting.
Wendy's Senior Chairman and Founder, R. David Thomas, has been its advertising
spokesman for seven consecutive years. The effectiveness of this advertising has
allowed Wendy's to achieve very high awareness despite being heavily outspent by
its two largest competitors. Approximately 91% of people polled recognize Mr.
Thomas as Wendy's founder.
New Unit Development -- In addition to increasing net sales at existing stores,
the Company grows by building new Wendy's restaurants in the U.S. The goal is to
increase market penetration and make Wendy's restaurants more convenient for
customers. In the U.S., there is one Wendy's restaurant for approximately every
56,000 people. The Company's largest competitor has one traditional restaurant
for approximately every 23,000 people. The Company expects to open or have under
construction a total of 325 new domestic Wendy's restaurants in 1996. In
addition to constructing new units, the Company utilizes a variety of
alternatives to grow its domestic Wendy's operations including:
- - Purchase and Development of Competitive Sites -- The Company believes it has
significant opportunities to purchase and remodel sites formerly operated by
competitive restaurant chains. These purchases provide the Company with an
opportunity to quickly achieve significant market presence or to further
penetrate an existing Wendy's market. In the first quarter of 1996, Wendy's
purchased 40 Roy Rogers outlets in the New York metropolitan area for $17.8
million. The Company expects to convert approximately 25 of these outlets into
Wendy's restaurants by year-end 1996.
- - Development of Special Sites -- In addition to more traditional sites, the
Company has been increasingly focused on developing special sites in which
restaurants are operated in conjunction with another business such as a
hospital, university student union, gas station, travel center or airport.
Management expects to have approximately 75 of these non-traditional units
open or under construction during 1996.
- - Purchase and Sale of Wendy's Restaurants -- An integral part of the Company's
long-term strategy is its "Simultaneous Equation" program, whereby restaurants
are regularly purchased from and sold to franchisees. This program provides
Company management with the flexibility to accomplish a number of important
objectives concerning the management of its franchise organization. For
example, the growth strategy of proven multi-unit operators seeking to expand
a restaurant base can be supported by selling units to new or existing
franchisees, or the Company may from time to time purchase ailing franchisee
stores and improve operating results with renovations and operational
improvements. The "Simultaneous Equation" program has consistently generated
net gains and positive cash flows for the Company.
International Wendy's Restaurants
The Company believes it has significant opportunities to develop Wendy's
restaurants outside of the U.S. As of June 30, 1996, Wendy's had 502
international restaurants open and expects to have a total of approximately 150
new international restaurants open or placed under construction during 1996. The
Company's international Wendy's restaurants feature the same core products as do
domestic restaurants, although products vary occasionally to accommodate local
tastes. Canada represents the largest number of Wendy's locations outside the
U.S., with more than 200 restaurants. The Canadian business strategies are
similar to those in the U.S., although
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adapted to local preferences and operational circumstances. The Company believes
that the acquisition of Tim Hortons will enhance its ability to further expand
in Canada by leveraging franchisee relationships and real estate sites. See
"-- Tim Hortons."
Growth Beyond Canada in Key Markets -- An integral part of Wendy's international
expansion strategy is to develop with existing strong local franchisees or
partners. In addition to pursuing development through these franchisees and
partners, the Company intends to grow in countries deemed to have a larger
opportunity for Wendy's because of factors such as higher per capita income,
larger populations, and lower political risk. Wendy's has its largest presence
outside of North America in the Pacific Rim countries, where it had 184
restaurants at the end of the second quarter of 1996. Most of the unit growth in
this area will come through franchisees in countries, such as Japan, Indonesia,
Hong Kong and the Philippines (59, 25, 8, and 33 restaurants, respectively, at
the end of the second quarter of 1996). In Latin America, Wendy's expects its
growth to come from its current base of franchisees in Caribbean and Central
American countries. The Company also recently entered into a joint venture in
Argentina that will convert existing restaurants as well as developing new
restaurants. In Europe, growth will come from the development of new company and
franchised stores in the United Kingdom and Ireland. The Company expects to have
opened or placed under construction approximately 100 new international
restaurants (excluding Canada) by the end of 1996.
Infrastructure for Growth is in Place -- Wendy's believes it is well positioned
for international expansion as a result of the infrastructure it has developed
to support its non-U.S. growth plans. Wendy's began to invest in infrastructure
and management to accelerate international development in 1993 and subsequently
opened regional offices to support growth anticipated in Europe, Asia, South
America and the Pacific Rim.
Tim Hortons
Tim Hortons' overall strategy in Canada is to continue leveraging its excellent
brand name and high-quality products as it expands. The variety of Tim Hortons'
units, including full-service restaurants with kitchens, satellite and
drive-through only restaurants without kitchens, kiosks and carts, provides
flexibility to expand in a variety of directions. The Company believes it has
significant opportunities to develop new Tim Hortons units in its principal
markets of Atlantic Canada and Ontario. In addition, the Company believes there
are significant growth opportunities for Tim Hortons in provinces such as
British Columbia and Quebec where Tim Hortons is relatively under penetrated.
Tim Hortons had 1,197 units open at the end of 1995 and expects to have 275 new
Tim Hortons restaurants open or under construction by the end of 1996. Longer
term, Tim Hortons expects to be operating 2,000 units by the year 2000. Future
development could include the sale of Tim Hortons products through Wendy's
restaurants. At present, this approach is being tested in five Wendy's in
Canada, where Tim Hortons kiosks offer coffee and a limited selection of baked
goods.
In the 1960s, Tim Hortons offered consumers just coffee and donuts. Both of
those items continue to be staples of the menu although Tim Hortons has added a
wide variety of high-quality items such as pies, cakes, muffins, soups,
sandwiches and, most recently, bagels.
Development of Combination Units -- The Company continues to develop Wendy's-Tim
Hortons combination units that feature separate kitchens but a shared dining
room, restroom facilities and parking lot. As of June 30, 1996, there were 32
combination units open in Canada and one in the U.S. The Company recognizes
economies of scale with its combination units because the per unit investment is
less than building separate Wendy's and Tim Hortons units. In addition, the
combination of two strong brands in one location is expected to be a strong
attraction for consumers in Canada and the U.S.
Tim Hortons in the U.S. -- The Company intends to explore the sale of Tim
Hortons products in the U.S. It currently has a presence in Buffalo, New York,
and is pursuing development in several markets, including Detroit, Michigan and
Columbus, Ohio, to establish viability of the concept.
S-16
<PAGE> 17
USE OF PROCEEDS
Wendy's Financing will invest the proceeds from the sale of the TECONS offered
hereby in the Convertible Debentures of Wendy's issued under the Subordinated
Indenture. After paying the Underwriters' compensation and other expenses
associated with this offering, Wendy's will use the net proceeds of
approximately $195.1 million for general corporate purposes, including the
acquisition and/or development of restaurants.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Wendy's Common Stock is traded on the New York Stock Exchange and on the
Boston, Cincinnati, Midwest, Pacific and Philadelphia Stock Exchanges under the
symbol "WEN." Options in Wendy's Common Stock are traded on the Pacific Stock
Exchange. The following table sets forth, on a per share basis for the periods
shown, the range of high and low reported sales prices of Wendy's Common Stock
on the New York Stock Exchange. Wendy's quarterly dividend during each of the
periods presented below was $.06 per share. Through August 26, 1996, Wendy's had
paid 73 consecutive quarterly dividends.
<TABLE>
<CAPTION>
-------------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal year ended January 1, 1995:
First Quarter..................................................................... $18.38 $16.25
Second Quarter.................................................................... 18.50 15.50
Third Quarter..................................................................... 16.50 14.00
Fourth Quarter.................................................................... 15.75 13.25
Fiscal year ended December 31, 1995:
First Quarter..................................................................... $17.63 $14.38
Second Quarter.................................................................... 18.88 16.00
Third Quarter..................................................................... 22.75 17.00
Fourth Quarter.................................................................... 22.25 19.25
Fiscal year ending December 29, 1996:
First Quarter..................................................................... $22.50 $17.13
Second Quarter.................................................................... 20.00 16.75
Third Quarter (through September 16, 1996)........................................ 22.25 16.75
</TABLE>
On September 16, 1996, the last reported sale price of Wendy's Common Stock on
the New York Stock Exchange was $21.13 per share.
S-17
<PAGE> 18
CAPITALIZATION
The following table sets forth the cash and cash equivalents, current portion of
long-term obligations and consolidated capitalization of the Company at June 30,
1996, and as adjusted to give effect to the sale of the TECONS offered hereby
and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
--------------------------
AT JUNE 30, 1996
--------------------------
Dollars in thousands ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS..................................................... $ 80,163 $ 275,263
========== ===========
CURRENT PORTION OF LONG-TERM OBLIGATIONS...................................... $ 6,202 $ 6,202
========== ===========
LONG-TERM OBLIGATIONS:
Term debt................................................................... $ 4,179 $ 4,179
6.35% Notes due December 15, 2005........................................... 96,387 96,387
7.00% Debentures due December 15, 2025...................................... 96,447 96,447
Capital leases.............................................................. 36,961 36,961
---------- -----------
Total long-term obligations.............................................. 233,974 233,974
---------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF WENDY'S
FINANCING I................................................................. -- 200,000
SHAREHOLDERS' EQUITY:
Preferred shares, authorized:
250,000 shares; issued: none............................................. -- --
Common shares, $.10 stated value;
authorized: 200,000,000 shares;
issued: 112,471,000 shares(1)............................................ 11,247 11,247
Capital in excess of stated value........................................... 302,160 297,260
Unrealized loss on investments.............................................. (1,452) (1,452)
Retained earnings........................................................... 668,125 668,125
Translation adjustments..................................................... (2,507) (2,507)
Pension liability adjustment................................................ -- --
---------- -----------
977,573 972,673
Treasury stock at cost: 129,000 shares...................................... (1,712) (1,712)
---------- -----------
Total shareholders' equity............................................... 975,861 970,961
---------- -----------
Total capitalization................................................ $1,209,835 $ 1,404,935
========== ===========
</TABLE>
(1) Does not include 16,450,000 shares of Wendy's Common Stock issuable upon
conversion of exchangeable shares of a subsidiary of the Company issued in
connection with the acquisition of Tim Hortons. At June 30, 1996, the total
number of outstanding shares was 128,792,000.
S-18
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected historical consolidated financial
information of the Company for each of the past five fiscal years. The selected
historical consolidated financial information for the 1991 through 1995 fiscal
years has been derived from the Company's audited financial statements. The
information for the six months ended June 30, 1996 and July 2, 1995 is derived
from unaudited consolidated financial statements, which are incorporated herein
by reference. Such unaudited consolidated financial statements have been
prepared on the same basis as the Company's audited financial statements, and
the Company believes that such unaudited consolidated financial statements
contain all adjustments necessary for a fair presentation of the financial
information presented (consisting only of normal, recurring adjustments except
as explained in note 3 to the Company's consolidated financial statements set
forth in its Form 10-Q for the fiscal quarter ended June 30, 1996). Interim
results are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
SIX MONTHS ENDED
Dollars in millions, except per -------------------
share data JUNE 30, JULY 2,
and as indicated 1996 1995 1995 1994 1993 1992(1) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Retail sales..................... $ 749.5 $ 713.5 $1,461.9 $1,365.7 $1,288.5 $1,207.0 $1,038.6
Franchise revenues............... 152.3 121.9 284.4 225.9 193.9 174.0 148.0
-------- -------- -------- -------- -------- -------- --------
Total revenues................. 901.8 835.4 1,746.3 1,591.6 1,482.4 1,381.0 1,186.6
-------- -------- -------- -------- -------- -------- --------
Cost of sales.................... 469.0 432.2 890.4 817.5 772.8 723.1 618.0
Company restaurant operating
costs.......................... 184.2 171.8 351.1 332.9 322.2 310.3 278.1
Operating costs.................. 24.7 27.4 60.2 52.5 44.2 37.9 31.7
General and administrative
expenses....................... 64.8 66.1 136.4 120.6 113.0 106.4 88.1
Depreciation and amortization of
property and equipment......... 43.6 39.0 80.6 74.5 71.1 66.7 60.3
Other expenses (income).......... (.6) -- 2.6 1.2 4.2 .4 (1.2)
Special charges(2)............... -- 16.2 49.7 28.9 23.3 17.7 17.8
Interest, net.................... 4.3 5.8 10.2 13.2 13.4 14.7 14.9
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses....... 790.0 758.5 1,581.2 1,441.3 1,364.2 1,277.2 1,107.7
-------- -------- -------- -------- -------- -------- --------
Income before income taxes....... 111.8 76.9 165.1 150.3 118.2 103.8 78.9
Income taxes..................... 43.0 21.2 55.0 52.9 37.7 37.3 27.0
-------- -------- -------- -------- -------- -------- --------
Net income....................... $ 68.8 $ 55.7 $ 110.1 $ 97.4 $ 80.5 $ 66.5 $ 51.9
======== ======== ======== ======== ======== ======== ========
Pro forma adjustment for profit
sharing expense(3)............. -- 8.9 16.3 16.1 12.9 9.8 9.9
-------- -------- -------- -------- -------- -------- --------
Pro forma net income(4).......... $ 68.8 $ 64.6 $ 126.4 $ 113.5 $ 93.4 $ 76.3 $ 61.8
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Net income -- fully diluted...... $ .53 $ .45 $ .88 $ .79 $ .67 $ .56 $ .45
Pro forma -- fully
diluted(4).................. .53 .52 1.01 .92 .77 .64 .53
Dividends........................ .12 .12 .24 .24 .24 .24 .24
BALANCE SHEET DATA (END OF
PERIOD):
Total assets..................... $1,464.6 NA(5) $1,509.2 $1,214.8 $1,100.3 $1,013.4 $ 965.9
Long-term obligations............ 234.0 NA(5) 337.2 144.9 200.6 233.7 239.6
Shareholders' equity............. 975.9 NA(5) 818.8 701.9 623.8 552.9 504.2
Fully diluted shares (in
thousands)..................... 131,188 129,371 130,230 128,718 127,595 126,100 115,958
</TABLE>
S-19
<PAGE> 20
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Dollars in millions, except per SIX MONTHS ENDED
share data JUNE 30, JULY 2,
and as indicated 1996 1995 1995 1994 1993 1992(1) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RESTAURANT DATA:
Systemwide sales:
Wendy's........................ $2,276.7 $2,209.9 $4,494.8 $4,227.2 $3,924.1 $3,612.9 $3,223.6
Tim Hortons.................... 300.1 249.2 541.3 440.4 377.4 340.5 308.1
Total stores at period end:
Domestic Wendy's, company...... 1,205 1,185 1,200 1,168 1,132 1,117 1,080
Domestic Wendy's, franchised... 3,071 2,892 2,997 2,826 2,657 2,490 2,408
International Wendy's,
company..................... 116 98 111 96 92 91 82
International Wendy's,
franchised.................. 386 328 359 321 287 264 234
-------- -------- -------- -------- -------- -------- --------
Total Wendy's............... 4,778 4,503 4,667 4,411 4,168 3,962 3,804
-------- -------- -------- -------- -------- -------- --------
Total Tim Hortons.............. 1,277 1,047 1,197 943 721 628 546
-------- -------- -------- -------- -------- -------- --------
Avg. sales per Wendy's domestic
restaurant
(in thousands):
Company........................ $ 502 $ 506 $ 1,014 $ 1,001 $ 978 $ 924 $ 874
Franchised..................... 471 489 974 982 960 907 843
Total domestic................. 480 494 986 988 966 912 852
</TABLE>
(1) Fiscal year 1992 includes 53 weeks.
(2) See Note 1 to the Company's consolidated financial statements for the fiscal
year ended December 31, 1995, which are incorporated herein by reference.
(3) Pro forma adjustment for profit sharing is net of income taxes of $0, $7.3,
$13.3, $12.9, $10.3, $7.9 and $7.9 for the six months ended June 30, 1996
and July 2, 1995, and for the years ended December 31, 1995, January 1,
1995, January 2, 1994, January 3, 1993 and December 29, 1991, respectively.
(4) Gives effect to the add back of profit sharing expense to an officer of Tim
Hortons. Had pro forma net income and pro forma net income per share for the
1995 fiscal year been computed without regard to the additional special
charges, including legal, accounting and other professional fees, reserves
provided for various contingencies and costs related to organizing Canadian
operations to blend the Wendy's and Tim Hortons concepts, as discussed in
Note 1 to the Company's consolidated financial statements for the fiscal
year ended December 31, 1995, which are incorporated herein by reference,
pro forma net income and pro forma net income per share for such year would
have been $141.7 million and $1.12, respectively.
(5) Balance sheet information as of July 2, 1995 was not required to be reported
as restated for the Tim Hortons acquisition and is therefore unavailable.
S-20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS
ENDED JULY 2, 1995
The Company recorded net income of $49.3 million for the second quarter ended
June 30, 1996, versus $40.0 million for the second quarter ended July 2, 1995.
Net income for the year-to-date period was $68.8 million for 1996 compared with
$55.7 million for 1995. The 1995 results included an after-tax non-recurring
charge of $5.1 million ($.04 per share), and $8.9 million ($.07 per share) for
the second quarter and year-to-date, respectively. This charge represents the
profit sharing distribution of Tim Hortons income (see "-- Special Charges"
below).
Retail Sales
Retail sales increased 8.7% for the second quarter of 1996 compared with the
second quarter of 1995. This was primarily a result of an increase in
restaurants open, and a 2.2% increase in average domestic Wendy's net sales.
Year-to-date retail sales increased $36.0 million in 1996 compared with 1995
reflecting additional domestic and international restaurants open offset by a
.8% decrease in average Wendy's domestic net sales. Retail sales also increased
in both the quarter and year-to-date periods due to increased warehouse sales
for Tim Hortons which reflect the growth of franchise restaurants, as well as
increased average store sales. Selling prices increased .5% for Wendy's
company-operated domestic restaurants during the current year.
The improvement in average domestic net sales was a result of the value menu
strategy, such as the five-piece Chicken Nuggets, the addition of the Spicy
Chicken sandwich to the permanent menu, solid restaurant operations and
effective marketing campaigns. Additionally, average sales improved due to the
impact of two markets purchased with average sales substantially above the
company average.
Average net sales per domestic Wendy's restaurant for the quarters and
year-to-date periods ended June 30, 1996 and July 2, 1995 were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
SECOND QUARTER YEAR-TO-DATE
--------------------- INCREASE ---------------------
1996 1995 (DECREASE) 1996 1995 (DECREASE)
-------- -------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Company........................ $264,950 $259,150 2.2% $502,000 $505,900 (.8)%
Franchise...................... 248,700 251,950 (1.3) 470,700 488,600 (3.7)
Total Domestic............ 253,350 254,050 (.3) 479,600 493,600 (2.8)
</TABLE>
The number of systemwide restaurants open as of June 30, 1996 and July 2, 1995
was as follows:
<TABLE>
<CAPTION>
---------------
1996 1995
----- -----
<S> <C> <C>
Company................................................................................. 1,321 1,283
Franchise............................................................................... 3,457 3,220
----- -----
Total Wendy's...................................................................... 4,778 4,503
===== =====
Total Tim Hortons....................................................................... 1,277 1,047
===== =====
</TABLE>
Cost of Sales and Restaurant Operating Costs
The domestic company operating margin decreased in the second quarter 1996 to
14.5% versus 16.7% for 1995. The operating margin decreased to 12.9% for the
year-to-date 1996 versus 15.4% in 1995. Cost of sales reflected increases in
restaurant labor due to inflation in the restaurant labor wage rate. Food costs
for chicken and tomatoes in both the quarter and year-to-date periods increased.
Restaurant operating costs increased as a percent of retail sales in both the
second quarter and year-to-date periods due to average sales not being enough to
leverage most operating costs. Utilities, salaries and wages and rent were also
higher throughout the first half of the year.
Franchise Revenues
Royalties before reserve provisions increased $2.2 million and $3.0 million in
the second quarter and year-to-date 1996 periods, respectively, compared with
1995. This was primarily a result of an increase in franchise restaurants open,
partly offset by Wendy's franchise domestic average net sales being down 1.3%
and 3.7% in the quarter and year-to-date, respectively. There were no reserves
provided for the second quarter 1996 or for the year-to-date period. In 1995,
$2.4 million was provided for royalty reserves in the first quarter.
S-21
<PAGE> 22
Gains from franchising Wendy's restaurants increased $15.1 million and $18.6
million in the second quarter and year-to-date periods, respectively. Rental
income increased $3.4 million and $6.9 million in the second quarter and
year-to-date periods, respectively.
General and Administrative Expenses
General and administrative expenses for the second quarter of 1996 were 6.5% of
total revenues versus 7.4% in 1995. For year-to-date 1996, general and
administrative expenses were 7.2% versus 7.9% in 1995. The reduction reflects
reduced provisions for management bonuses, franchise reserve reversals and a
reduction in advertising costs for new product testing. Also, a reduction from
1995 is due to a charge for a Hortons retirement plan expense for which no
similar expense applies in 1996 and future years.
Special Charges
The special charges in 1995 represent the profit-sharing contributions made to
the sole shareholder of Hortons. As a result of the acquisition of Hortons by
Wendy's in December 1995, these charges no longer apply in 1996 or future years.
Income Taxes
Income taxes in the second quarter of 1995 reflect the benefit of a reduction in
the valuation allowance related to excess capital allowances and net operating
loss carryovers of a Canadian subsidiary of $6.6 million. As a result, income
taxes were 38.5% in the first half of 1996 versus 23.6% and 27.6% in the second
quarter and year-to-date 1995 periods, respectively.
FINANCIAL CONDITION
The Company's financial condition remains solid at the end of the second quarter
of 1996. The debt to equity and debt to total capitalization ratios were 24% and
19%, respectively, at June 30, 1996. These compare to a debt to equity ratio and
debt to total capitalization ratio of 41% and 29%, respectively, at fiscal
year-end 1995. Substantially all of the $100 million 7% convertible debentures
were converted to common stock in April 1996, which significantly improved the
debt to equity ratio. Year-to-date capital expenditures amounted to $131.6
million for 1996 compared to $91.9 million for 1995. The Company estimates that
capital expenditures will total approximately $290 million in 1996.
OUTLOOK
Competition in the quick-service restaurant industry has been intense and will
remain so in the foreseeable future. Pressure on retail sales is continuing in
1996. Emphasis continues to be on solid restaurant operations, new products,
effective marketing, new restaurant development and the overall financial health
of the entire system. The Company anticipates that as many as 750 new
restaurants will be opened or under construction systemwide (both company and
franchise) during 1996. Cash flow from operations, cash and investments on hand,
net proceeds of this offering, possible asset sales, and cash available through
existing revolving credit agreements should help provide for projected cash
requirements.
WENDY'S FINANCING I
Wendy's Financing is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement, dated as of August 8, 1996, as amended,
executed by Wendy's as depositor (the "Sponsor"), and the trustees of Wendy's
Financing (the "Wendy's Trustees") and (ii) the filing of a certificate of trust
with the Secretary of State of the State of Delaware on August 8, 1996. Such
trust agreement will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus are a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the TECONS, the purchasers thereof will own
all of the TECONS. See "Description of the TECONS -- Book-Entry Only
Issuance -- The Depository Trust Company." Wendy's will directly or indirectly
acquire all of the Trust Common Securities which will have an aggregate
liquidation amount equal to 1% of the total capital of Wendy's Financing.
Wendy's Financing exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the
Convertible Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Wendy's Trustees will initially be
five. Three of the Wendy's Trustees (the "Regular Trustees") will be persons who
are employees or officers of or who are affiliated with Wendy's. The fourth
trustee will be an institution that maintains its principal place of business in
the state of Delaware (the "Delaware Trustee"). Initially, First Chicago
Delaware Inc. will act as Delaware Trustee. The fifth trustee will be a
financial institution that is unaffiliated with Wendy's and will serve as
institutional trustee under the Declaration and as indenture trustee for the
purposes of compliance with the provisions of the Trust
S-22
<PAGE> 23
Indenture Act (the "Institutional Trustee"). Initially, NBD Bank, a Michigan
banking corporation, and an affiliate of the Delaware Trustee, will be the
Institutional Trustee until removed or replaced by the holder of the Trust
Common Securities. For the purpose of compliance with the provisions of the
Trust Indenture Act, NBD Bank will act as trustee (the "Guarantee Trustee")
under the Guarantee and as Subordinated Indenture Trustee (as defined in the
accompanying Prospectus) under the Subordinated Indenture. See "Description of
Trust Preferred Securities Guarantees" in the accompanying Prospectus and
"Description of the TECONS -- Voting Rights" herein.
The Institutional Trustee will hold title to the Convertible Debentures for the
benefit of the Trust and the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Subordinated Indenture as the holder of the Convertible
Debentures. In addition, the Institutional Trustee will maintain exclusive
control of a segregated non-interest bearing account (the "Property Account") to
hold all payments made in respect of the Convertible Debentures for the benefit
of the holders of the Trust Securities. The Institutional Trustee will make
payments of Distributions and payments on liquidation, redemption and otherwise
to the holders of the Trust Securities out of funds from the Property Account.
The Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the TECONS. Wendy's, as the direct or indirect holder of all the Trust Common
Securities, will have the right to appoint, remove or replace any Wendy's
Trustee and to increase or decrease the number of Wendy's Trustees. Wendy's will
pay all fees and expenses related to Wendy's Financing and the offering of the
Trust Securities. See "Description of the Convertible
Debentures -- Miscellaneous."
The rights of the holders of the TECONS, including economic rights, rights to
information and voting rights, are set forth in the Declaration, the Delaware
Business Trust Act (the "Trust Act") and the Trust Indenture Act. See
"Description of the TECONS."
DESCRIPTION OF THE TECONS
The TECONS will be issued pursuant to the terms of the Declaration. The
Declaration will be qualified as an indenture under the Trust Indenture Act. The
Institutional Trustee, NBD Bank, will act as indenture trustee for the TECONS
under the Declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the TECONS will include those stated in the
Declaration and those made part of the Declaration by the Trust Indenture Act.
The following summary of the material terms and provisions of the TECONS is
subject to, and qualified in its entirety by reference to, the Declaration, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus Supplement is a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the Trust
the Trust Securities, which represent undivided beneficial interests in the
assets of the Trust. All of the Trust Common Securities will be owned, directly
or indirectly, by Wendy's. The Trust Common Securities rank pari passu, and
payments will be made thereon on a pro rata basis, with the TECONS, except that
upon the occurrence and during the continuance of a Declaration Event of
Default, the rights of the holders of the Trust Common Securities to receive
payment of periodic Distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the TECONS. The
Declaration does not permit the issuance by the Trust of any securities other
than the Trust Securities or the incurrence of any indebtedness by the Trust.
Pursuant to the Declaration, the Institutional Trustee will hold the Convertible
Debentures purchased by the Trust for the benefit of the holders of the Trust
Securities. The payment of Distributions out of money held by the Trust, and
payments upon redemption of the TECONS or liquidation of the Trust, are
guaranteed by Wendy's to the extent described under "Description of Trust
Preferred Securities Guarantees" in the accompanying Prospectus. The Guarantee
will be held by NBD Bank, the Guarantee Trustee, for the benefit of the holders
of the TECONS. The Guarantee does not cover payment of Distributions when the
Trust does not have sufficient available funds to pay such Distributions. In
such event, the remedy of a holder of TECONS is to vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Convertible Debentures except in the limited circumstances in which the holder
may take Direct Action. See "-- Voting Rights" and "-- Declaration Events of
Default."
DISTRIBUTIONS
Distributions on the TECONS will be fixed at an annual rate of $2.50 per TECONS.
Distributions in arrears for more than one quarter will accrue interest thereon
at the Distribution rate, compounded quarterly. The term "Distribution" as used
herein includes any such interest payable unless otherwise stated. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
Distributions on the TECONS will be cumulative, will accumulate from September
20, 1996, and will be payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing December 15, 1996, when,
as and if available for payment. Distributions will be made by the Institutional
Trustee, except as otherwise described below.
S-23
<PAGE> 24
So long as Wendy's shall not be in default in the payment of interest on the
Convertible Debentures, Wendy's has the right under the Indenture to defer
payments of interest on the Convertible Debentures by extending the interest
payment period from time to time on the Convertible Debentures, which, if
exercised, would defer quarterly Distributions on the TECONS (though such
Distributions would continue to accumulate with interest thereon at the
Distribution rate, compounded quarterly, since interest would continue to accrue
on the Convertible Debentures) during any such Extension Period. Such right to
extend the interest payment period for the Convertible Debentures is limited to
a period not exceeding 20 consecutive quarters and such period may not extend
beyond the maturity of the Convertible Debentures. In the event that Wendy's
exercises this right, then (a) Wendy's shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Wendy's Common Stock in connection with
the satisfaction by Wendy's of its obligations under any employee benefits
plans, (ii) as a result of a reclassification of Wendy's capital stock or the
exchange or conversion of one class or series of Wendy's capital stock for
another class or series of Wendy's capital stock , (iii) the purchase of
fractional interests in shares of Wendy's capital stock pursuant to the
conversion or exchange provisions of such Wendy's capital stock or the security
being converted or exchanged or (iv) purchases or acquisitions of shares of
Wendy's Common Stock to be used in connection with acquisitions of Wendy's
Common Stock by shareholders pursuant to the Company's dividend reinvestment
plan), (b) Wendy's shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem, any debt securities issued by Wendy's
that rank pari passu with or junior to the Convertible Debentures and (c)
Wendy's shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Guarantee). Prior to the termination of any such
Extension Period, Wendy's may further extend the interest payment period;
provided, that such Extension Period, together with all such previous and
further extensions, may not exceed 20 consecutive quarters or extend beyond the
maturity of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, Wendy's may commence a new
Extension Period, subject to the above requirements. See "Description of the
Convertible Debentures -- Interest" and "-- Option to Extend Interest Payment
Period." If Distributions are deferred, the deferred Distributions and accrued
interest thereon shall be paid to holders of record of the TECONS as they appear
on the books and records of the Trust on the record date next following the
termination of such deferral period.
Distributions on the TECONS must be paid on the dates payable to the extent that
the Trust has funds available for the payment of such Distributions. The Trust's
funds available for Distribution to the holders of TECONS will be limited to
payments received from Wendy's on the Convertible Debentures. See "Description
of the Convertible Debentures." The payment of Distributions out of moneys held
by the Trust is guaranteed by Wendy's to the extent set forth under "Description
of Trust Preferred Securities Guarantees" in the accompanying Prospectus.
Distributions on the TECONS will be payable to the holders thereof as they
appear on the books and records of the Trust on the relevant record dates,
which, as long as the TECONS remain in book-entry only form, will be one
Business Day (as defined below) prior to the relevant payment dates. Such
Distributions will be paid through the Institutional Trustee who will hold
amounts received in respect of the Convertible Debentures for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment will be made as
described under "-- Book-Entry Only Issuance -- The Depository Trust Company"
below. In the event that the TECONS do not continue to remain in book-entry only
form, the relevant record dates for the TECONS shall conform to the rules of any
securities exchange on which the TECONS are listed and, if none, the Regular
Trustees shall have the right to select relevant record dates, which shall be
more than one Business Day prior to the relevant payment dates. In the event
that any date on which Distributions are to be made on the TECONS is not a
Business Day, then payment of the Distributions payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such record date. A "Business Day" means any day other than
Saturday, Sunday or any other day on which banking institutions in New York
City, Detroit, Michigan or Columbus, Ohio are permitted or required by any
applicable law to close.
CONVERSION RIGHTS
General.
The TECONS will be convertible at any time prior to the close of business on
September 15, 2026 (or in the case of TECONS called for redemption, prior to the
close of business on the Business Day prior to the Redemption Date) (the
"Conversion Expiration Date"), at the option of the holders thereof and in the
manner described below, into shares of Wendy's Common Stock at an initial
conversion rate of 1.8932 shares of Wendy's Common Stock for each TECONS
(equivalent to a conversion price of $26.41 per share of Wendy's Common Stock
(the "Initial Conversion Price")), subject to adjustment as described under
"-- Conversion Price Adjustments -- General" and "-- Conversion Price
Adjustments -- Fundamental Change" below. If a TECONS is surrendered for
conversion after the close of business on any regular record date for payment of
a Distribution and before the opening of business on the corresponding
Distribution payment date, then, notwithstanding such conversion, the
Distribution payable on such Distribution payment date will be
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paid in cash to the person in whose name the TECONS is registered at the close
of business on such record date, and (other than a TECONS or a portion of a
TECONS called for redemption on a redemption date occurring after such record
date and on or prior to such Distribution payment date) when so surrendered for
conversion, the TECONS must be accompanied by payment of an amount equal to the
Distribution payable on such Distribution payment date.
The terms of the TECONS provide that a holder of a TECONS wishing to exercise
its conversion right shall surrender such TECONS, together with an irrevocable
conversion notice, to the Institutional Trustee, as conversion agent (the
"Conversion Agent"), which shall, on behalf of such holder, exchange such TECONS
for a portion of the Convertible Debentures and immediately convert an
equivalent amount of Convertible Debentures into Wendy's Common Stock. Holders
may obtain copies of the required form of the conversion notice from the
Conversion Agent. So long as a book-entry system for the TECONS is in effect,
however, procedures for converting the TECONS into shares of Wendy's Common
Stock will differ, as described under "-- Book-Entry Only Issuance -- The
Depository Trust Company."
No fractional shares of Wendy's Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by Wendy's
in cash based on the current market price of Wendy's Common Stock on the date
such TECONS are surrendered for conversion.
Conversion Price Adjustments -- General.
The Initial Conversion Price is subject to adjustment (under formulae set forth
in the Subordinated Indenture) in certain events, including:
(i) the issuance of Wendy's Common Stock as a dividend or distribution on
Wendy's Common Stock;
(ii) certain subdivisions and combinations of Wendy's Common Stock;
(iii) the issuance to all holders of Wendy's Common Stock of certain rights
or warrants to purchase Wendy's Common Stock at less than the then
current market price;
(iv) the distribution to all holders of Wendy's Common Stock of (A) equity
securities of the Company (other than Wendy's Common Stock), (B)
evidences of indebtedness of the Company and/or (C) other assets
(including securities, but excluding (1) any rights or warrants
referred to in clause (iii) above, (2) any rights or warrants to
acquire any capital stock of any entity other than the Company or any
subsidiary of the Company, (3) any dividends or distributions in
connection with the liquidation, dissolution or winding-up of the
Company, (4) any dividends payable solely in cash that may from time
to time be fixed by the Board of Directors of the Company and (5) any
dividends or distributions referred to in clause (i) above);
(v) distributions to all holders of Wendy's Common Stock, consisting of
cash, excluding (a) any cash dividends on Wendy's Common Stock to the
extent that the aggregate cash dividends per share of Wendy's Common
Stock in any consecutive 12-month period do not exceed the greater of
(x) the amount per share of Wendy's Common Stock of the cash
dividends paid on Wendy's Common Stock in the immediately preceding
12-month period, to the extent that such dividends for the
immediately preceding 12-month period did not require an adjustment
of the conversion price pursuant to this clause (v) (as adjusted to
reflect subdivisions or combinations of Wendy's Common Stock), and
(y) 15% of the average of the daily Closing Price (as defined in the
Subordinated Indenture) of Wendy's Common Stock for the ten
consecutive Trading Days (as defined in the Subordinated Indenture)
immediately prior to the date of declaration of such dividend, and
(b) any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company or a redemption of any
rights issued under a rights agreement; provided, however, that no
adjustment shall be made pursuant to this clause (v) if such
distribution would otherwise constitute a Fundamental Change (as
defined below) and be reflected in a resulting adjustment described
below; and
(vi) payment in respect of a tender or exchange offer by the Company or
any subsidiary of the Company for Wendy's Common Stock to the extent
that the cash and value of any other consideration included in such
payment per share of Wendy's Common Stock exceed (by more than 10%,
with any smaller excess being disregarded in computing the adjustment
provided hereby) the first reported sale price per share of Wendy's
Common Stock on the Trading Day next succeeding the Expiration Time
(as defined in the Subordinated Indenture) for such tender or
exchange offer.
The Company has entered into a Rights Agreement (as amended, the "Rights
Agreement") between the Company and American Stock Transfer and Trust Company,
as Rights Agent. See "Description of the Capital Stock -- Shareholder Rights
Plan" in the accompanying Prospectus. In the event that the Rights (as defined
therein) are separated from the Wendy's Common Stock in accordance with the
provisions of the Rights Agreement, such that the holders of TECONS would
thereafter not be entitled to receive any such Rights in respect of the Wendy's
Common Stock issuable upon conversion of such TECONS, the conversion price of
the
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Convertible Debentures (and thus the conversion price of the TECONS) will be
adjusted so that the holders of the TECONS would be in the same relative
position after such separation as they would have been if they had converted
their TECONS immediately prior to such separation (subject to readjustment in
the event of the expiration, termination or redemption of the Rights). In lieu
of any such adjustment, the Company may amend the Rights Agreement to provide
that upon conversion of the TECONS the holders thereof will receive, in addition
to the Wendy's Common Stock issuable upon such conversion, the Rights which
would have attached to such shares of Wendy's Common Stock if the Rights had not
become separated from the Wendy's Common Stock pursuant to the provisions of the
Rights Agreement.
If any adjustment is required to be made as set forth in clause (v) above as a
result of a distribution which is a dividend described in subclause (a) of
clause (v) above, such adjustment would be based upon the amount by which such
distribution exceeds the amount of the dividend permitted to be excluded
pursuant to such subclause (a) of clause (v). If an adjustment is required to be
made as set forth in clause (v) above as a result of a distribution which is not
such a dividend, such adjustment would be based upon the full amount of such
distribution. If an adjustment is required to be made as set forth in clause
(vi) above, such adjustment would be calculated based upon the amount by which
the aggregate consideration paid for the Wendy's Common Stock acquired in the
tender or exchange offer exceeds 110% of the value of such shares based on the
first reported sale price of Wendy's Common Stock on the Trading Day next
succeeding the Expiration Time. In lieu of making such a conversion price
adjustment in the case of certain dividends or distributions, the Company may
provide that upon the conversion of the TECONS the holder converting such TECONS
will receive, in addition to the Wendy's Common Stock to which such holder is
entitled, the cash, securities or other property which such holder would have
received if such holder had, immediately prior to the record date for such
dividend or distribution, converted its TECONS into Wendy's Common Stock.
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least 1% in the conversion price then in effect;
provided, however, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
The Company from time to time may, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 Business Days (as
defined in the Subordinated Indenture), in which case the Company shall give at
least 15 days' notice of such reduction. In particular, the Company may, at its
option, make such reduction in the conversion price, in addition to those set
forth above, as the Company deems advisable to avoid or diminish any income tax
to holders of Wendy's Common Stock resulting from any dividend or distribution
of stock (or rights to acquire stock) or from any event treated as such for tax
purposes or for any other reasons. See "Certain Federal Tax
Consequences -- Adjustment of Conversion Price."
Conversion Price Adjustments -- Fundamental Change.
In the event that the Company shall be a party to any transaction or series of
transactions constituting a Fundamental Change, including, without limitation,
(i) any recapitalization or reclassification of Wendy's Common Stock (other than
a change in par value or as a result of a subdivision or combination of Wendy's
Common Stock); (ii) any consolidation or merger of the Company with or into
another corporation as a result of which holders of Wendy's Common Stock shall
be entitled to receive securities or other property or assets (including cash)
with respect to or in exchange for Wendy's Common Stock (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of the outstanding Wendy's Common Stock); (iii) any sale or
transfer of all or substantially all of the assets of the Company; or (iv) any
compulsory share exchange, pursuant to any of which holders of Wendy's Common
Stock shall be entitled to receive other securities, cash or other property,
then appropriate provision shall be made so that the holder of each TECONS then
outstanding shall have the right thereafter to convert such TECONS only into (x)
if any such transaction does not constitute a Common Stock Fundamental Change
(as defined below), the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Wendy's Common Stock issuable upon conversion
of such TECONS immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after, in the case of a
Non-Stock Fundamental Change (as defined below), giving effect to any adjustment
in the conversion price in accordance with clause (i) of the following
paragraph, and (y) if any such transaction constitutes a Common Stock
Fundamental Change, shares of common stock of the kind received by holders of
Wendy's Common Stock as a result of such Common Stock Fundamental Change in an
amount determined in accordance with clause (ii) of the following paragraph. The
company formed by such consolidation or resulting from such merger or which
acquires such assets or which acquires the Wendy's Common Stock, as the case may
be, shall enter into a supplemental indenture with the Debt Trustee,
satisfactory in form to the Debt Trustee and executed and delivered to the Debt
Trustee, the provisions of which shall establish such right. Such supplemental
indenture shall provide for adjustments which, for events subsequent to the
effective date of such supplemental indenture, shall be as nearly equivalent as
practical to the relevant adjustments provided for in the preceding paragraphs
and in this paragraph.
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Notwithstanding any other provision in the preceding paragraphs, if any
Fundamental Change occurs, the conversion price in effect will be adjusted
immediately after that Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
per share of Wendy's Common Stock immediately following such Non-Stock
Fundamental Change will be the lower of (A) the conversion price in
effect immediately prior to such Non-Stock Fundamental Change, but
after giving effect to any other prior adjustments effected pursuant
to the preceding paragraphs, and (B) the result obtained by
multiplying the greater of the Applicable Price (as defined below) or
the then applicable Reference Market Price (as defined below) by a
fraction of which the numerator will be 100 and the denominator of
which will be an amount based on the date such Non-Stock Fundamental
Change occurs. For the 12-month period beginning September 15, 1996,
the denominator will be 105.00, and the denominator will decrease by
0.50 during each successive 12-month period; provided, that the
denominator shall in no event be less than 100.0.
(ii) in the case of a Common Stock Fundamental Change, the conversion price
per share of Wendy's Common Stock immediately following the Common
Stock Fundamental Change will be the conversion price in effect
immediately prior to the Common Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, multiplied by a fraction, the numerator of which
is the Purchaser Stock Price (as defined below) and the denominator of
which is the Applicable Price; provided, however, that in the event of
a Common Stock Fundamental Change in which (A) 100% of the value of
the consideration received by a holder of Wendy's Common Stock
(subject to certain limited exceptions) is shares of common stock of
the successor, acquiror or other third party (and cash, if any, paid
with respect to any fractional interests in the shares of common stock
resulting from the Common Stock Fundamental Change) and (B) all of the
Wendy's Common Stock (subject to certain limited exceptions) shall
have been exchanged for, converted into, or acquired for, shares of
common stock (and cash, if any, with respect to fractional interests)
of the successor, acquiror or other third party, the conversion price
per share of Wendy's Common Stock immediately following the Common
Stock Fundamental Change shall be the conversion price in effect
immediately prior to the Common Stock Fundamental Change divided by
the number of shares of common stock of the successor, acquiror, or
other third party received by a holder of one share of Wendy's Common
Stock as a result of the Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in "Fundamental Change"
transactions where all or substantially all of the Wendy's Common Stock is
converted into securities, cash, or property and not more than 50% of the value
received by the holders of Wendy's Common Stock consists of stock listed or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market of the Nasdaq Stock Market,
Inc. (a "Non-Stock Fundamental Change," as defined herein), to increase the
securities, cash or property into which each TECONS is convertible.
In a Non-Stock Fundamental Change transaction where the initial value received
per share of Wendy's Common Stock (measured as described in the definition of
Applicable Price below) is lower than the then applicable conversion price of
the TECONS but greater than or equal to the Reference Market Price (as defined
herein), the conversion price will be adjusted as described above with the
effect that each TECONS will be convertible into securities, cash or property of
the same type received by the holders of Wendy's Common Stock in such
transaction but in an amount per TECONS equal to the amount indicated as the
denominator as of the date of such transaction as set forth in clause (i) above
with respect to conversion prices for Non-Stock Fundamental Changes.
In a Non-Stock Fundamental Change transaction where the initial value received
per share of Wendy's Common Stock (measured as described in the definition of
Applicable Price below) is lower than both the conversion price of a TECONS and
the Reference Market Price, the conversion price will be adjusted as described
above but calculated as though such initial value had been the Reference Market
Price.
In a Fundamental Change transaction where all or substantially all the Wendy's
Common Stock is converted into securities, cash, or property and more than 50%
of the value received by the holders of Wendy's Common Stock (subject to certain
limited exceptions) consists of listed or Nasdaq National Market traded common
stock (a "Common Stock Fundamental Change," as defined herein), the foregoing
adjustments are designed to provide in effect that (a) where Wendy's Common
Stock is converted partly into such common stock and partly into other
securities, cash, or property, each TECONS will be convertible solely into a
number of shares of such common stock determined so that the initial value of
such shares (measured as described in the definition of Purchaser Stock Price
below) equals the value of the shares of Wendy's Common Stock into which such
TECONS was convertible immediately before the transaction (measured as
aforesaid) and (b) where Wendy's Common Stock is converted solely into such
common stock, each TECONS will be convertible into the same number of shares of
such common stock receivable by a holder of the number of shares of Wendy's
Common Stock into which such TECONS was convertible immediately before such
transaction.
In determining the amount and type of consideration received by a holder of
Wendy's Common Stock in the event of a Fundamental Change, consideration
received by a holder of Wendy's Common Stock pursuant to a statutory right of
appraisal will be disregarded.
"Applicable Price" means (i) in the event of a Non-Stock Fundamental Change in
which the holders of Wendy's Common Stock receive only cash, the amount of cash
receivable by a holder of one share of Wendy's Common Stock and (ii) in the
event of any other
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Fundamental Change, the average of the Closing Prices (as defined in the
Subordinated Indenture) for one share of Wendy's Common Stock during the ten
Trading Days immediately prior to the record date for the determination of the
holders of Wendy's Common Stock entitled to receive cash, securities, property
or other assets in connection with such Fundamental Change or, if there is no
such record date, prior to the date on which the holders of the Wendy's Common
Stock will have the right to receive such cash, securities, property or other
assets.
"Common Stock Fundamental Change" means any Fundamental Change in which more
than 50% of the value (as determined in good faith by the Company's Board of
Directors) of the consideration received by holders of Wendy's Common Stock
(subject to certain limited exceptions) pursuant to such transaction consists of
shares of common stock that, for the ten consecutive Trading Days immediately
prior to such Fundamental Change has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the Nasdaq National Market, provided however, that a Fundamental
Change will not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding TECONS continue to exist as outstanding TECONS, or (ii) the
outstanding TECONS continue to exist as TECONS and are convertible into shares
of common stock of the successor to the Company.
"Fundamental Change" means the occurrence of any transaction or event or series
of transactions or events pursuant to which all or substantially all of the
Wendy's Common Stock is exchanged for, converted into, acquired for or
constitutes solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change will be deemed to have occurred when substantially all
of the Wendy's Common Stock has been exchanged for, converted into, or acquired
for or constitutes solely the right to receive cash, securities, property or
other assets but the adjustment shall be based upon the consideration that the
holders of Wendy's Common Stock received in the transaction or event as a result
of which more than 50% of the Wendy's Common Stock shall have been exchanged
for, converted into, or acquired for, or shall constitute solely the right to
receive such cash, securities, properties or other assets.
"Non-Stock Fundamental Change" means any Fundamental Change other than a Common
Stock Fundamental Change.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the average of the Closing Prices for one share of common stock received
by holders of Wendy's Common Stock in such Common Stock Fundamental Change
during the ten Trading Days immediately prior to the record date for the
determination of the holders of Wendy's Common Stock entitled to receive such
shares of common stock or, if there is no such record date, prior to the date
upon which the holders of Wendy's Common Stock shall have the right to receive
such shares of common stock.
"Reference Market Price" will initially mean $14.08 (which unless otherwise
specified in this Prospectus Supplement or the accompanying Prospectus will be
66 2/3% of the last reported sale price per share of Wendy's Common Stock on the
New York Stock Exchange on September 16, 1996) and, in the event of any
adjustment to the conversion price other than as a result of a Fundamental
Change, the Reference Market Price will also be adjusted so that the ratio of
the Reference Market Price to the conversion price after giving effect to any
adjustment will always be the same as the ratio of the initial Reference Market
Price to the Initial Conversion Price of the TECONS.
Conversions of the TECONS may be effected by delivering them to the office or
agency of the Company maintained for such purpose in the Borough of Manhattan,
The City of New York.
Conversion price adjustments may, in certain circumstances, result in
constructive distributions that could be taxable as dividends under the Internal
Revenue Code of 1986, as amended (the "Code"), to holders of TECONS or to
holders of Wendy's Common Stock issued upon conversion thereof. See "Certain
Federal Tax Consequences -- Adjustment of Conversion Price."
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least 1% in the conversion price then in effect;
provided, however, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
MANDATORY REDEMPTION
The Convertible Debentures will mature on September 15, 2026, and may be
redeemed, in whole or in part, at any time on or after September 17, 2000, or at
any time in certain circumstances upon the occurrence of a Special Event. Upon
the repayment of the Convertible Debentures, whether at maturity or upon
redemption, the proceeds from such repayment or payment shall simultaneously be
applied to redeem Trust Securities having an aggregate liquidation amount equal
to the aggregate principal amount of the Convertible Debentures so repaid or
redeemed at the appropriate Redemption Price; provided, that holders of Trust
Securities shall be given not less than 30 nor more than 60 days notice of such
redemption. See "Description of the Convertible Debentures --
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Redemption at the Option of Wendy's." In the event that fewer than all of the
outstanding TECONS are to be redeemed, the TECONS will be redeemed pro rata as
described under "Book-Entry Only Issuance -- The Depository Trust Company"
below.
SPECIAL EVENT DISTRIBUTION; TAX EVENT REDEMPTION
"Tax Event" means that each of the Wendy's Trustees shall have received an
opinion of a nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that on or after the date of
the Prospectus Supplement, as a result of (a) any amendment to, clarification
of, or change (including any announced prospective change) in the laws, or any
regulations thereunder, of the U.S. or any political subdivision or taxing
authority thereof or therein, (b) any judicial decision, official administrative
pronouncement, ruling, regulatory procedure, notice or announcement, including
any notice or announcement of intent to adopt such procedures or regulations (an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in the official position or the interpretation of such Administrative Action or
judicial decision that differs from the theretofore generally accepted position,
in each case, by any legislative body, court, governmental authority or
regulatory body, irrespective of the manner in which such amendment,
clarification or change is made known, which amendment, clarification, or change
is effective or such pronouncement or decision is announced, in each case, on or
after, the date of this Prospectus Supplement, there is the creation by such
change in tax law of more than an insubstantial risk that (i) the Trust is or
will be subject to U.S. federal income tax with respect to income accrued or
received on the Convertible Debentures, (ii) the Trust is, or will be, subject
to more than a de minimis amount of taxes, duties or other governmental charges,
or (iii) interest paid in cash by Wendy's to the Trust on the Convertible
Debentures is not, or will not be, deductible, in whole or in part, by Wendy's
for U.S. federal income tax purposes. Notwithstanding the foregoing, a Tax Event
shall not include any change in tax law that requires Wendy's for U.S. federal
income tax purposes to defer taking a deduction for any original issue discount
("OID") that accrues with respect to the Convertible Debentures until the
interest payment related to such OID is paid by the Company in cash; provided,
that such change in tax law does not create more than an insubstantial risk that
Wendy's will be prevented from taking a deduction for OID accruing with respect
to the Convertible Debentures at a date that is no later than the date the
interest payment related to such OID is actually paid by Wendy's in cash.
"Investment Company Event" means that each of the Wendy's Trustees shall have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority on or after
the date of this Prospectus Supplement (a "Change in 1940 Act Law"), there is
more than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
If, at any time, a Tax Event or an Investment Company Event (each, as defined
above, a "Special Event") shall occur and be continuing, the Trust may with the
consent of Wendy's, except in the limited circumstances described below, be
dissolved with the result that Convertible Debentures with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Distribution rate of, and accrued and unpaid
interest equal to accumulated and unpaid Distributions on, the Trust Securities,
would be distributed to the holders of the Trust Securities in liquidation of
such holders' interests in the Trust on a pro rata basis within 90 days
following the occurrence of the Special Event; provided, that such dissolution
and distribution shall be conditioned on (i) the Wendy's Trustees' receipt of an
opinion of nationally recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the holders
of the Trust Securities will not recognize any gain or loss for U.S. federal
income tax purposes as a result of such dissolution and distribution of
Convertible Debentures, (ii) Wendy's or the Trust being unable to avoid such Tax
Event within such 90 day period by taking some ministerial action or pursuing
some other reasonable measure that will have no adverse effect on the Trust,
Wendy's or the holders of the Trust Securities and (iii) Wendy's prior written
consent to such dissolution and distribution. If Wendy's declines to consent to
the dissolution and distribution, Wendy's may incur an obligation to pay
Additional Interest. See "Description of the Convertible
Debentures -- Additional Interest." Furthermore, if after receipt of a
Dissolution Tax Opinion by the Wendy's Trustees (i) Wendy's has received an
opinion (a "Redemption Tax Opinion") of nationally recognized independent tax
counsel experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that Wendy's would be precluded from deducting
the interest on the Convertible Debentures for U.S. federal income tax purposes,
even after the Convertible Debentures were distributed to the holders of Trust
Securities in liquidation of such holders' interests in the Trust as described
above, or (ii) the Wendy's Trustees shall have been informed by such tax counsel
that it cannot deliver a No Recognition Opinion to the Trust, Wendy's shall have
the right, upon not less than 30 nor more than 60 days notice, to redeem the
Convertible Debentures, in whole or in part, at 100% of the principal amount
thereof plus accrued and unpaid interest thereon for cash within 90 days
following the occurrence of such Tax Event. So long as the corresponding TECONS
are outstanding, the proceeds from any such redemption of the Convertible
Debentures will be used to redeem TECONS; provided, however, that if at the time
there is available to Wendy's or the Trust the opportunity to eliminate, within
such 90 day period, the Tax Event by taking some ministerial action, such as
filing a form or making an election or pursuing some other similar reasonable
measure that has no adverse effect on the Trust, Wendy's or the holders of the
Trust Securities, Wendy's or the Trust will pursue such measure in lieu of
redemption.
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After the date for any distribution of Convertible Debentures upon dissolution
of the Trust, (i) the TECONS will no longer be deemed to be outstanding, (ii)
the Depositary (as defined herein) or its nominee, as the record holder of the
TECONS, will receive a registered global certificate or certificates
representing the Convertible Debentures to be delivered upon such distribution,
and (iii) any certificates representing TECONS not held by the Depositary or its
nominee will be deemed to represent Convertible Debentures having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Distribution rate of, and accrued and unpaid
interest (including Compound Interest) equal to accumulated and unpaid
Distributions on such TECONS until such certificates are presented to Wendy's or
its agent for transfer or reissuance.
If the Convertible Debentures are distributed to the holders of the TECONS,
Wendy's will use its best efforts to cause the Convertible Debentures to be
listed on the New York Stock Exchange or on such other exchange as the TECONS
are then listed.
REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST
The Trust may not redeem fewer than all of the outstanding TECONS unless all
accumulated and unpaid Distributions have been paid on all TECONS for all
quarterly Distribution periods terminating on or prior to the date of
redemption.
If the Trust gives notice of redemption in respect of TECONS (which notice will
be irrevocable), then, by 12:00 noon, New York City time, on the redemption
date, provided, that Wendy's has paid to the Institutional Trustee a sufficient
amount of cash in connection with the related redemption of the Convertible
Debentures, the Trust will irrevocably deposit with the Depositary funds
sufficient to pay the applicable Redemption Price and will give the Depositary
irrevocable instructions and authority to pay the Redemption Price to the
holders of the TECONS. See "-- Book-Entry Only Issuance -- The Depository Trust
Company." If notice of redemption shall have been given and funds deposited as
required, then, immediately prior to the close of business on the date of such
deposit, Distributions will cease to accrue and all rights of holders of such
TECONS so called for redemption will cease, except the right of the holders of
such TECONS to receive the Redemption Price but without interest on such
Redemption Price. In the event that any date fixed for redemption of TECONS is
not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day that is a Business Day (without any
interest or other payment in respect of any such delay). In the event that
payment of the Redemption Price in respect of TECONS is improperly withheld or
refused and not paid either by the Trust, or by Wendy's pursuant to the
Guarantee, Distributions on such TECONS will continue to accrue at the then
applicable rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding TECONS are to be redeemed,
the TECONS will be redeemed as described below under "-- Book-Entry Only
Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation, U.S.
federal securities laws), Wendy's or its subsidiaries may at any time, and from
time to time, purchase outstanding TECONS by tender, in the open market or by
private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the TECONS will be entitled to receive out of the assets of the Trust, after
satisfaction of liabilities to creditors, distributions in an amount equal to
the aggregate of the stated liquidation amount of $50 per TECONS plus
accumulated and unpaid Distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Convertible Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid Distributions on, the TECONS have been distributed on a pro rata basis to
the holders of the TECONS.
If, upon any such Liquidation, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the TECONS shall be paid on a pro rata basis. The holders of the Trust
Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the TECONS, except that if a
Declaration Event of Default has occurred and is continuing, the TECONS shall
have a preference over the Trust Common Securities with regard to such
distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on September 20,
2031, the expiration of the term of the Trust, (ii) upon the bankruptcy of
Wendy's or the holder of the Trust Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Trust Common Securities or Wendy's, the filing of a certificate of cancellation
with respect to the Trust after obtaining the consent of the holders of at least
a majority in liquidation amount of the Trust Securities affected thereby voting
together as a single class to file such certificate of cancellation, or the
revocation of the charter of the holder of the Trust Common Securities or
Wendy's and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) upon the distribution of Convertible Debentures upon
the occurrence of a Special Event, (v) upon the entry of a decree of a judicial
dissolution of
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the holder of the Trust Common Securities, Wendy's or the Trust, (vi) upon the
redemption of all the Trust Securities or (vii) upon the distribution of Wendy's
Common Stock to all holders of TECONS upon conversion of all outstanding TECONS.
DECLARATION EVENTS OF DEFAULT
An event of default under the Subordinated Indenture (an "Indenture Event of
Default") constitutes an event of default under the Declaration with respect to
the Trust Securities (a "Declaration Event of Default"); provided, that pursuant
to the Declaration, the holder of the Trust Common Securities will be deemed to
have waived any Declaration Event of Default with respect to the Trust Common
Securities until all Declaration Events of Default with respect to the TECONS
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the TECONS have been so cured, waived, or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the TECONS and only the holders of the TECONS will have
the right to direct the Institutional Trustee with respect to certain matters
under the Declaration, and therefore the Subordinated Indenture. If the
Institutional Trustee fails to enforce its rights under the Convertible
Debentures, any holder of TECONS may institute a legal proceeding against
Wendy's to enforce the Institutional Trustee's rights under the Convertible
Debentures. Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
Wendy's to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
the redemption date), Wendy's acknowledges that then a holder of TECONS may
institute a Direct Action for payment on or after the respective due date
specified in the Convertible Debentures. In connection with such Direct Action,
Wendy's will be subrogated to the rights of such holders of TECONS under the
Declaration to the extent of any payment made by Wendy's to such holder of
TECONS in such Direct Action. The holders of TECONS will not be able to exercise
directly any other remedy available to the holders of the Convertible
Debentures.
Upon the occurrence of a Declaration Event of Default, the Institutional Trustee
as the sole holder of the Convertible Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Debentures
to be immediately due and payable. Wendy's and the Trust are each required to
file annually with the Institutional Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Indenture Act and under "Description
of Trust Preferred Securities Guarantees -- Modification of the Trust Preferred
Securities Guarantees; Assignment" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the TECONS will
have no voting rights.
Subject to the requirement of each of the Wendy's Trustees obtaining a tax
opinion in certain circumstances set forth in the last sentence of the next
paragraph, the holders of a majority in aggregate liquidation amount of the
TECONS have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee, or direct the
exercise of any trust or power conferred upon the Institutional Trustee under
the Declaration including the right to direct the Institutional Trustee, as a
holder of the Convertible Debentures, to (i) exercise the remedies available
under the Subordinated Indenture with respect to the Convertible Debentures,
(ii) waive any past Indenture Event of Default that is waivable under Section
513 of the Base Indenture (as defined herein), or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Convertible
Debentures shall be due and payable; provided, however, that if an Indenture
Event of Default has occurred and is continuing, then the holders of 25% of the
aggregate liquidation amount of the TECONS may direct the Institutional Trustee
to declare the principal of and interest on the Convertible Debentures
immediately due and payable; provided, further, that, where a consent or action
under the Indenture would require the consent or act of holders of more than a
majority in principal amount of the Convertible Debentures (a "Super-Majority")
affected thereby, only the holders of at least such Super-Majority in aggregate
liquidation amount of the TECONS may direct the Institutional Trustee to give
such consent or take such action.
The Institutional Trustee shall notify all holders of the TECONS of any notice
of default received from the Debt Trustee with respect to the Convertible
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless each of
the Wendy's Trustees has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for U.S. federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Subordinated Indenture, the
Institutional Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a majority in liquidation amount of the Trust Securities voting together as a
single class; provided, however, that where a consent under the Subordinated
Indenture would require the consent of a Super-Majority, the Institutional
Trustee may only give such consent at the direction of the holders of at least
the proportion in liquidation
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amount of the Trust Securities which the relevant Super-Majority represents of
the aggregate principal amount of the Convertible Debentures outstanding. The
Institutional Trustee shall be under no obligation to take any such action in
accordance with the directions of the holders of the Trust Securities unless
each of the Wendy's Trustees has obtained an opinion of tax counsel to the
effect that for the purposes of United States federal income tax the Trust will
not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of TECONS may be given at a
separate meeting of holders of TECONS convened for such purpose, at a meeting of
all of the holders of Trust Securities or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which holders of TECONS
are entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be mailed to each holder of record of TECONS.
Each such notice will include a statement setting forth the following
information: (i) the date of such meeting or the date by which such action is to
be taken; (ii) a description of any resolution proposed for adoption at such
meeting on which such holders are entitled to vote or of such matter upon which
written consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of TECONS will be required for the
Trust to redeem and cancel TECONS or distribute Convertible Debentures in
accordance with the Declaration.
Notwithstanding that holders of TECONS are entitled to vote or consent under any
of the circumstances described above, any of the TECONS that are owned at such
time by Wendy's or any entity directly or indirectly controlling or controlled
by, or under direct common control with, Wendy's, shall not be entitled to vote
or consent and shall, for purposes of such vote or consent, be treated as if
such TECONS were not outstanding.
The procedures by which holders of TECONS may exercise their voting rights are
described below. See "-- Book-Entry Only Issuance -- The Depository Trust
Company" below.
Holders of the TECONS will have no rights to appoint or remove the Wendy's
Trustees, who may be appointed, removed or replaced solely by Wendy's as the
indirect or direct holder of all of the Trust Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular Trustees
(and in certain circumstances the Institutional Trustee), provided, that, if any
proposed amendment provides for, or the Regular Trustees otherwise propose to
effect, (i) any action that would adversely affect the powers, preferences or
special rights of the Trust Securities, whether by way of amendment to the
Declaration or otherwise or (ii) the dissolution, winding-up or termination of
the Trust other than pursuant to the terms of the Declaration, then the holders
of the Trust Securities voting together as a single class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation amount
of the Trust Securities affected thereby; provided, that, if any amendment or
proposal referred to in clause (i) above would adversely affect only the TECONS
or the Trust Common Securities, then only the affected class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of a majority in liquidation amount of such
class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to the
Declaration if such amendment or modification would (i) cause the Trust to be
classified for purposes of U.S. federal income taxation as other than a grantor
trust, (ii) reduce or otherwise adversely affect the powers of the Institutional
Trustee or (iii) cause the Trust to be deemed an "investment company" which is
required to be registered under the 1940 Act.
PROPOSED TAX LEGISLATION
On March 19, 1996, as a part of President Clinton's Fiscal 1997 Budget Proposal,
the Treasury Department proposed legislation (the "Proposed Legislation") that,
among other things, would (i) treat as equity for U.S. federal income tax
purposes certain debt instruments with a maximum term of more than 20 years and
(ii) disallow interest deductions on certain convertible debt instruments or
defer interest deductions on certain debt instruments issued with OID. The
Proposed Legislation is proposed to be effective for debt instruments issued on
or after December 7, 1995.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were enacted, such legislation would not apply to the Convertible
Debentures since they would be issued prior to the date of any "appropriate
Congressional action" or otherwise qualify for transitional relief. However,
there can be no assurances that the effective date guidance contained in the
Joint Statement will be incorporated in the Proposed Legislation, if enacted, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the tax treatment of the Convertible Debentures.
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If the Proposed Legislation or any similar legislation changed the tax treatment
of the Convertible Debentures and the TECONS, the U.S. federal income tax
consequences of the purchase, ownership and disposition of the TECONS would
differ from those described herein. If legislation were enacted that would
constitute a Tax Event, there could be a distribution of the Convertible
Debentures to holders of the TECONS or, in certain circumstances, at Wendy's
option, redemption of the Convertible Debentures by Wendy's. There can be no
assurances as to whether or in what form the Proposed Legislation may be enacted
into law or whether other legislation will be enacted that otherwise adversely
affects the tax treatment of the Convertible Debentures and the TECONS. The
discussion herein assumes that the Proposed Legislation, if enacted, will not
apply to the Convertible Debentures or the TECONS.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to, any corporation or other body, except as described below or as
otherwise described in the Declaration. The Trust may, with the consent of the
Regular Trustees and without the consent of the holders of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by a trust organized
as such under the laws of any State; provided, that (i) such successor entity
either (x) expressly assumes all of the obligations of the Trust under the Trust
Securities or (y) substitutes for the TECONS other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) Wendy's expressly acknowledges a trustee of such
successor entity possessing the same powers and duties as the Institutional
Trustee as the holder of the Convertible Debentures, (iii) the TECONS or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the TECONS are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the TECONS (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, Wendy's has received an opinion of a
nationally recognized independent counsel to the Trust experienced in such
matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), and (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (viii)
Wendy's guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Trust Common
Securities Guarantee (as described in the accompanying Prospectus).
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the Successor Entity to be classified as other than a grantor trust for U.S.
federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the TECONS. The TECONS will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global TECONS certificates, representing the total aggregate
number of TECONS, will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global TECONS as represented
by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
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Purchases of TECONS within the DTC system must be made by or through Direct
Participants, which will receive a credit for the TECONS on DTC's records. The
ownership interest of each actual purchaser of each TECONS ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased TECONS. Transfers of ownership interests in the TECONS are to
be accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the TECONS, except in the event that use of the
book-entry system for the TECONS is discontinued.
To facilitate subsequent transfers, all the TECONS deposited by Participants
with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of
TECONS with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the TECONS. DTC's records reflect only the identity of the Direct
Participants to whose accounts such TECONS are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the TECONS
are being redeemed, DTC will reduce the amount of the interest of each Direct
Participant in such TECONS in accordance with its procedures.
Although voting with respect to the TECONS is limited, in those cases where a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to TECONS. Under its usual procedures, DTC would mail an Omnibus Proxy
to the Trust as soon as possible after the record date. The Omnibus Proxy
assigns the consenting or voting rights of Cede & Co. to those Direct
Participants to whose accounts the TECONS are credited on the record date
(identified in a listing attached to the Omnibus Proxy). Wendy's and the Trust
believe that the arrangements among DTC, Direct and Indirect Participants, and
Beneficial Owners will enable the Beneficial Owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a holder
of a beneficial interest in the Trust.
Distribution payments on the TECONS will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name," and such payments will
be the responsibility of such Participant and not of DTC, the Trust or Wendy's,
subject to any statutory or regulatory requirements to the contrary that may be
in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global TECONS certificate
will not be entitled to receive physical delivery of TECONS. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any rights under
the TECONS.
DTC may discontinue providing its services as Depositary with respect to the
TECONS at any time by giving reasonable notice to the Trust. Under such
circumstances, in the event that a successor Depositary is not obtained,
certificates for the TECONS are required to be printed and delivered.
Additionally, the Regular Trustees (with the consent of Wendy's) may decide to
discontinue use of the system of book-entry transfers through DTC (or any
successor Depositary) with respect to the TECONS. In that event, certificates
for the TECONS will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that Wendy's and the Trust believe to be reliable,
but neither Wendy's nor the Trust takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Institutional Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of TECONS, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The holders of
TECONS will not be required to offer such indemnity in the event such holders,
by exercising their voting rights, direct the Institutional Trustee to take any
action it is empowered to take under the Declaration following a Declaration
Event of Default. The Institutional Trustee also serves as trustee under the
Guarantee and the Indenture.
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CONVERSION AGENT AND PAYING AGENT
The Institutional Trustee will act as Conversion Agent. In addition, in the
event that the TECONS do not remain in book-entry only form, the following
provisions would apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers of
TECONS will be effected without charge by or on behalf of the Trust, but upon
payment (with the giving of such indemnity as the Trust or Wendy's may require)
in respect of any tax or other government charges that may be imposed in
relation to it. The Trust will not be required to register or cause to be
registered the transfer of TECONS after such TECONS have been called for
redemption.
INSTITUTIONAL TRUSTEE
The Company may maintain banking and other commercial relationships with the
Institutional Trustee and its affiliates in the ordinary course of business, and
the Institutional Trustee may own Securities (as defined in the accompanying
Prospectus).
GOVERNING LAW
The Declaration and the TECONS will be governed by, and construed in accordance
with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in such a
way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a grantor trust for
U.S. federal income tax purposes. Wendy's is authorized and directed to conduct
its affairs so that the Convertible Debentures will be treated as indebtedness
of Wendy's for U.S. federal income tax purposes. In this connection, Wendy's and
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the articles of
incorporation of Wendy's, that each of Wendy's and the Regular Trustees
determine in their discretion to be necessary or desirable to achieve such end,
as long as such action does not adversely affect the interests of the holders of
the TECONS or vary the terms thereof.
Holders of the TECONS have no preemptive or similar rights.
DESCRIPTION OF THE GUARANTEE
Pursuant to the Guarantee, Wendy's will irrevocably and unconditionally agree,
to the extent set forth therein, to pay in full, to the holders of the TECONS
issued by the Trust, the Guarantee Payments (as defined in the accompanying
Prospectus) (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of TECONS or by causing the Trust to pay such amounts to such holders.
The Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Institutional Trustee will act as indenture trustee under the Guarantee (the
"Guarantee Trustee"). The terms of the Guarantee will be those set forth in such
Guarantee and those made part of such Guarantee by the Trust Indenture Act. The
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the TECONS. A summary description of the Guarantee appears in the
accompanying Prospectus under the caption "Description of Trust Preferred
Securities Guarantees."
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. This description supplements the description of
the general terms and provisions of the Convertible Debentures set forth in the
accompanying Prospectus under the caption "Description of Debt Securities." The
following description is subject to, and is qualified in its entirety by
reference to, the description in the accompanying Prospectus and the
Subordinated Indenture, dated as of September 16, 1996 (the "Base Indenture"),
between Wendy's and NBD Bank, as Trustee (the "Debt Trustee"), as supplemented
by a First Supplemental Indenture, to be dated as of September 20, 1996 (the
"First Supplemental Indenture" and, together with the Base Indenture, the
"Subordinated Indenture"), the forms of which are filed as Exhibits to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus are a part. Certain capitalized terms used herein are defined in the
Subordinated Indenture.
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Under certain circumstances involving the dissolution of the Trust following the
occurrence of a Special Event, Convertible Debentures may be distributed to the
holders of the Trust Securities in liquidation of the Trust. See "Description of
the TECONS -- Special Event Distribution; Tax Event Redemption."
If the Convertible Debentures are distributed to the holders of the TECONS,
Wendy's will use its best efforts to have the Convertible Debentures listed on
the New York Stock Exchange or on such other national securities exchange or
similar organization on which the TECONS are then listed or quoted.
GENERAL
The Convertible Debentures will be issued as unsecured debt under the
Subordinated Indenture. The Convertible Debentures will be limited in aggregate
principal amount to approximately $202,020,250, such amount being the sum of the
aggregate stated liquidation of the TECONS and the capital contributed by
Wendy's in exchange for the Trust Common Securities (the "Wendy's Payment").
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will mature and become due
and payable, together with any accrued and unpaid interest thereon including
Compound Interest (as defined herein) and Additional Interest (as defined
herein), if any, on September 15, 2026.
If Convertible Debentures are distributed to holders of TECONS in liquidation of
such holders' interests in the Trust, such Convertible Debentures will initially
be issued as a Global Security (as defined herein). As described herein, under
certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security. See "Book-Entry and
Settlement" below. In the event that Convertible Debentures are issued in
certificated form, such Convertible Debentures will be in denominations of $50
and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on Convertible Debentures issued as a Global
Security will be made to DTC, a successor Depositary or, in the event that no
depositary is used, to a Paying Agent for the Convertible Debentures. In the
event Convertible Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Convertible Debentures will be
registrable and Convertible Debentures will be exchangeable for Convertible
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Institutional Trustee in New York, New York;
provided, that payment of interest may be made at the option of Wendy's by check
mailed to the address of the holder entitled thereto or by wire transfer to an
account appropriately designated by the holder entitled thereto. Notwithstanding
the foregoing, so long as the holder of any Convertible Debentures is the
Institutional Trustee, the payment of principal and interest on the Convertible
Debentures held by the Institutional Trustee will be made at such place and to
such account as may be designated by the Institutional Trustee.
SUBORDINATION
The Subordinated Indenture provides that the Convertible Debentures are
subordinated in right of payment to all Senior Indebtedness (as defined under
the caption "Description of Debt Securities -- Subordination of Subordinated
Debt Securities" in the accompanying Prospectus) of Wendy's. No payment of
principal (including redemption payments), premium, if any, or interest on the
Convertible Debentures may be made (i) if any Senior Indebtedness of Wendy's is
not paid when due and any applicable grace period with respect to such default
has ended and such default has not been cured or waived or ceased to exist or
(ii) if the maturity of any Senior Indebtedness of Wendy's has been accelerated
because of a default. Upon any distribution of assets of Wendy's to creditors
upon any dissolution, winding-up, liquidation or reorganization, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any, and interest due or to become due
on all Senior Indebtedness of Wendy's must be paid in full before the holders of
Convertible Debentures are entitled to receive or retain any payment. Upon
satisfaction of all claims of all Senior Indebtedness then outstanding, the
rights of the holders of the Convertible Debentures will be subrogated to the
rights of the holders of Indebtedness of Wendy's to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Convertible Debentures are paid in full.
The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by Wendy's.
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REDEMPTION AT THE OPTION OF WENDY'S
Wendy's shall have the right to redeem the Convertible Debentures, in whole or
in part, from time to time, on or after September 17, 2000, upon not less than
30 nor more than 60 days notice, at the following prices (expressed as
percentages of the principal amount of the Convertible Debentures) together with
accrued and unpaid interest, including Compound Interest (as defined herein) to,
but excluding, the redemption date, if redeemed during the 12-month period
beginning September 15:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000........................................................................... 103.00%
2001........................................................................... 102.50
2002........................................................................... 102.00
2003........................................................................... 101.50
2004........................................................................... 101.00
2005........................................................................... 100.50
</TABLE>
and 100% if redeemed on or after September 15, 2006.
If Convertible Debentures are redeemed on any March 15, June 15, September 15,
or December 15, accrued and unpaid interest shall be payable to holders of
record on the relevant record date.
Wendy's shall also have the right to redeem the Convertible Debentures in
certain circumstances upon the occurrence of a Special Event as described under
"Description of the TECONS -- Special Event Distribution; Tax Event Redemption,"
and, depending on the specific circumstances, any such redemption may be at 100%
of the principal amount thereof together with accrued and unpaid interest
(including Compound Interest) to the redemption date.
So long as the corresponding TECONS are outstanding, the proceeds from the
redemption of any of the Convertible Debentures will be used to redeem TECONS.
If a partial redemption of the TECONS resulting from a partial redemption of the
Convertible Debentures would result in the delisting of the TECONS, Wendy's may
only redeem the Convertible Debentures in whole.
INTEREST
Each Convertible Debenture shall bear interest at the rate of 5% per annum from
the first date of issuance, payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year (each an "Interest Payment Date"),
commencing December 15, 1996, to the person in whose name such Convertible
Debenture is registered, subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date. In the event the
Convertible Debentures shall not continue to remain in book-entry only form,
Wendy's shall have the right to select record dates, which shall be more than
one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full quarterly period for which interest is computed, will
be computed on the basis of the actual number of days elapsed per 30-day month.
In the event that any date on which interest is payable on the Convertible
Debentures is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, then such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date.
PROPOSED TAX LEGISLATION
Please refer to discussion above under the heading "Description of the
TECONS -- Proposed Tax Legislation."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as Wendy's shall not be in default in the payment of interest on the
Convertible Debentures, Wendy's has the right at any time and from time to time,
during the term of the Convertible Debentures to defer payments of interest for
successive periods not exceeding 20 consecutive quarters for each such Extension
Period, at the end of which Extension Period, Wendy's shall pay all interest
then accrued and unpaid (including any Additional Interest, as herein defined)
together with interest thereon compounded quarterly at the rate specified for
the Convertible Debentures to the extent permitted by applicable law ("Compound
Interest"); provided, that during any such Extension Period, (a) Wendy's shall
not declare or pay dividends on, make any distribution with respect to, or
redeem,
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<PAGE> 38
purchase, acquire or make a liquidation payment with respect to any of its
capital stock (other than (i) purchases or acquisitions of shares of Wendy's
Common Stock in connection with the satisfaction by Wendy's of its obligations
under any employee benefit plans, (ii) as a result of a reclassification of
Wendy's capital stock or the exchange or conversion of one class or series of
Wendy's capital stock for another class or series of Wendy's capital stock,
(iii) the purchase of fractional interests in shares of Wendy's capital stock
pursuant to the conversion or exchange provisions of such Wendy's capital stock
or the security being converted or exchanged or (iv) purchases or acquisitions
of shares of Wendy's Common Stock to be used in connection with acquisitions of
Wendy's Common Stock by shareholders pursuant to the Company's dividend
reinvestment plan), (b) Wendy's shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Wendy's that rank pari passu with or junior to the
Convertible Debentures and (c) Wendy's shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Extension Period, Wendy's may further defer payments
of interest by extending the interest payment period; provided, however, that,
such Extension Period, including all such previous and further extensions, may
not exceed 20 consecutive quarters or extend beyond the maturity of the
Convertible Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, Wendy's may commence a new Extension Period,
subject to the terms set forth in this section. No interest during an Extension
Period, except at the end thereof, shall be due and payable. Wendy's has no
present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Convertible Debentures. If the
Institutional Trustee shall be the sole holder of the Convertible Debentures,
Wendy's shall give the Regular Trustees and the Institutional Trustee notice of
its selection of such Extension Period one Business Day prior to the earlier of
(i) the date distributions on the TECONS are payable or (ii) the date the
Regular Trustees are required to give notice to the New York Stock Exchange (or
other applicable self-regulatory organization) or to holders of the TECONS of
the record date or the date such distribution is payable. The Regular Trustees
shall give notice of Wendy's selection of such Extension Period to the holders
of the TECONS. If the Institutional Trustee shall not be the sole holder of the
Convertible Debentures, Wendy's shall give the holders of the TECONS notice of
its selection of such Extension Period ten Business Days prior to the earlier of
(i) the Interest Payment Date or (ii) the date upon which Wendy's is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Convertible Debentures of the record or
payment date of such related interest payment.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Wendy's Common Stock at the
option of the holders of the Convertible Debentures at any time prior to the
close of business on September 15, 2026 (or, in the case of Convertible
Debentures called for redemption, the close of business on the Business Day
prior to the Redemption Date) at the Initial Conversion Price subject to the
conversion price adjustments described under "Description of the
TECONS -- Conversion Rights." The Trust has agreed not to convert Convertible
Debentures held by it except pursuant to a notice of conversion delivered to the
Conversion Agent by a holder of TECONS. Upon surrender of a TECONS to the
Conversion Agent for conversion, the Trust will distribute Convertible
Debentures to the Conversion Agent on behalf of the holder of the TECONS so
converted, whereupon the Conversion Agent will convert such Convertible
Debentures to Wendy's Common Stock on behalf of such holder. Wendy's delivery to
the holders of the Convertible Debentures (through the Conversion Agent) of the
fixed number of shares of Wendy's Common Stock into which the Convertible
Debentures are convertible (together with the cash payment, if any, in lieu of
fractional shares) will be deemed to satisfy the obligation of Wendy's to pay
the principal amount of the Convertible Debentures so converted, and the accrued
and unpaid interest thereon attributable to the period from the last date to
which interest has been paid or duly provided for; provided, however, that if
any Convertible Debenture is converted after a record date for payment of
interest, the interest payable on the related interest payment date with respect
to such Convertible Debenture shall be paid to the Trust (which will distribute
such interest to the converting holder) or other holder of Convertible
Debentures, as the case may be, despite such conversion.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the U.S., or any other taxing authority, then, in any such case,
Wendy's will pay as additional interest ("Additional Interest") such additional
amounts as shall be required so that the net amounts received and retained by
the Trust after paying any such taxes, duties, assessments or other governmental
charges will be not less than the amounts the Trust would have received had no
such taxes, duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Convertible Debentures, will have
the right to declare the principal of and the interest on the Convertible
Debentures (including any Compound Interest and Additional Interest, if any) and
any other amounts payable under the Indenture to be forthwith due and payable
and to enforce its other rights as a creditor with respect to the Convertible
Debentures. See "Description of Debt Securities -- Events of Default and Notice
Thereof" in the accompanying Prospectus for a description of the Events of
Default. An Indenture Event of Default also
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<PAGE> 39
constitutes a Declaration Event of Default. The holders of TECONS in certain
circumstances have the right to direct the Institutional Trustee to exercise its
rights as the holder of the Convertible Debentures. See "Description of the
TECONS -- Declaration Events of Default" and "-- Voting Rights." Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of Wendy's to pay interest or principal on
the Convertible Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), Wendy's
acknowledges that then a holder of TECONS may institute a Direct Action for
payment on or after the respective due date specified in the Convertible
Debentures. Notwithstanding any payments made to such holder of TECONS by
Wendy's in connection with a Direct Action, Wendy's shall remain obligated to
pay the principal of or interest on the Convertible Debentures held by the Trust
or the Institutional Trustee of the Trust, and Wendy's shall be subrogated to
the rights of the holder of such TECONS with respect to payments on the TECONS
to the extent of any payments made by Wendy's to such holder in any Direct
Action. The holders of TECONS will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of TECONS in connection with the involuntary or
voluntary dissolution, winding-up or liquidation of the Trust as a result of the
occurrence of a Special Event, the Convertible Debentures will be issued in the
form of one or more global certificates (each, a "Global Security") registered
in the name of the Depositary or its nominee. Except under the limited
circumstances described below, Convertible Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Convertible Debentures in definitive form. The Global Securities described above
may not be transferred except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or to a successor Depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders (as defined
in the Subordinated Indenture) thereof for any purpose under the Indenture and
no Global Security representing Convertible Debentures shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee or to a successor
Depositary or its nominee. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary or if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest to
exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Convertible Debentures are distributed to holders of TECONS in liquidation of
such holders' interests in the Trust, DTC will act as Depositary for the
Convertible Debentures. For a description of DTC and the specific terms of the
depositary arrangements, see "Description of the TECONS -- Book-Entry Only
Issuance -- The Depository Trust Company." As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the TECONS apply in all material respects to any debt obligations
represented by one or more Global Securities held by Wendy's. Wendy's may
appoint a successor to DTC or any successor Depositary in the event DTC or such
successor Depositary is unable or unwilling to continue as a Depositary for the
Global Securities.
None of Wendy's, the Trust, the Institutional Trustee, any paying agent and any
other agent of Wendy's or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Convertible
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures registered in
the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies Wendy's that it is unwilling or unable to continue as a
depositary for such Global Security and no successor depositary shall have been
appointed, (ii) the Depositary, at any time, ceases to be a clearing agency
registered under the Exchange Act at which time the Depositary is required to be
so registered to act as such depositary and no successor depositary shall have
been appointed, (iii) Wendy's, in its sole discretion, determines that such
Global Security shall be so exchangeable or (iv) there shall have occurred an
Event of Default with respect to such Convertible Debentures. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Convertible Debentures registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
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<PAGE> 40
GOVERNING LAW
The Subordinated Indenture and the Convertible Debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Subordinated Indenture will provide that Wendy's will pay all fees and
expenses related to (i) the offering of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Wendy's Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the TECONS. The payment of
such fees and expenses will be fully and unconditionally guaranteed by Wendy's.
Wendy's will have the right at all times to assign any of its respective rights
or obligations under the Subordinated Indenture to a direct or indirect
wholly-owned subsidiary of Wendy's; provided, that, in the event of any such
assignment, Wendy's will remain liable for all of their respective obligations.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns. The
Indenture provides that it may not otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue the
Trust Securities evidencing undivided beneficial interests in the assets of the
Trust, and to invest the proceeds from such issuance and sale in the Convertible
Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures will match the Distribution rate and Distribution and other payment
dates for the TECONS; (iii) Wendy's shall pay, and the Trust shall not be
obligated to pay, directly or indirectly, any costs, expenses, debt, and
obligations of the Trust (other than with respect to the Trust Securities); and
(iv) the Declaration further provides that the Wendy's Trustees shall not take
or cause or permit the Trust to, among other things, engage in any activity that
is not consistent with the purposes of the Trust.
Payments of Distributions (to the extent funds therefor are available) and other
payments due on the TECONS (to the extent funds therefor are available) are
guaranteed by Wendy's as and to the extent set forth under "Description of Trust
Preferred Securities Guarantees" in the accompanying Prospectus. If Wendy's does
not make interest payments on the Convertible Debentures purchased by the Trust,
it is expected that the Trust will not have sufficient funds to pay
Distributions on the TECONS. The Guarantee is a full guarantee on a subordinated
basis with respect to the TECONS issued by the Trust from the time of its
issuance but does not apply to any payment of Distributions unless and until the
Trust has sufficient funds for the payment of such Distributions. The Guarantee
covers the payment of Distribution and other payments on the TECONS only if and
to the extent that Wendy's has made a payment of interest or principal on the
Convertible Debentures held by the Trust as its sole asset. The Guarantee, when
taken together with Wendy's obligations under the Convertible Debentures, the
Indenture and the Declaration, including its obligations to pay costs, expenses,
debts and liabilities of the Trust (other than with respect to the Trust
Securities), provides a full and unconditional guarantee of amounts on the
TECONS.
If Wendy's fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby a holder of the TECONS, using the procedures
described in "Description of the TECONS -- Book-Entry Only Issuance -- The
Depositary Trust Company" and "-- Voting Rights," may direct the Institutional
Trustee to enforce its rights under the Convertible Debentures. Notwithstanding
the foregoing, in such circumstances a holder of TECONS may institute a Direct
Action for payment on or after the respective due date specified in the
Convertible Debentures. In connection with such Direct Action, Wendy's will be
subrogated to the rights of such holder of TECONS under the Declaration to the
extent of any payment made by Wendy's to such holder of TECONS in such Direct
Action. Wendy's, under the Guarantee, acknowledges that the Guarantee Trustee
shall enforce the Guarantee on behalf of the holders of the TECONS. If Wendy's
fails to make payments under the Guarantee, the Guarantee provides a mechanism
whereby the holders of the TECONS may direct the Guarantee Trustee to enforce
its rights thereunder. Any holder of TECONS may institute a legal proceeding
directly against Wendy's to enforce such holder's right to receive payment under
the Guarantee without first instituting a legal proceeding against the Trust,
the Guarantee Trustee, or any other person or entity.
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<PAGE> 41
CERTAIN FEDERAL TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material U.S. federal income tax
consequences of the purchase, ownership and disposition of TECONS. Unless
otherwise stated, this summary deals only with TECONS held as capital assets by
holders who purchase the TECONS upon original issuance ("Initial Holders"). It
does not deal with special classes of holders such as banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that will
hold the TECONS as a position in a "straddle," as part of a "synthetic security"
or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the tax consequences to persons that have a functional currency other than the
U.S. Dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of TECONS. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the TECONS.
This summary is based on the Code, Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
In connection with the issuance of the Convertible Debentures, Vorys, Sater,
Seymour and Pease, special tax counsel to the Company and the Trust, will render
its opinion to the effect generally that the Convertible Debentures will be
classified for U.S. federal income tax purposes as indebtedness of Wendy's under
current law, and, by acceptance of a TECONS, each holder covenants to treat the
Convertible Debentures as indebtedness and the TECONS as evidence of an indirect
beneficial ownership interest in the Convertible Debentures. No assurance can be
given, however, that such position of the Company will not be challenged by the
Internal Revenue Service. The remainder of this discussion assumes that the
Convertible Debentures will be classified for U.S. income tax purposes as
indebtedness of Wendy's.
CLASSIFICATION OF WENDY'S FINANCING
In connection with the issuance of the TECONS, Vorys, Sater, Seymour and Pease,
special tax counsel to Wendy's and the Trust, will render its opinion generally
to the effect that, under then current law and assuming full compliance with the
terms of the Declaration and the Subordinated Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for U.S. federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for U.S. federal income tax purposes, each holder of TECONS generally will be
considered the owner of an undivided interest in the Convertible Debentures, and
pursuant to the agreement to treat the Convertible Debentures as indebtedness,
each holder will be required to include in its gross income interest received or
accrued with respect to its allocable share of those Convertible Debentures.
ORIGINAL ISSUE DISCOUNT
Corporate holders of TECONS will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the TECONS.
Under current law, Wendy's option to defer payments of interest by extending
interest payment periods for up to 20 quarters would cause the Convertible
Debentures to be issued with OID. OID must be included in income by all holders
as it accrues economically on a daily basis, without regard to when it is paid
in cash or whether a particular holder generally used the cash method of
accounting. On June 14, 1996, however, the U.S. Treasury Department issued new
income tax regulations providing that "remote" contingencies are ignored in
determining whether a debt instrument is issued with OID. These new regulations
apply to all debt instruments that, like the Convertible Debentures, are to be
issued on or after August 13, 1996.
Wendy's believes that the likelihood of its exercising its option to defer
payments of interest is "remote" because exercising that option would prevent
Wendy's from declaring dividends on its Common Stock and Wendy's has paid
regular quarterly dividends on Wendy's Common Stock for more than 17 years.
Thus, subject to the discussion set forth in the following paragraph, Wendy's
intends to take the position that the Convertible Debentures that will be issued
on or after August 13, 1996, will not include OID under the new regulations, and
holders of the TECONS should accrue interest under their own methods of
accounting (e.g., cash or accrual) instead of under the daily accrual rules for
OID instruments.
Under the new regulations, however, if Wendy's exercises its right to defer
payments of interest, the Convertible Debentures will become OID instruments,
and the holders of the TECONS will be required to accrue interest on a daily
basis during the extended interest period, even if such holders generally use
the cash method of accounting. A holder who disposes of the TECONS during an
extended interest period may suffer a loss because the market value of the
TECONS will likely fall if Wendy's exercises its option to defer payments of
interest on the Convertible Debentures. Furthermore, the market value of the
TECONS may not reflect the accumulated
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<PAGE> 42
distributions that will be paid at the end of the extended interest period, and
a holder who sells the TECONS during the extended interest period will not
receive from Wendy's any cash related to the interest income the holder accrued
and included in its taxable income under the OID rules (because that cash will
be paid to the holder of record at the end of the extended interest period).
If the Convertible Debentures become OID instruments (i.e., if the Company ever
exercises its right to defer payments of interest), the Convertible Debentures
will be taxed as OID instruments for as long as they remain outstanding. Thus,
even after the end of the extended interest period, all holders will be required
to continue accruing interest on the Convertible Debentures on a daily basis,
regardless of their method of accounting. Under the OID rules, a holder would
accrue an amount of interest income each year that approximates the stated
interest payments called for under the terms of the Convertible Debentures, and
actual cash payments of interest on the Convertible Debentures would not be
reported separately as taxable income.
The new regulations have not yet been addressed in any ruling or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to special tax counsel's interpretation.
MARKET DISCOUNT AND BOND PREMIUM
Holders of TECONS and holders that purchase the TECONS at a price other than the
issue price may be considered to have acquired their undivided interests in the
Convertible Debentures with market discount or acquisition premium as such
phrases are defined for U.S. federal income tax purposes. Such holders are
advised to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the TECONS.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF WENDY'S FINANCING
Under certain circumstances, as described under the caption "Description of the
TECONS -- Special Event Distribution; Tax Event Redemption," Convertible
Debentures may be distributed to holders in exchange for the TECONS and in
liquidation of the Trust. Under current law, such a distribution, for U.S.
federal income tax purposes, would be treated as a non-taxable event to each
holder, and each holder would receive an aggregate tax basis in the Convertible
Debentures equal to such holder's aggregate tax basis in its TECONS. A holder's
holding period in the Convertible Debentures so received in liquidation of the
Trust would include the period during which the TECONS were held by such holder.
If, however, the related special event is a Tax Event which results in the
Trust's being treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to holders of the TECONS.
Under certain circumstances described herein (see "Description of the TECONS"),
the Convertible Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their TECONS. Under current
law, such a redemption would, for U.S. federal income tax purposes, constitute a
taxable disposition of the redeemed TECONS, and a holder could recognize gain or
loss as if it sold such redeemed TECONS for cash. See "-- Sales of TECONS."
SALES OF TECONS
A holder that sells TECONS will recognize gain or loss equal to the difference
between its adjusted tax basis in the TECONS and the amount realized on the sale
of such TECONS. Assuming that the Company does not defer payment of interest on
the Convertible Debentures, a holder's adjusted tax basis in the TECONS
generally will be its initial purchase price. Subject to the discussion below
regarding accrued and unpaid interest, such gain or loss generally will be a
capital gain or loss and generally will be a long-term capital gain or loss if
the TECONS have been held for more than one year.
The TECONS may trade at a price that does not accurately reflect the value of
accrued but unpaid interest with respect to the underlying Convertible
Debentures. Should Wendy's exercise its right to defer payments of interest, a
holder who disposes of his TECONS between record dates for payments of
Distributions thereon will be required to include accrued but unpaid interest on
the Convertible Debentures through the date of disposition in income as ordinary
income, and to add such amount to his adjusted tax basis in his pro rata share
of the underlying Convertible Debentures of which he is deemed to have disposed.
To the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest) a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for U.S. federal
income tax purposes.
CONVERSION OF TECONS TO WENDY'S COMMON STOCK
A holder of TECONS will not recognize income, gain or loss upon the conversion
through the Conversion Agent, of Convertible Debentures into Wendy's Common
Stock except to the extent of ordinary income recognized with respect to accrued
and unpaid interest on the Convertible Debentures at that time. A holder of
TECONS will also recognize gain upon the receipt of cash in lieu of a fractional
share of Wendy's Common Stock equal to the amount of cash received less such
holder's tax basis in such fractional share. Such
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<PAGE> 43
holder's tax basis in the Wendy's Common Stock received upon conversion should
generally be equal to such holder's tax basis in the TECONS delivered to the
Conversion Agent for exchange, plus the amount of interest income recognized on
the exchange, less the basis allocated to any fractional share for which cash is
received and such holder's holding period in the Wendy's Common Stock received
upon conversion should generally begin on the date such holder acquired the
TECONS delivered to the Conversion Agent for exchange (except that the holding
period of the Common Stock deemed issued for accrued interest will begin on the
day following the date of conversion).
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under section 305 of the Code would treat
holders of TECONS as having received a constructive distribution from Wendy's in
the event the conversion ratio of the Convertible Debentures were adjusted if
(i) as a result of such adjustment, the proportionate interest (measured by the
quantum of Wendy's Common Stock into or for which the Convertible Debentures are
convertible or exchangeable) of the holders of the TECONS in the assets or
earnings and profits of Wendy's were increased, and (ii) the adjustment was not
made pursuant to a bona fide, reasonable anti-dilution formula. An adjustment in
the conversion ratio would not be considered made pursuant to such a formula if
the adjustment was made to compensate for certain taxable distributions with
respect to the Wendy's Common Stock. Thus, under certain circumstances, a
reduction in the conversion price for the holders may result in deemed dividend
income to holders to the extent of the current or accumulated earnings and
profits of Wendy's. Holders of the Convertible Debentures would be required to
include their allocable share of such deemed dividend in gross income but will
not receive any cash related thereto.
PROPOSED TAX LEGISLATION
Please refer to the discussion above under the heading "Description of the
TECONS -- Proposed Tax Legislation."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the U.S., a
foreign corporation, a non-resident alien individual, a foreign partnership, or
a non-resident fiduciary of a foreign estate or trust.
As discussed above, the Company intends to take the position that the
Convertible Debentures will be classified for U.S. federal income tax purposes
as indebtedness of Wendy's under current law; no assurance can be given,
however, that such position of the Company will not be challenged by the
Internal Revenue Service. See "-- Classification of the Convertible Debentures."
Assuming that the Convertible Debentures are classified for U.S. federal income
tax purposes as indebtedness of Wendy's, under present U.S. federal income tax
law: (i) payments by the Trust or any of its paying agents to any holder of a
TECONS who or which is a United States Alien Holder would not be subject to U.S.
federal withholding tax; provided, that, (a) the beneficial owner of the TECONS
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Wendy's entitled to vote, (b) the beneficial
owner of the TECONS is not a controlled foreign corporation that is related to
Wendy's through stock ownership, and (c) either (A) the beneficial owner of the
TECONS certifies to the Trust or its agent, under penalties of perjury, that it
is not a U.S. holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the TECONS in such capacity, certifies to the Trust or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a TECONS generally would not be subject to
U.S. federal withholding tax on any gain realized upon the sale or other
disposition of a TECONS.
However, a United States Alien Holder of a TECONS would be subject to U.S.
federal income tax on gain realized on the sale, exchange or other disposition
of the security if (i) the United States Alien Holder is an individual who is
present in the U.S. for 183 days or more in the taxable year of disposition, and
certain other conditions apply or (ii) the gain is effectively connected with
the conduct by the United States Alien Holder of a trade or business in the U.S.
The Company believes that it is not a "United States real property holding
corporation" within the meaning of section 897(c)(2) of the Code. However, there
can be no assurance that the Company will not qualify as a United States real
property holding corporation in the future. Should it so qualify, gain realized
on a disposition of TECONS by a United States Alien Holder that is not deemed to
have owned more than five percent of all TECONS at any time during the shorter
of the five-year period preceding such disposition or such holder's holding
period will not be subject to U.S. federal income tax; provided, that the TECONS
continue to be "regularly traded on an established securities market" (within
the meaning of section 897(c)(3) of the Code and the regulations issued pursuant
thereto) at the time of disposition. If a United States Alien Holder is deemed
to own more than five percent of all the TECONS at any time during the shorter
of the five-year period preceding such disposition or such holder's holding
period, such United States Alien Holder may be
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<PAGE> 44
subject to U.S. federal income tax upon a disposition (including a conversion)
of such TECONS if the Company is a United States real property holding
corporation at such time, and, therefore, is urged to consult its tax advisor.
If the Convertible Debentures were not classified for U.S. federal income tax
purposes as indebtedness of Wendy's, payments by the Trust or any of its paying
agents to any holder of a TECONS who or which is a United States Alien Holder
could be subject to U.S. withholding tax at a 30% rate (or a lower rate
prescribed by an applicable tax treaty) unless certain exemptions were
applicable. Prospective investors that would be United States Alien Holders
should consult their tax advisors concerning the possible application of these
rules.
On April 15, 1996, the Internal Revenue Service proposed regulations (the
"Proposed Regulations") that could affect the procedures to be followed by a
United States Alien Holder in establishing such United States Alien Holder's
non-U.S. person status. The Proposed Regulations would generally be effective
for payments made after December 31, 1997. United States Alien Holders should
consult their tax advisors regarding the effect, if any, of the Proposed
Regulations on their purchase, ownership, and disposition of the TECONS.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the TECONS will be
reported to holders on Forms 1099, which forms should be mailed to holders of
TECONS by January 31 following each calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the TECONS, the OID related to the Convertible Debentures that accrued
during the year. The Trust currently intends to report such information on Form
1099 prior to January 31 following each calendar year even though the Trust is
not legally required to report to record holders until April 15 following each
calendar year. The Underwriters have indicated to the Trust that, to the extent
that they hold TECONS as nominees for beneficial holders, they currently expect
to report to such beneficial holders on Forms 1099 by January 31 following each
calendar year. Under current law, holders of TECONS who hold as nominees for
beneficial holders will not have any obligation to report information regarding
the beneficial holders to the Trust. The Trust, moreover, will not have any
obligation to report to beneficial holders who are not also record holders.
Thus, beneficial holders of TECONS who hold their TECONS through the
Underwriters will receive Forms 1099 reflecting the income on their TECONS from
such nominee holders rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the TECONS or the Convertible
Debentures distributed to holders of the TECONS may be subject to a "backup"
withholding tax of 31% unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a refund or a credit
against the holder's U.S. federal income tax, provided, that the required
information is provided to the Service.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TECONS,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS (WITH
POSSIBLE RETROACTIVE EFFECT).
S-44
<PAGE> 45
UNDERWRITING
Under the terms and subject to the conditions set forth in the Underwriting
Agreement dated September 16, 1996 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters") for whom J.P. Morgan Securities
Inc. and Goldman, Sachs & Co. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and Wendy's Financing has
agreed to sell to them, the respective number of TECONS set forth opposite their
names below.
<TABLE>
<CAPTION>
----------------
UNDERWRITERS NUMBER OF TECONS
----------------
<S> <C>
J.P. Morgan Securities Inc. ................................................................. 1,482,500
Goldman, Sachs & Co. ........................................................................ 1,482,500
Bear, Stearns & Co. Inc. .................................................................... 115,000
Dean Witter Reynolds Inc. ................................................................... 115,000
Legg Mason Wood Walker, Incorporated......................................................... 115,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................................... 115,000
NatWest Securities Limited................................................................... 115,000
Oppenheimer & Co., Inc. ..................................................................... 115,000
Prudential Securities Incorporated........................................................... 115,000
Smith Barney Inc. ........................................................................... 115,000
UBS Securities LLC........................................................................... 115,000
---------
Total................................................................................... 4,000,000
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the TECONS offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
TECONS offered hereby if any are taken. Under certain circumstances, the
commitments of nondefaulting Underwriters may be increased as set forth in the
Underwriting Agreement.
The Company has been advised by the Underwriters that the Underwriters propose
to offer the TECONS at the public offering price set forth on the cover page of
this Prospectus Supplement and to certain securities dealers at such prices less
a concession of not in excess of $0.675. After the TECONS are released for sale
to the public, the offering price and other selling terms may from time to time
be varied by the Underwriters.
In view of the fact that substantially all of the proceeds of the sale of the
TECONS will be loaned by Wendy's Financing to Wendy's, the Underwriting
Agreement provides that Wendy's will pay to the Underwriters the underwriters'
compensation set forth on the cover page of this Prospectus Supplement and will
pay all expenses of the offering made hereby.
The Trust, the Company, the Company's directors and certain of the Company's
executive officers have agreed not to (i) offer, pledge to sell, file a
registration statement relating to, announce the intention to sell or otherwise
transfer or dispose of any TECONS, any shares of Wendy's Common Stock or any
securities convertible into or exchangeable for any shares of Wendy's Common
Stock (except for the TECONS offered hereby and the Wendy's Common Stock
issuable upon conversion of the Convertible Debentures or the Company's
presently outstanding convertible securities or pursuant to the Company's
existing dividend reinvestment plans or employee benefit plans as in effect on
the date hereof) or (ii) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership of Wendy's
Common Stock for a period of 90 days after the date of this Prospectus
Supplement, without the prior written consent of J.P. Morgan Securities Inc.;
provided that, notwithstanding the foregoing, such executive officers and
directors may transfer, pledge or otherwise dispose of shares of Wendy's Common
Stock to certain permitted transferees who agree to be similarly bound; and
provided further that the Company may make issuances of options or shares of
Wendy's Common Stock, or securities convertible into, or exercisable or
exchangeable therefor, pursuant to employee benefit plans registered on Form S-8
or, subject to certain limitations, as consideration for acquisitions.
Prior to the offering made hereby, there has been no market for the TECONS. The
TECONS have been authorized for listing on the New York Stock Exchange under the
symbol "WEN PrT," subject to official notice of issuance.
From time to time, J.P. Morgan Securities Inc. and its affiliates and Goldman,
Sachs & Co. have engaged in investment and/or commercial banking activities with
the Company and may continue to do so in the future.
The Trust and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
S-45
<PAGE> 46
LEGAL MATTERS
The validity of the Convertible Debentures, the Common Stock issuable upon
conversion, the Guarantee and certain matters relating thereto and certain U.S.
federal income taxation matters will be passed upon for Wendy's and Wendy's
Financing by Vorys, Sater, Seymour and Pease, Columbus, Ohio, and the validity
of the TECONS will be passed upon for the Company and Wendy's Financing by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the
Company and Wendy's Financing. Certain legal matters will be passed upon for the
Underwriters by Davis Polk & Wardwell, New York, New York.
S-46
<PAGE> 47
Prospectus
LOGO
WENDY'S INTERNATIONAL, INC.
Debt Securities, Preferred Stock,
Common Stock and Warrants
WENDY'S FINANCING I
WENDY'S FINANCING II
Trust Preferred Securities Fully and Unconditionally
Guaranteed by Wendy's International, Inc.
Wendy's International, Inc. ("Wendy's" or the "Company") may offer and issue
from time to time, together or separately, (i) its debt securities (the "Debt
Securities"), which may be either unsubordinated debt securities (the
"Unsubordinated Debt Securities") or subordinated debt securities (the
"Subordinated Debt Securities"), consisting of notes, debentures or other
secured or unsecured evidences of indebtedness in one or more series; (ii) its
preferred shares, $1.00 par value per share (the "Preferred Stock"); (iii) its
common shares, without par value (the "Common Stock"); and (iv) warrants to
purchase Debt Securities, Preferred Stock or Common Stock or any combination
thereof, as shall be designated by the Company at the time of the offering (the
"Warrants") in amounts, at prices and on terms to be determined at the time of
the offering.
Wendy's Financing I and Wendy's Financing II (each, a "Wendy's Trust"), each a
statutory business trust created under the laws of the State of Delaware, may
offer, from time to time, preferred securities, representing undivided
beneficial interests in the assets of the respective Wendy's Trust ("Trust
Preferred Securities"). The payment of periodic cash distributions
("distributions") with respect to Trust Preferred Securities of each of the
Wendy's Trusts out of moneys held by each of the Wendy's Trusts, and payment on
liquidation, redemption or otherwise with respect to such Trust Preferred
Securities, will be guaranteed by the Company to the extent described herein
(each, a "Trust Preferred Securities Guarantee"). See "Description of Trust
Preferred Securities Guarantees." The Company's obligations under the Trust
Preferred Securities Guarantees will be subordinate and junior in right of
payment to all other liabilities of the Company and rank pari passu with the
most senior preferred stock, if any, issued from time to time by the Company.
Subordinated Debt Securities may be issued and sold from time to time in one or
more series to a Wendy's Trust, or a trustee of such Wendy's Trust, in
connection with the investment of the proceeds from the offering of Trust
Preferred Securities and Trust Common Securities (as defined herein, together
the "Trust Securities") of such Wendy's Trust. The Subordinated Debt Securities
purchased by a Wendy's Trust may be subsequently distributed pro rata to holders
of Trust Preferred Securities and Trust Common Securities in connection with the
dissolution of such Wendy's Trust upon the occurrence of certain events as may
be described in an accompanying Prospectus Supplement. The Trust Preferred
Securities Guarantees, when taken together with the Company's other obligations
under Subordinated Debt Securities, the Indenture related thereto and the
Declaration (as defined below), including its obligations to pay costs,
expenses, debts and liabilities of the Wendy's Trusts (other than with respect
to the Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Trust Preferred
Securities. The Debt Securities, Preferred Stock, Common Stock, Warrants and the
Trust Preferred Securities and the related Trust Preferred Securities Guarantees
are collectively called the "Securities."
(continued on following page)
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 28, 1996
<PAGE> 48
(continued from previous page)
The Securities may be offered as separate series or issuances at an aggregate
initial public offering price not to exceed $200,000,000 or, if applicable, the
equivalent thereof in one or more foreign currencies, currency units, composite
currencies or in amounts determined by reference to an index as shall be
designated by the Company, in amounts, at prices and on terms to be determined
in light of market conditions at the time of sale and set forth in the
applicable Prospectus Supplement. The Prospectus Supplement relating to any
series of Securities will contain information concerning United States federal
income tax considerations, if applicable.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities, when issued, will be subordinated in right of payment to all
Senior Indebtedness (as hereinafter defined) of the Company. If the Debt
Securities are secured, the security, which may consist of real estate
properties or other assets owned by the Company, and any related mortgage will
be described in the Prospectus Supplement.
Certain specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement, including, where applicable, (i) in the case of Debt Securities, the
title, aggregate principal amount, denominations, maturity, subordination terms,
if any, any interest rate (which may be fixed or variable) and time of payment
of any interest, the right of the Company, if any, to defer payment of interest
on the Debt Securities and the maximum length of such deferral period, any terms
for redemption at the option of the Company or the holder, any terms for sinking
fund payments, any terms for conversion or exchange into other Securities,
currency or currencies of denomination and payment, if other than U.S. dollars,
any security applicable to Debt Securities which are secured, any listing on a
securities exchange and any other terms in connection with the offering and sale
of the Debt Securities in respect of which this Prospectus is delivered, as well
as the initial public offering price; (ii) in the case of Trust Preferred
Securities, the designation and number, liquidation preference per Trust
Preferred Security, initial public offering price, any listing on a securities
exchange, distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other Securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Trust
Preferred Securities and the terms upon which the proceeds of the sale of the
Trust Preferred Securities shall be used to purchase a specific series of
Subordinated Debt Securities of the Company, (iii) in the case of Preferred
Stock, the specific title, the aggregate amount, any dividend (including the
method of calculating payment of dividends), seniority, liquidation, redemption,
voting and other rights, any terms for any conversion or exchange into other
Securities, any listing on a securities exchange, the initial public offering
price and any other terms; (iv) in the case of Common Stock, the number of
shares of Common Stock and the terms of offering thereof; and (v) in the case of
Warrants, the designation and number, the exercise price, any listing of the
Warrants or the underlying Securities on a securities exchange and any other
terms in connection with the offering, sale and exercise of the Warrants.
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "WEN." Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on such exchange, subject to official notice of issuance.
The Company and/or each of the Wendy's Trusts may sell the Securities directly,
through agents, underwriters or dealers as designated from time to time, or
through a combination of such methods. See "Plan of Distribution." If agents of
the Company and/or any Wendy's Trust or any dealers or underwriters are involved
in the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Securities. The net proceeds to the
Company from such sale also will be set forth in the applicable Prospectus
Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, any accompanying
Prospectus Supplement or the documents incorporated or deemed incorporated by
reference herein, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or by any
underwriter, agent or dealer. This Prospectus and any Prospectus Supplement
shall not constitute an offer to sell or a solicitation of an offer to buy any
of the Securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus and any Prospectus Supplement nor any sale made
thereunder shall, under any circumstances, create any implication that the
information therein is correct as of any time subsequent to the date thereof.
2
<PAGE> 49
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Citicorp Center, 500 West Madison, 14th Floor, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. The Company's Common Stock is listed
on the New York Stock Exchange. Reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of The New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company and the Wendy's Trusts have filed a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (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 and the exhibits filed as part thereof.
Statements contained herein are qualified in their entirety by reference to the
Registration Statement and such exhibits.
No separate financial statements of any of the Wendy's Trusts have been included
herein. The Company does not consider that such financial statements would be
material to holders of the Trust Preferred Securities because (i) all of the
voting securities of each of the Wendy's Trusts will be owned, directly or
indirectly, by the Company, a reporting company under the Exchange Act, (ii)
each of the Wendy's Trusts has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in the
assets of such Wendy's Trust and investing the proceeds thereof in Subordinated
Debt Securities issued by the Company, and (iii) the Company's obligations
described herein and in any accompanying Prospectus Supplement under the
Declarations of each Trust, the guarantee issued with respect to Trust Preferred
Securities issued by that Trust, the Subordinated Debt Securities purchased by
that Trust and the related Indenture, taken together, constitute a full and
unconditional guarantee of payments due on the Trust Preferred Securities. See
"Description of Debt Securities" and "Description of Trust Preferred Securities
Guarantees."
The Wendy's Trusts are not currently subject to the information reporting
requirements of the Exchange Act. The Wendy's Trusts will become subject to such
requirements upon the effectiveness of the Registration Statement, although they
intend to seek and expect to receive exemptions therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995; the Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1996 and June 30, 1996, respectively; the Company's Current Report on
Form 8-K dated July 23, 1996; and all other documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (File No.
1-8116) subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities are incorporated herein by reference. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the request of any such person, a copy of all of
the documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to Wendy's International,
Inc., P.O. Box 256, 4288 West Dublin-Granville Road, Dublin, Ohio 43017,
Attention: Vice President of Investor Relations, telephone number (614)
764-3251.
THE COMPANY
Wendy's is primarily engaged in the business of operating, developing and
franchising a system of distinctive quick-service restaurants under the name
Wendy's Old Fashioned Hamburgers. The Company is one of the largest food service
organizations in the world. Each Wendy's restaurant offers a relatively standard
menu featuring the Company's core products of hamburgers and chicken breast
sandwiches prepared according to customer specifications and salads in either a
prepared or salad bar format. Wendy's menu also includes chili, baked and french
fried potatoes, chicken nuggets, desserts, soft drinks and children's meals. In
addition, Wendy's restaurants sell a variety of promotional and test products on
a limited basis, and a breakfast menu is available at certain Wendy's
3
<PAGE> 50
restaurants during the morning hours. As of June 30, 1996, there were 4,778
Wendy's restaurants in operation worldwide, of which 4,276 were lcoated in the
U.S. and 502 in 33 other countries. Of the total restaurants, 3,457 were
franchised and the remainder were Company operated.
In December 1995, Wendys acquired Tim Hortons. Tim Hortons is the second largest
restaurant chain in Canada, with 1,277 units as of June 30, 1996, and it is the
largest chain specializing in coffee and fresh baked goods including donuts,
bagels, muffins, croissants and cookies as well as sandwiches and soups. The
acquisition was accounted for as a pooling of interests and therefore the
Company's 1995 and prior financial statements have been restated to reflect the
operations of both Wendy's and Tim Hortons.
The Company was incorporated in 1969 under the laws of the State of Ohio. The
principal offices of the Company are located at 4288 West Dublin-Granville Road,
Dublin, Ohio 43017, and its telephone number is (614) 764-3100.
THE TRUSTS
Each of Wendy's Financing I and Wendy's Financing II is a statutory business
trust created under Delaware law pursuant to (i) a separate trust agreement
(each, as amended, a "Declaration") executed by the Company, as depositor for
such trust (the "Sponsor") and the Wendy's Trustees (as defined herein) for such
trust and (ii) the filing of a certificate of trust with the Delaware Secretary
of State on August 8, 1996. Each Wendy's Trust exists for the exclusive purposes
of (i) issuing the Trust Preferred Securities and common securities representing
undivided beneficial interests in the assets of such Trust (the "Trust Common
Securities" and, together with the Trust Preferred Securities, the "Trust
Securities"), (ii) investing the gross proceeds of the Trust Securities in a
specific series of Subordinated Debt Securities and (iii) engaging in only those
other activities necessary or incidental thereto. All of the Trust Common
Securities will be directly or indirectly owned by the Company. The Trust Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Trust Preferred Securities except that upon an event of default under
the Declaration, the rights of the holders of the Trust Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. The Company will, directly or indirectly, acquire Trust
Common Securities in an aggregate liquidation amount equal to 1% of the total
capital of each Wendy's Trust. Each Wendy's Trust has a term of approximately 35
years, but may earlier terminate as provided in the Declaration. Each Wendy's
Trust's business and affairs will be conducted by the trustees (the "Wendy's
Trustees") appointed by the Company, as the direct or indirect holder of all the
Trust Common Securities. Except in certain limited circumstances, the holder of
the Trust Common Securities will be entitled to appoint, remove or replace any
of, or increase or reduce the number of, the Wendy's Trustees of a Wendy's
Trust. The duties and obligations of the Wendy's Trustees shall be governed by
the Declaration of such Wendy's Trust. A majority of the Wendy's Trustees (the
"Regular Trustees") of each Wendy's Trust will be persons who are employees or
officers of or affiliated with the Company. One Wendy's Trustee of each Wendy's
Trust will be a financial institution which will be unaffiliated with the
Company and which shall act as property trustee and as indenture trustee for
purposes of the Trust Indenture Act of 1939 (the "Trust Indenture Act"),
pursuant to the terms set forth in a Prospectus Supplement (the "Property
Trustee"). In addition, unless the Property Trustee maintains a principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law, one Wendy's Trustee of each Wendy's Trust will have its
principal place of business or reside in the State of Delaware (the "Delaware
Trustee"). The Company will pay all fees and expenses related to the Wendy's
Trusts and the offering of Trust Securities. The payment of periodic
distributions with respect to Trust Preferred Securities of each of the Wendy's
Trusts out of moneys held by each of the Wendy's Trusts, and payment on
liquidation, redemption or otherwise with respect to such Trust Preferred
Securities, will be guaranteed by the Company to the extent described herein.
See "Description of Trust Preferred Securities Guarantees." The Company's
obligations under the Trust Preferred Securities Guarantees will be subordinate
and junior in right of payment to all other liabilities of the Company and rank
pari passu with the most senior preferred shares, if any, issued from time to
time by the Company. The office of the Delaware Trustee for each Wendy's Trust
in the State of Delaware is c/o First Chicago Delaware Inc., 300 King Street,
Wilmington, Delaware 19801. The principal place of business of each Wendy's
Trust shall be c/o Wendy's International, Inc., P.O. Box 256, 4288 West
Dublin-Granville Road, Dublin, Ohio 43017.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, proceeds
from the sale of the Securities will be used by the Company for general
corporate purposes, which may include the repayment of existing indebtedness.
Proceeds from the sale of Securities initially may be temporarily invested in
short-term securities.
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<PAGE> 51
RATIOS OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges for the
Company for the periods indicated:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------------- ------------------
DEC. 29, JAN. 3, JAN. 2, JAN. 1, DEC. 31 JULY 2, JUNE 30,
1991 1993 1994 1995 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.......................... 2.91x 3.47x 3.84x 4.68x 5.05x 4.85x 6.09x
</TABLE>
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. For this purpose, earnings includes income before income taxes
and fixed charges excluding capitalized interest. Fixed charges includes
interest expense, capitalized interest and one-third of rent expense,
representative of the interest factor. The Company did not have any preferred
stock dividends in any of the periods indicated, and, therefore, the ratio of
earnings to combined fixed charges and preferred stock dividends for each of the
periods indicated was equal to the ratio of earnings to fixed charges for such
period.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under the Indenture dated as of December
14, 1995 (as amended or supplemented, the "Senior Indenture") between the
Company and The Huntington National Bank, as trustee (the "Senior Indenture
Trustee"), or under a subordinated indenture between the Company and NBD Bank,
as trustee (the "Subordinated Indenture Trustee"). The Senior Indenture and the
Subordinated Indenture are sometimes referred to herein collectively as the
"Indentures" or, individually, as an "Indenture." The forms of the Indentures
have been filed as an exhibit to the Registration Statement of which this
Prospectus is a part or incorporated therein by reference. The Senior Indenture
permits the Company and the Senior Indenture Trustee, and the Subordinated
Indenture permits the Company and the Subordinated Indenture Trustee, to enter
into a Supplemental Indenture to provide for the appointment of another
qualifying bank or trust company to act as trustee with respect to a series of
unsubordinated Debt Securities or Subordinated Debt Securities, respectively.
Any such bank or trust company so appointed will be identified in the Prospectus
Supplement relating to the particular Debt Securities offered thereby (the
"Offered Debt Securities"). The Senior Indenture Trustee and the Subordinated
Indenture Trustee, as well as any such other bank or trust company as shall have
been appointed to act with respect to a series of Offered Debt Securities, are
sometimes referred to herein collectively as the "Trustees" or individually as a
"Trustee."
The Debt Securities will represent unsecured general obligations of the Company,
unless otherwise provided in the Prospectus Supplement. As indicated in the
applicable Prospectus Supplement, the Debt Securities will either be senior to
all future subordinated indebtedness of the Company and pari passu with other
current and future unsecured, unsubordinated indebtedness of the Company or, in
the alternative, subordinate in right of payment to current and future senior
debt and pari passu with other future subordinated indebtedness of the Company.
The following summaries of certain provisions of the Debt Securities and the
Indentures do not purport to be complete and are subject to and are qualified in
their entirety by reference to all the provisions of the Indenture applicable to
a particular series of Offered Debt Securities (the "Applicable Indenture"),
including the definitions of certain terms therein. Wherever particular
Sections, Articles or defined terms of the Applicable Indenture are referred to,
it is intended that such Sections, Articles or defined terms shall be
incorporated herein by reference. Article and Section references used herein are
references to the Applicable Indenture or the Indentures, as the case may be.
Capitalized terms not otherwise defined herein shall have the respective
meanings given to them in the Applicable Indenture.
In the event Subordinated Debt Securities are issued to a Wendy's Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Wendy's Trust, such Subordinated Debt Securities will be issued pursuant to
the Subordinated Indenture and subsequently may be distributed pro rata to the
holders of such Trust Securities in connection with the dissolution of such
Wendy's Trust upon the occurrence of certain events described in the Prospectus
Supplement relating to such Trust Securities. Only one series of Subordinated
Debt Securities will be issued to a Wendy's Trust or a trustee of such trust in
connection with the issuance of Trust Securities by such Wendy's Trust.
The following description sets forth certain general terms and provisions of the
Debt Securities to which any Prospectus Supplement may relate. The particular
terms of the Offered Debt Securities and the extent, if any, to which such
general provisions may not apply to the Offered Debt Securities will be
described in the Prospectus Supplement relating to such Offered Debt Securities.
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<PAGE> 52
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
that may be issued thereunder and provide that Debt Securities may be issued
thereunder from time to time in one or more series. Reference is made to the
Prospectus Supplement relating to the Offered Debt Securities, which shall set
forth the following terms, as applicable, of the Offered Debt Securities: (1)
the title of the Offered Debt Securities; (2) any limit on the aggregate
principal amount of the Offered Debt Securities; (3) the price (expressed as a
percentage of the aggregate principal amount thereof) at which the Offered Debt
Securities will be issued; (4) the Person to whom any interest on the Offered
Debt Securities will be payable, if other than the Person in whose name such
Offered Debt Securities (or one or more Predecessor Securities) are registered
on any Regular Record Date; (5) the date or dates on which the principal of the
Offered Debt Securities will be payable; (6) the rate or rates per annum (which
may be fixed, floating or adjustable) at which the Offered Debt Securities will
bear interest, if any, or the formula pursuant to which such rate or rates shall
be determined, the date or dates from which such interest will accrue and the
dates on which such interest, if any, will be payable and the Regular Record
Dates for such interest payment dates; (7) the place or places where principal
of (and premium, if any) and interest, if any, on Offered Debt Securities will
be payable; (8) if applicable, the price at which, the periods within which and
the terms and conditions upon which the Offered Debt Securities may be redeemed
at the option of the Company, pursuant to a sinking fund or otherwise; (9) if
applicable, any obligation of the Company to redeem or purchase Offered Debt
Securities pursuant to any sinking fund or analogous provisions or at the option
of a holder thereof (each, a "Holder"), and the period or periods within which,
the price or prices at which and the terms and conditions upon which the Offered
Debt Securities will be redeemed or purchased, in whole or in part; (10) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Offered Debt Securities will be issuable; (11) the
currency or currencies, including composite currencies or currency units, in
which payment of the principal of (or premium, if any) or interest, if any, on
any of the Offered Debt Securities will be payable if other than the currency of
the United States of America; (12) if the amount of payments of principal of (or
premium, if any) or interest, if any, on the Offered Debt Securities may be
determined with reference to one or more indices, the manner in which such
amounts will be determined; (13) if the principal of (or premium, if any) or
interest, if any, on any of the Offered Debt Securities of the series is to be
payable, at the election of the Company or a Holder thereof, in one or more
currencies, including composite currencies, or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies, including composite currencies, or currency units in which payment
of the principal of (or premium, if any) or interest, if any, on Securities of
such series as to which such election is made will be payable, and the periods
within which and the terms and conditions upon which such election is to be
made; (14) the portion of the principal amount of the Offered Debt Securities,
if other than the entire principal amount thereof, payable upon acceleration of
maturity thereof; (15) whether all or any part of the Offered Debt Securities
will be issued in the form of a permanent Global Security or Securities, as
described under "Permanent Global Securities," and, if so, the depositary for,
and other terms relating to, such permanent Global Security or Securities; (16)
any event or events of default applicable with respect to the Offered Debt
Securities in addition to those provided in the Applicable Indenture; (17) any
other covenant or warranty included for the benefit of the Offered Debt
Securities in addition to (and not inconsistent with) those included in the
Indentures for the benefit of Debt Securities of all series, or any other
covenant or warranty included for the benefit of the Offered Debt Securities in
lieu of any covenant or warranty included in the Indenture for the benefit of
Offered Debt Securities, or any combination of such covenants, warranties or
provisions; (18) any restriction or condition on the transferability of the
Offered Debt Securities; (19) if applicable, that such Offered Debt Securities,
in whole or any specified part, are defeasible pursuant to the provisions of the
Applicable Indenture described under "Defeasance and Covenant Defeasance"; (20)
any authenticating or paying agents, registrars, conversion agents or any other
agents with respect to the Offered Debt Securities; (21) designation (including
whether the Offered Debt Securities are senior debt or subordinated debt and
whether such debt is convertible); (22) the terms, if any, on which such Offered
Debt Securities will be subordinate to other debt of the Company; (23) any
rights of the Holders thereof to convert such Offered Debt Securities into other
securities or property of the Company; and (24) any other specific terms or
provisions of the Offered Debt Securities not inconsistent with the Applicable
Indenture. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Offered Debt Securities are to be issued as registered securities without
coupons in denominations of $1,000 or any integral multiple of $1,000. (Section
302). No service charge will be made for any transfer or exchange of such
Offered Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(Section 305)
Debt Securities may be issued under the Indentures as Original Issue Discount
Debt Securities to be offered and sold at a substantial discount below their
stated principal amount. Special Federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus Supplement
relating thereto. "Original Issue Discount Debt Security" means any security
which provides for an amount less than the principal amount thereof to be due
and payable upon the declaration of acceleration of the maturity thereof upon
the occurrence and continuance of an Event of Default. (Section 101)
If the Debt Securities are denominated in whole or in part in any currency other
than United States dollars, if the principal of (and premium, if any) or
interest, if any, on the Debt Securities are to be payable, at the election of
the Company or a Holder thereof, in a
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<PAGE> 53
currency or currencies other than that in which such Debt Securities are to be
payable, or if any index is used to determine the amount of payments of
principal of, premium, if any, or interest on any series of the Debt Securities,
special Federal income tax, accounting and other considerations applicable
thereto will be described in the Prospectus Supplement relating thereto.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest payment. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement, principal of
and any premium and interest on the Debt Securities of a particular series will
be payable at the office of such Paying Agent or Paying Agents as the Company
may designate for such purpose from time to time, except that, at the option of
the Company, payment of any interest may be made by check mailed to the address
of the Person entitled thereto as such address appears in the Security Register.
Unless otherwise indicated in the applicable Prospectus Supplement, the
corporate trust office of the applicable Trustee in Columbus, Ohio, New York,
New York or Wilmington, Delaware, as the case may be, will be designated as the
Company's sole Paying Agent for payments with respect to Debt Securities of each
series.
Any other Paying Agents initially designated by the Company for the Debt
Securities of a particular series will be named in the applicable Prospectus
Supplement. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent in each place of payment for the Debt Securities of a
particular series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 1003)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Indebtedness, including the Senior Debt Securities. Upon
any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company the holders of Senior Indebtedness will
first be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Indebtedness before the holders of the
Subordinated Debt Securities will be entitled to receive or retain any payment
in respect of the principal of (and premium, if any) or interest, if any, on the
Subordinated Debt Securities. (Subordinated Indenture Section 1502)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not Holders of Senior Indebtedness or
Subordinated Debt Securities may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of the Subordinated
Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due thereon before the Holders of Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities. (Subordinated Indenture
Section 1503)
No payments on account of principal (or premium, if any) or interest, if any, in
respect of the Subordinated Debt Securities may be made if there shall have
occurred and be continuing a default in the payment of principal of (or premium,
if any) or interest on Senior Indebtedness or an event of default with respect
to any Senior Indebtedness resulting in the acceleration of the maturity
thereof, or if any judicial proceeding shall be pending with respect to any such
default. (Subordinated Indenture Section 1504)
"Debt" means (without duplication and without regard to any portion of principal
amount that has not accrued and to any interest component thereof (whether
accrued or imputed) that is not due and payable) with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (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 (but excluding trade accounts payable or accrued
liabilities
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<PAGE> 54
arising in the ordinary course of business); (v) every capital lease obligation
of such Person; and (vi) every obligation of the type referred to in clauses (i)
through (v) of another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed or is responsible or liable,
directly or indirectly, as obligor or otherwise. (Subordinated Indenture Section
101)
"Senior Indebtedness" means the principal of (and premium, if any) and interest,
if any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent that such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Subordinated Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debt
Securities, or to other Debt which is pari passu with, or subordinated to the
Subordinated Debt Securities; provided, however, that Senior Indebtedness shall
not be deemed to include the Subordinated Debt Securities. (Subordinated
Indenture Section 101)
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior
Indebtedness.
The applicable Prospectus Supplement may further describe the provisions, if
any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CERTAIN COVENANTS OF THE COMPANY
The Senior Indenture, but not the Subordinated Indenture, includes the following
covenants:
Limitation on Liens
The Senior Indenture provides that the Company may not, and may not permit any
Domestic Subsidiary to, create or suffer to exist any Lien to secure any
Indebtedness of the Company or any Subsidiary upon any Principal Property, or
upon any shares of capital stock or evidences of Indebtedness issued by any
Domestic Subsidiary and owned by the Company or any Domestic Subsidiary (whether
such Principal Property, shares or evidences of indebtedness were owned as of
the date of the Senior Indenture or thereafter acquired), without making, or
causing such Domestic Subsidiary to make, effective provision to secure all of
the Debt Securities issued under the Senior Indenture and then Outstanding by
such Lien, equally and ratably with any and all other Indebtedness thereby
secured, so long as such Indebtedness is so secured, unless, after giving effect
thereto, the sum of (A) the principal amount of Indebtedness secured by all
Liens incurred after the date of the Senior Indenture and otherwise prohibited
by the Senior Indenture and (B) the Attributable Value of all Sale and Leaseback
Transactions entered into after the date of the Senior Indenture and otherwise
prohibited by the Senior Indenture does not exceed 10% of Consolidated
Capitalization. The foregoing restrictions shall not apply to Indebtedness
secured by Liens existing on the date of the Senior Indenture or to: (i) Liens
on any property existing at the time of the acquisition thereof; (ii) Liens on
property of a corporation existing at the time such corporation is merged into
or consolidated with the Company or a Domestic Subsidiary or at the time of a
sale, lease or other disposition of the properties of such corporation (or a
division thereof) as an entirety or substantially as an entirety to the Company
or a Domestic Subsidiary, provided that such Lien as a result of such merger,
consolidation, sale, lease or other disposition is not extended to property
owned by the Company or such Domestic Subsidiary immediately prior thereto;
(iii) Liens on property of a corporation existing at the time such corporation
becomes a Domestic Subsidiary; (iv) Liens securing Indebtedness of a Domestic
Subsidiary to the Company or to another Domestic Subsidiary; (v) Liens to secure
all or part of the cost of acquisition, construction, development or improvement
of the underlying property, or to secure Indebtedness incurred to provide funds
for any such purpose, provided that the commitment of the creditor to extend the
credit secured by any such Lien shall have been obtained not later than 24
months after the later of (a) the completion of the acquisition, construction,
development or improvement of such property or (b) the placing in operation of
such property or of such property as so constructed, developed or improved; (vi)
Liens on any property created, assumed or otherwise brought into existence in
contemplation of the sale or other disposition of the underlying property,
whether directly or indirectly, by way of share disposition or otherwise,
provided that the Company must have disposed of such property within 180 days
after the creation of such Liens and that any Indebtedness secured by such Liens
shall be without recourse to the Company or any Subsidiary; (vii) Liens in favor
of the United States of America or any State thereof, or any department, agency
or instrumentality or political subdivision thereof, to secure partial,
progress, advance or other payments; (viii) Liens to secure Indebtedness of
joint ventures in which the Company or a Domestic Subsidiary has an interest, to
the extent such Liens are on property or assets of, or equity interests in, such
joint ventures; (ix) Liens to secure Indebtedness in connection with financing
by the Company or a Domestic Subsidiary of the acquisition, development or
construction of one or more restaurants by or for one or more franchisees of the
Company or of a Domestic Subsidiary; and (x) any extension, renewal, replacement
or refunding of any Lien existing on the date of the Senior Indenture or
referred to in clauses (i) to (iii), (v) and (ix), provided that the principal
amount of Indebtedness secured thereby and not otherwise authorized by clauses
(i) to (iii), (v) or (ix) shall not exceed the principal amount of Indebtedness,
plus any premium or fee payable in connection with any such extension,
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<PAGE> 55
renewal, replacement or refunding, so secured at the time of such extension,
renewal, replacement or refunding. (Senior Indenture Section 1008)
Limitation on Sale and Leaseback Transactions
The Senior Indenture provides that the Company may not, and may not permit any
Domestic Subsidiary to, enter into any Sale and Leaseback Transaction with
respect to any Principal Property, unless, either (i) the Company or such
Domestic Subsidiary would otherwise be entitled to issue, assume or guarantee
Indebtedness secured by a Lien on such Principal Property without equally and
ratably securing the outstanding Debt Securities under the Indenture; (ii) the
Company or such Domestic Subsidiary applies, within 180 days after the effective
date of such Sale and Leaseback Transaction, an amount equal to the Net
Available Proceeds therefrom to (A) the acquisition of one or more Principal
Properties or (B) to the retirement of the Debt Securities or the repayment of
other Indebtedness of the Company or a Domestic Subsidiary (other than such
Indebtedness owned by the Company or a Domestic Subsidiary) which, in the case
of such Indebtedness of the Company, is not subordinate and junior in right of
payment to the prior payment of the Debt Securities; or (iii) after giving
effect thereto, the sum of (A) the principal amount of Indebtedness secured by
all Liens incurred after the date of the Senior Indenture and otherwise
prohibited by the Senior Indenture and (B) the Attributable Value of all Sale
and Leaseback Transactions entered into after the date of the Senior Indenture
and otherwise prohibited by the Senior Indenture does not exceed 10% of
Consolidated Capitalization. The foregoing restrictions will not apply to (w) a
Sale and Leaseback Transaction providing for a lease for a term, including any
renewal thereof, of not more than three years, by the end of which term it is
intended that the use of such Principal Property by the lessee will be
discontinued; (x) a Sale and Leaseback Transaction between the Company and a
Domestic Subsidiary or between Domestic Subsidiaries; (y) a Sale and Leaseback
Transaction between the Company or a Domestic Subsidiary and a joint venture in
which the Company or a Domestic Subsidiary has an interest; or (z) a Sale and
Leaseback Transaction between the Company or a Domestic Subsidiary and any other
Person primarily for the purpose of financing the acquisition, development or
construction of one or more restaurants by one or more franchisees of the
Company or of a Domestic Subsidiary. (Senior Indenture Section 1009)
The Subordinated Indenture, but not the Senior Indenture, provides that if
Subordinated Debt Securities are issued to a Wendy's Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such Wendy's Trust
and (i) there shall have occurred any event that would constitute an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the related Trust Preferred Securities Guarantee or Trust
Common Securities Guarantee, or (iii) the Company shall have given notice of its
election to defer payments of interest on such Subordinated Debt Securities by
extending the interest payment period as provided in the Subordinated Indenture
and such period, or any extension thereof, shall be continuing, then (a) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock (other than (i) purchases or acquisitions of shares of
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock of the Company or the security being converted
or exchanged) or make any guarantee payments with respect to the foregoing, and
(b) the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company which rank pari passu with or junior to such
Subordinated Debt Securities.
The Subordinated Indenture further provides that, in the event Subordinated Debt
Securities are issued to a Wendy's Trust or a trustee of such trust in
connection with the issuance of Trust Securities of such Wendy's Trust, for so
long as such Trust Securities remain outstanding, the Company will covenant (i)
to directly or indirectly maintain 100% ownership of the Trust Common Securities
of such Wendy's Trust; provided, however, that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of such Trust
Common Securities, (ii) to use its reasonable efforts to cause such Wendy's
Trust (a) to remain a statutory business trust, except in connection with the
distribution of Subordinated Debt Securities to the holders of Trust Securities
in liquidation of such Wendy's Trust, the redemption of all of the Trust
Securities of such Wendy's Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Wendy's Trust, and
(b) to continue to be classified as a grantor trust for United States federal
income tax purposes and (iii) to use its reasonable efforts to cause each holder
of Trust Securities to be treated as owning an undivided beneficial interest in
the Subordinated Debt Securities. (Subordinated Indenture Section 1009)
RESTRICTIONS ON MERGER AND SALE OF ASSETS
The Indentures provide that the Company may not consolidate with or merge into
any other Person or sell, lease or otherwise transfer its property and assets
as, or substantially as, an entirety to any Person, and the Company may not
permit any Person to merge into or consolidate with the Company unless (i)
either (A) the Company will be the resulting or surviving entity or (B) any
successor or purchaser is a corporation, partnership, limited liability company
or trust organized under the laws of the United States of America, any
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State or the District of Columbia, and any such successor or purchaser expressly
assumes the Company's obligations on the Debt Securities under a supplemental
Indenture; (ii) immediately after giving effect to the transaction no Event of
Default, and no event which after notice or lapse of time or both would become
an Event of Default, shall have occurred and be continuing; and (iii) certain
other conditions are met. (Section 801). Upon any consolidation or merger into
any other Person or any conveyance, transfer or lease of the Company's assets
substantially as an entirety to any Person, the successor Person shall succeed
to, and be substituted for, the Company under the Indentures, and the Company,
except in the case of a lease, shall be relieved of all obligations and
covenants under the Indentures and the Debt Securities to the extent it was the
predecessor Person. (Section 802)
CONVERSION RIGHTS
The terms and conditions, if any, upon which Debt Securities are convertible
into Common Stock, Preferred Stock or other securities of the Company will be
set forth in the applicable Prospectus Supplement relating thereto. Such terms
will include the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the Holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of redemption of such
Debt Securities.
EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Debt Securities, the following events are, in the case of clauses (a)
through (e) and (g), defined in the Senior Indenture or, in the case of clauses
(a) through (c) and (e) through (g), defined in the Subordinated Indenture as
"Events of Default" with respect to Debt Securities of any series: (a) failure
to pay principal (including any sinking fund payment) of (or premium, if any,
on) any Debt Security of that series when due; (b) failure to pay any interest
on any Debt Security of that series when due, continued for 30 days; (c) failure
to perform any other covenant or agreement of the Company under the Applicable
Indenture (other than a covenant the performance of which is dealt with
specifically elsewhere in the Applicable Indenture or which has been included in
the Applicable Indenture solely for the benefit of a series of Debt Securities
other than that series), continued for 90 days after written notice as provided
in the Applicable Indenture; (d) failure to pay when due (after applicable grace
periods as provided in the Applicable Indenture) the principal of, or
acceleration of, any indebtedness for money borrowed by the Company having an
aggregate principal amount outstanding equal to at least $25 million, if such
indebtedness is not discharged, or such acceleration is not annulled, within 10
days after written notice as provided in the Applicable Indenture; (e) certain
events of bankruptcy, insolvency or reorganization; (f) in the event
Subordinated Debt Securities are issued to a Wendy's Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such Wendy's Trust,
the voluntary or involuntary dissolution, winding-up or termination of such
Wendy's Trust, except in connection with the distribution of Subordinated Debt
Securities to the holders of Trust Securities in liquidation of such Wendy's
Trust, the redemption of all of the Trust Securities of such Wendy's Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration of such Wendy's Trust; and (g) any other Event of Default provided
with respect to Debt Securities of that series. (Section 501)
No Event of Default with respect to Debt Securities of a particular series shall
necessarily constitute an Event of Default with respect to Debt Securities of
any other series. (Section 301) The Holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of any series shall have the right,
subject to reasonable provisions for indemnification of the Trustee, to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee under the Applicable Indenture or exercising any trust or power
conferred on the Trustee with respect to Debt Securities of that series.
(Section 512)
If an Event of Default (other than an Event of Default specified in clause (e)
of the second preceding paragraph) with respect to Debt Securities of any series
at the time Outstanding shall occur and be continuing under the Applicable
Indenture, either the Trustee or the Holders of at least 25% in principal amount
of the Outstanding Debt Securities of that series may, by a notice in writing to
the Company (and to the Trustee if given by the Holders), declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of that series to be due and
payable immediately; provided, however, that under certain circumstances the
Holders of a majority in aggregate principal amount of Outstanding Debt
Securities of that series may rescind or annul such declaration and its
consequences. (Section 502). If an Event of Default specified in clause (e) of
the next preceding paragraph occurs, the outstanding Debt Securities
automatically will become immediately payable without any declaration or other
act on the part of the Trustee or any Holder. (Section 502). For information as
to waiver of defaults, see "Modification and Waiver" herein.
Reference is made to the Prospectus Supplement relating to any series of Offered
Debt Securities which are Original Issue Discount Securities for the particular
provisions relating to the principal amount of such Original Issue Discount
Securities due on acceleration upon the occurrence of an Event of Default and
the continuation thereof.
No Holder of a Debt Security of any series will have any right to institute any
proceeding with respect to the Applicable Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the applicable
Trustee written notice of a continuing Event of
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Default with respect to Debt Securities of that series and unless also the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of the same series shall have made written request, and offered
reasonable indemnity to the applicable Trustee, to institute such proceeding as
trustee, and the applicable Trustee shall not have received from the Holders of
a majority in aggregate principal amount of the Outstanding Debt Securities of
the same series a direction inconsistent with such request and shall have failed
to institute such proceeding within 60 days. (Section 507). However, such
limitations do not apply to a suit instituted by a Holder of any Debt Security
for enforcement of payment of the principal of (or premium, if any) or interest,
if any, on such Debt Security on or after the respective due dates expressed in
such Debt Security. (Section 508)
Subject to the provisions of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), the Trustee will be under no obligation to exercise any
of its rights or powers under the Applicable Indenture at the request of any of
the Holders of Debt Securities unless they shall have offered to the applicable
Trustee security or indemnity in form and substance reasonably satisfactory to
such Trustee against the costs, expenses and liabilities which might be incurred
by it in compliance with such request. (Section 603)
The Company will be required to furnish to each Trustee annually a statement by
certain officers of the Company as to whether the Company is in default in the
performance and observance of any of the terms, provisions and conditions of the
Applicable Indenture. (Section 1004)
Notwithstanding anything in the Indentures to the contrary, the right of any
holder of a Debt Security to receive payment of the principal of and interest on
such Debt Security, on and after the respective due dates expressed in such Debt
Security (as the same may be extended in accordance with the terms of such Debt
Security) or to institute suit for the enforcement of any such payment shall not
be impaired or affected without the consent of such holder, including, in the
case of a Subordinated Debt Security issued to a Wendy's Trust, the holders of
the Trust Preferred Securities issued by such Wendy's Trust. In addition, in the
case of a Subordinated Debt Security issued to a Wendy's Trust, if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal then a holder of Trust
Preferred Securities of such Wendy's Trust may directly institute a proceeding
against the Company for payment.
MODIFICATION AND WAIVER
Each Indenture will provide that modifications and amendments of such Indenture
may be made by the Company and the applicable Trustee, with the consent of the
Holders of not less than a majority of principal amount of each series of the
Outstanding Debt Securities of each series under such Indenture affected by the
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Outstanding Debt
Security affected thereby: (a) change the Stated Maturity of the principal of
(or premium, if any) or any installment of principal or interest, if any, on any
such Debt Security; (b) reduce the principal amount of (or premium, if any) or
the interest rate, if any, on any such Debt Security or the principal amount due
upon acceleration of an Original Issue Discount Security; (c) adversely affect
any right of repayment at the option of the Holder of any such Debt Security;
(d) reduce the amount of, or postpone the date fixed for, the payment of any
sinking fund or analogous obligation; (e) change the place or currency of
payment of principal of (or premium, if any) or the interest, if any, on any
such Debt Security; (f) impair the right to institute suit for the enforcement
of any such payment on or with respect to any such Debt Security on or after the
Stated Maturity (or, in the case of redemption, on or after the Redemption
Date); (g) reduce the percentage of the principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is necessary to
modify or amend the Applicable Indenture; (h) modify the foregoing requirements
or reduce the percentage of Outstanding Debt Securities necessary to waive
compliance with certain provisions of the Applicable Indenture or for waiver of
certain defaults; or (i) in the case of the Subordinated Indenture only, any
change that adversely affects the conversion rights of any Outstanding Debt
Securities or adversely affects the ranking of such Outstanding Debt Securities.
(Section 902)
If a Wendy's Trust or the Property Trustee of a Wendy's Trust holds a series of
Subordinated Debt Securities no such amendment or modification which requires
the approval of the holders of a certain percentage in aggregate principal
amount of Subordinated Debt Securities shall be effective without the approval
of the holders of the same percentage of aggregate liquidation preference of
Trust Preferred Securities of such Wendy's Trust. (Subordinated Indenture
Section 902)
The holders of at least a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Company with certain restrictive provisions of
the Applicable Indenture and waive any past default under such Indenture, except
a default in the payment of principal, premium or interest or in the performance
of certain covenants. (Senior Indenture Sections 1010 and 513; Subordinated
Indenture Sections 1008 and 513)
Each Indenture provides that a supplemental indenture which changes or
eliminates any covenant or other provision of such Indenture which has expressly
been included solely for the benefit of one or more particular series of Debt
Securities, or which modifies the rights of the Holders of such series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under such Indenture of the Holders of Debt Securities of any other
series. (Section 901)
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Each Indenture provides that modifications and amendments of such Indenture may
be made by the Company and the applicable Trustee, without the consent of the
Holders of any series of Debt Securities issued thereunder: (1) to evidence the
succession of another corporation to the Company and assumption by any such
successor of the covenants of the Company in such Indenture and in the Debt
Securities issued thereunder; (2) to add to the covenants of the Company or to
add any additional events of default; (3) to permit or facilitate the issuance
of Debt Securities in bearer form or to provide for uncertificated Debt
Securities to be issued thereunder; (4) to change or eliminate any provision of
such Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior to the execution of such supplemental indenture which are entitled
to the benefit of such provision; (5) to secure any Debt Securities issued
thereunder; (6) to establish the form or terms of Debt Securities issued
thereunder; (7) to evidence and provide for a successor trustee under such
Indenture with respect to one or more series of Debt Securities issued
thereunder or to provide for or facilitate the administration of the trusts
under such Indenture by more than one trustee; or (8) to cure any ambiguity, to
correct or supplement any provision in such Indenture that may be inconsistent
with any other provision of such Indenture or to make any other provisions with
respect to matters or questions arising under such Indenture, provided that such
action shall not adversely affect the interests of the Holders of any series of
Debt Securities issued thereunder. (Section 901)
The Indentures provide that in determining whether the Holders of the requisite
principal amount of the Outstanding Debt Securities of any series have given or
taken any direction, notice, consent, waiver or other action under the Indenture
as of any date, (i) the principal amount of an Original Issue Discount Debt
Security that will be deemed to be Outstanding will be the amount of the
principal thereof that would be due and payable as of such date upon
acceleration of the Maturity thereof to such date; (ii) if, as of such date, the
principal amount payable at the Stated Maturity of a Debt Security is not
determinable (for example, because it is based on an index), the principal
amount of such Debt Security deemed to be Outstanding as of such date will be an
amount determined in the manner prescribed for such Debt Security; and (iii) the
principal amount of a Security denominated in one or more foreign currencies or
currency units that will be deemed to be Outstanding will be the United States
dollar equivalent, determined as of such date in the manner prescribed for such
Debt Security, of the principal amount of such Debt Security (or, in the case of
a Debt Security described in clause (i) or (ii) above, of the amount described
in such clause). Certain Debt Securities, including those for which payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased pursuant to the Applicable Indenture, will
not be deemed to be Outstanding. (Section 101) For purposes of the Indentures,
the Debt Securities of any series "Outstanding" thereunder are deemed to exclude
those held by Persons that control, are controlled by or are under common
control with the Company. (Section 101)
Except in certain limited circumstances, the Company will be entitled to set any
day as a record date for the purpose of determining the Holders of Outstanding
Debt Securities of any series entitled to give or take any direction, notice,
consent, waiver or other action under the Indentures, in the manner and subject
to the limitations provided in the Indenture. In certain limited circumstances,
the Trustee will be entitled to set a record date for action by Holders. If a
record date is set for any action to be taken by Holders of a particular series,
such action may be taken only by persons who are Holders of Outstanding Debt
Securities of that series on the record date. To be effective, such action must
be taken by Holders of the requisite principal amount of such Debt Securities
within a specified period following the record date. For any particular record
date, this period will be 180 days or such shorter period as may be specified by
the Company (or the Trustee, if it set the record date), and may be shortened or
lengthened (but not beyond 180 days) from time to time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Indentures (which will
be indicated in the Prospectus Supplement applicable thereto), that the Company
may elect either (A) to defease and be discharged from any and all obligations
with respect to such Debt Securities then outstanding (except for the
obligations to exchange or register the transfer of such Debt Securities, to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of the Debt Securities, and to hold
monies for payments in trust) ("defeasance"), or (B) to be released from its
obligations with respect to such Debt Securities concerning the restrictions
described under "Restriction on Merger and Sale of Assets" (Section 801) and any
other covenants applicable to such Debt Securities which are subject to covenant
defeasance ("covenant defeasance"), and the occurrence of an event described and
notice thereof in clauses (c) and, in the case of the Senior Indenture only, (d)
under "Events of Default and Notice Thereof" (with respect to covenants
determined, pursuant to Section 301 of the Applicable Indenture, to be subject
to covenant defeasance) shall no longer be an Event of Default, in each case,
upon the irrevocable deposit with the applicable Trustee (or other qualifying
trustee), in trust for such purpose, of money, and/or U.S. Government
Obligations (as defined in the Indentures) which through the payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient without reinvestment to pay the principal of (and premium, if
any) and interest, if any, on such Debt Securities, and any mandatory sinking
fund or analogous payments thereon, on the scheduled due dates therefor. Such a
trust may only be established if, among other things, (i) the Company has
delivered to the applicable Trustee an opinion of counsel (as specified in the
Applicable Indenture) to the effect that the Holders of such Debt Securities
will not recognize gain or loss
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for Federal income tax purposes as a result of such defeasance or 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 defeasance
or covenant defeasance had not occurred, (ii) no Event of Default or event which
with the giving of notice or lapse of time, or both, would become an Event of
Default under the Indenture shall have occurred and be continuing on the date of
such deposit and (iii) certain other customary conditions precedent are
satisfied. In the case of defeasance under clause (A) above, the opinion of
counsel referred to in clause (i) above must refer to and be based on a ruling
of the Internal Revenue Service issued to the Company or published as a revenue
ruling or on a change in applicable Federal income tax law, in each case after
the date of such Indenture. (Article Thirteen)
The Company may exercise the defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of the covenant defeasance option.
If the Company exercises the defeasance option, payment of such Debt Securities
may not be accelerated because of an Event of Default. If the Company exercises
the covenant defeasance option, payment of such Debt Securities may not be
accelerated by reference to the covenants noted under clause (B) above. In the
event the Company omits to comply with the remaining obligations with respect to
such Debt Securities under such Indenture after exercising its covenant
defeasance option and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the applicable Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default, because the
required deposit in the defeasance trust is based upon scheduled cash flows,
rather than market values, which will vary depending on prevailing interest
rates and other factors. However, the Company will remain liable in respect of
such payments.
The Prospectus Supplement may further describe the provisions, if any,
applicable to defeasance or covenant defeasance with respect to the Debt
Securities of a particular series.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the Senior
Indenture. Reference is made to the Applicable Indenture with respect to any
particular series of Debt Securities for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
(Section 101)
"Attributable Value" in respect of any Sale and Leaseback Transaction means, as
of the time of determination, the lesser of (i) the sale price of the Principal
Property so leased multiplied by a fraction the numerator of which is the
remaining portion of the base term of the lease included in such Sale and
Leaseback Transaction and the denominator of which is the base term of such
lease, and (ii) the total obligation (discounted to present value at the highest
rate of interest specified by the terms of any series of Debt Securities then
Outstanding compounded semi-annually) of the lessee for rental payments (other
than amounts required to be paid on account of property taxes as well as
maintenance, repairs, insurance, water rates and other items which do not
constitute payments for property rights) during the remaining portion of the
base term of the lease included in such Sale and Leaseback Transaction.
"Consolidated Capitalization" of the Company means consolidated total assets
less consolidated current liabilities, all as shown on a consolidated balance
sheet of the Company and all Subsidiaries (whether or not consolidated for
accounting purposes).
"Domestic Subsidiary" means any Subsidiary which owns a Principal Property.
"Indebtedness" of any Person means (without duplication), with respect to any
Person, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (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 and (iv) every obligation of the type referred to in
clauses (i) through (iii) of another Person the payment of which such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise (but only, in the case of clause (iv), to the extent such
Person has guaranteed or is responsible or liable for such obligations).
"Lien" means, with respect to any property or assets, any mortgage or deed of
trust, pledge, hypothecation, assignment, security interest, lien, encumbrance,
or other security arrangement of any kind or nature whatsoever on or with
respect to such property or assets (including any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Net Available Proceeds" from any Sale Transaction by any Person means cash or
readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiree of
Indebtedness or obligations relating to the properties or assets that are the
subject of such Sale Transaction or received in any other noncash form)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
as a consequence of such Sale Transaction; (ii) all payments made by such Person
or its Subsidiaries on any Indebtedness which is secured in whole or in part by
any such properties and assets in accordance with the terms of any Lien upon or
with respect to any such properties and assets or which must, by the terms of
such Lien, or in order to obtain a
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necessary consent to such Sale Transaction or by applicable law, be repaid out
of the proceeds from such Sale Transaction; and (iii) all distributions and
other payments made to minority interest holders in Subsidiaries of such Person
or joint ventures as a result of such Sale Transaction; provided, however, that
for purposes of clause (ii) of "Limitations on Sale and Leaseback Transactions,"
the amount of Net Available Proceeds to be applied to any acquisition of
Principal Properties or retirement of Debt Securities or other Indebtedness
shall be reduced by an amount equal to the sum of (A) an amount equal to the
redemption price with respect to such Debt Securities delivered within 180 days
after the effective date of such Sale and Leaseback Transaction to the Trustee
for retirement and cancellation and (B) the principal amount, plus any premium
or fee paid in connection with a redemption in accordance with the terms, of
such other Indebtedness voluntarily retired by the Company within such 180-day
period, excluding in each case retirements pursuant to mandatory sinking fund or
prepayment provisions and payments at maturity.
"Principal Property" means all restaurant or related equipment and all real
property, in each case which is owned by the Company or a Subsidiary and which
constitutes all or part of any restaurant located within one of the 50 states of
the United States or the District of Columbia.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such Person of any Principal Property that, more than 12 months
after (i) the completion of the acquisition, construction, development or
improvement of such Principal Property or (ii) the placing in operation of such
Principal Property or of such Principal Property as so constructed, developed or
improved, has been or is being sold, conveyed, transferred or otherwise disposed
of by such Person to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender on the security of such Principal
Property. The term of such arrangement, as of any date (the "measurement date"),
shall end on the date of the last payment of rent or any other amount due under
such arrangement on or prior to the first date after the measurement date on
which such arrangement may be terminated by the lessee, at its sole option,
without payment of a penalty. "Sale Transaction" means any such sale,
conveyance, transfer or other disposition.
"Subsidiary" of any Person means (i) a corporation more than 50% of the combined
voting power of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person
or by such Person and one or more Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof.
PERMANENT GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
permanent Global Securities that will be deposited with a Depositary or its
nominee. In such a case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to be represented
by such Global Security or Securities. The Prospectus Supplement relating to
such series of Debt Securities will describe the circumstances, if any, under
which beneficial owners of interests in any such permanent Global Security may
exchange such interests for Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive registered form,
a permanent Global Security may not be registered for transfer or exchange
except in the circumstances described in the applicable Prospectus Supplement.
(Senior Indenture Sections 204 and 305; Subordinated Indenture Sections 203, 205
and 305)
The specific terms of the depositary arrangement with respect to any portion of
a series of Debt Securities to be represented by a permanent Global Security and
a description of the Depositary will be contained in the applicable Prospectus
Supplement.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by and construed in
accordance with the internal laws of the State of New York. (Section 112)
DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000,000 shares of
Common Stock, without par value, and 250,000 shares of Preferred Stock, par
value $1.00 per share. As of August 5, 1996, there were 128,804,000 shares of
Common Stock outstanding, and no shares of Preferred Stock were outstanding.
The following summary does not purport to be complete and is qualified in its
entirety by reference to the applicable provisions of Ohio law and the Company's
Articles of Incorporation (the "Articles of Incorporation") and New Regulations
(the "Regulations").
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COMMON STOCK
Holders of outstanding Common Stock are entitled to receive dividends when and
if declared by the Board of Directors from funds legally available therefor,
subject to the rights of holders of Preferred Stock, if any, and to restrictions
contained in long-term indebtedness of the Company. At all meetings of
shareholders, holders of Common Stock are entitled to one vote for each share
held except that the laws of Ohio provide for cumulative voting for the election
of directors upon the previous request of any shareholder. Holders of Common
Stock have no preemptive or subscription rights. Upon liquidation, all shares of
Common Stock are entitled to participate equally in the assets of the Company
available for distribution to holders of Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue the Preferred Stock in one or
more series and to fix certain of the rights, preferences, privileges and
restrictions thereof, including the dividend rights, dividend rate, the dates of
payment of dividends and the dates from which they are cumulative, conversion
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series or the designations of such series, without any further vote or
action by the shareholders. Holders of the Preferred Stock are entitled to one
vote per share on matters to be voted upon by the holders of Common Stock and
Preferred Stock voting together as a single class, except that Ohio laws
entitles the holders of Preferred Stock to exercise a class vote on certain
matters.
SHAREHOLDER RIGHTS PLAN
On August 4, 1988, the Board of Directors of the Company declared a dividend of
one Right for each outstanding share of Common Stock. Until the Rights become
exercisable, or the earlier redemption or exchange of the Rights, the Company
will issue one Right with each share of Common Stock that is newly issued so
that all shares of Common Stock will have Rights attached thereto. Upon the
occurrence of the events enumerated below, each Right will entitle the holder
thereof, until the earlier of the close of business on August 10, 1998, or the
redemption or exchange of the Rights, to buy one ten-thousandth of one Series A
Preferred Share of the Company, at a price of $25.00 per one ten-thousandth of a
share, subject to adjustment. The rights will not be exercisable until the
earlier to occur of (i) a public announcement that, without the prior consent of
the Company, a person or group of affiliated or associated persons have
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of Common Stock (an "Acquiring Person") or (ii) the
tenth business day (or such later date as may be determined by the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or the first public announcement of an intention
to make, a tender offer or exchange offer, the consummation of which would
result in the beneficial ownership by a person or group of 15% or more of such
outstanding shares of Common Stock (the earlier of such dates being referred to
as the "Distribution Date"). Until the Distribution Date (or earlier exchange or
redemption of the Rights), the Rights will be transferred with and only with the
shares of Common Stock. Separate certificates for the Rights will be issued as
soon as practicable following the Distribution Date to holders of record of the
Common Stock as of the Distribution Date. The Rights will then begin trading
separately from the Common Stock.
In the event the Company is acquired in a merger or other business combination
transaction or 50% or more of its assets or earning power is sold, each holder
of a Right will have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of common shares of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right. In the event that (i) any person
becomes an Acquiring Person (unless such person first acquires 15% or more of
the outstanding shares of Common Stock pursuant to a tender or exchange offer
for all outstanding shares of Common Stock at a price and on terms determined by
at least a majority of the Board of Directors who are not officers of the
Company to be both adequate and otherwise in the best interests of the Company
and its shareholders (other than the person or an affiliate or associate thereof
on whose behalf the offer is being made)), each holder of a Right (other than
Rights beneficially owned by the Acquiring Person which will thereafter be void)
will have the right to receive upon exercise that number of shares of Common
Stock having a market price of two times the exercise price of the Right.
Generally, the Company may redeem each Right for $.01 at any time before a
person or group becomes an Acquiring Person without prior approval. After the
Distribution Date, Rights will not be issued with respect to Common Stock except
under certain circumstances.
The summary description of the Rights set forth above does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as amended, between the Company and American Stock Transfer and Trust Company,
as Rights Agent, which is incorporated by reference as an exhibit to the
Registration Statement.
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TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, 40 Wall Street, New York, New York 10005.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Share Warrants") or Common Stock
(the "Common Stock Warrants", collectively with the Debt Warrants and the
Preferred Stock Warrants the "Warrants"). Warrants may be issued independently
or together with any Securities and may be attached to or separate from such
Securities. The Warrants are to be issued under warrant agreements (each a
"Warrant Agreement") to be entered into between the Company and a bank or trust
company, as warrant agent (the "Warrant Agent"), all as shall be set forth in
the Prospectus Supplement relating to the Warrants being offered pursuant
thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt Warrants
offered thereby, the Warrant Agreement relating to such Debt Warrants and the
debt warrant certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate number of such
Debt Warrants; (3) the price or prices at which such Debt Warrants will be
issued; (4) the designation, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants; (5) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such security; (6)
the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (7) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price at
which such principal amount of Debt Securities may be purchased upon such
exercise; (8) the date on which the right to exercise such Debt Warrants shall
commence, and the date on which such right shall expire; (9) the maximum or
minimum number of such Debt Warrants which may be exercised at any time; (10) a
discussion of material federal income tax considerations, if any; and (11) any
other terms of such Debt Warrants and terms, procedures and limitations relating
to the exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant certificates
of different denominations, and Debt Warrants may be exercised at the corporate
trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement. Prior to the exercise of their Debt Warrants, holder of
Debt Warrants will not have any of the rights of holders of the securities
purchasable upon such exercise and will not be entitled to payments of principal
of (or premium, if any) or interest, if any, on the securities purchasable upon
such exercise.
OTHER WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants and Common Share Warrants in respect of which this
Prospectus is being delivered: (1) the title of such Warrants; (2) the
Securities for which such Warrants are exercisable; (3) the price or prices at
which such Warrants will be issued; (4) the number of such Warrants issued with
each share of Preferred Stock or Common Stock; (5) any provisions for adjustment
of the number or amount of Preferred Stock or Common Stock receivable upon
exercise of such Warrants or the exercise price of such Warrants; (6) if
applicable, the date on and after which such Warrants and the related Preferred
Stock or Common Stock will be separately transferable; (7) if applicable, a
discussion of material federal income tax considerations; (8) any other terms of
such Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Warrants; (9) the date on which the right to
exercise such Warrants shall commence, and the date on which the right shall
expire; (10) the maximum or minimum number of such Warrants which may be
exercised at any time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of the Warrants to purchase for cash such
principal amount of Debt Securities or Preferred Stock or Common Stock at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the Prospectus Supplement relating to the Warrants offered thereby.
Warrants may be exercised at any time up to the close of business on the
expiration date set forth in the Prospectus Supplement relating to the Warrants
offered thereby. After the close of business on the expiration date, unexercised
Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating to
the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the Prospectus Supplement,
the Company will, as soon as practicable, forward the Debt Securities or
Preferred Stock or
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Common Stock purchasable upon such exercise. If less than all of the Warrants
represented by such warrant certificate are exercised, a new warrant certificate
will be issued for the remaining Warrants.
DESCRIPTION OF TRUST PREFERRED SECURITIES
Each Wendy's Trust may issue, from time to time, only one series of Trust
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Wendy's Trust authorizes the Regular
Trustees of such Wendy's Trust to issue on behalf of such Wendy's Trust one
series of Trust Preferred Securities. The Declaration will be qualified as an
indenture under the Trust Indenture Act. The Trust Preferred Securities will
have such terms, including distributions, redemption, voting, liquidation,
conversion rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act, and which will mirror the terms of the
Subordinated Debt Securities held by the Wendy's Trust and described in the
Prospectus Supplement related thereto. Reference is made to the Prospectus
Supplement relating to the Trust Preferred Securities of any Wendy's Trust for
specific terms, including (i) the distinctive designation of such Trust
Preferred Securities; (ii) the number of Trust Preferred Securities issued by
such Wendy's Trust; (iii) the annual distribution rate (or method of determining
such rate) for Trust Preferred Securities issued by such Wendy's Trust and the
date or dates upon which such distributions shall be payable; provided, however,
that distributions on such Trust Preferred Securities shall be payable on a
quarterly basis to holders of such Trust Preferred Securities as of a record
date in each quarter during which such Trust Preferred Securities are
outstanding; (iv) whether distributions on Trust Preferred Securities issued by
such Wendy's Trust shall be cumulative, and, in the case of Trust Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on Trust
Preferred Securities issued by such Wendy's Trust shall be cumulative; (v) the
amount or amounts which shall be paid out of the assets of such Wendy's Trust to
the holders of Trust Preferred Securities of such Wendy's Trust upon voluntary
or involuntary dissolution, winding-up or termination of such Wendy's Trust;
(vi) the obligation, if any, of such Wendy's Trust to purchase or redeem Trust
Preferred Securities issued by such Wendy's Trust and the price or prices at
which, the period or periods within which, and the terms and conditions upon
which, Trust Preferred Securities issued by such Wendy's Trust shall be
purchased or redeemed, in whole or in part, pursuant to such obligation; (vii)
the voting rights, if any, of Trust Preferred Securities issued by such Wendy's
Trust in addition to those required by law, including the number of votes per
Trust Preferred Security and any requirement for the approval by the holders of
Trust Preferred Securities, or of Trust Preferred Securities issued by one or
more Wendy's Trusts, or of both, as a condition to specified action or
amendments to the Declaration of such Wendy's Trust; (viii) the terms and
conditions, if any, upon which Trust Preferred Securities issued by such Wendy's
Trust may be converted into shares of Common Stock, including the conversion
price per share and the circumstances, if any, under which any such conversion
right shall expire; (ix) the terms and conditions, if any, upon which the
Subordinated Debt Securities may be distributed to holders of Trust Preferred
Securities; (x) if applicable, any securities exchange upon which the Trust
Preferred Securities shall be listed; and (xi) any other relevant rights,
preferences, privileges, limitations or restrictions of Trust Preferred
Securities issued by such Wendy's Trust not inconsistent with the Declaration of
such Wendy's Trust or with applicable law. All Trust Preferred Securities
offered hereby will be guaranteed by the Company to the extent set forth below
under "Description of Trust Preferred Securities Guarantees." Certain United
States federal income tax considerations applicable to any offering of Trust
Preferred Securities will be described in the Prospectus Supplement relating
thereto.
In connection with the issuance of Trust Preferred Securities, each Wendy's
Trust will issue one series of Trust Common Securities. The Declaration of each
Wendy's Trust authorizes the Regular Trustees of such trust to issue on behalf
of such Wendy's Trust one series of Trust Common Securities having such terms
including distributions, redemption, voting and liquidation rights or such
restrictions as shall be set forth therein. The terms of the Trust Common
Securities issued by a Wendy's Trust will be substantially identical to the
terms of the Trust Preferred Securities issued by such trust and the Trust
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Trust Preferred Securities except that, upon an event of default
under the Declaration, the rights of the holders of the Trust Common Securities
to payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. Except in certain limited circumstances, the Trust Common
Securities will also carry the right to vote to appoint, remove or replace any
of the Wendy's Trustees of a Wendy's Trust. All of the Trust Common Securities
of each Wendy's Trust will be directly or indirectly owned by the Company.
PROPOSED TAX LEGISLATION
On March 19, 1996, as a part of President Clinton's Fiscal 1997 Budget Proposal,
the Treasury Department proposed legislation (the "Proposed Legislation") that,
among other things, would (i) treat as equity for United States federal income
tax purposes certain debt instruments with a maximum term of more than 20 years
and (ii) disallow interest deductions on certain convertible debt instruments or
defer interest deductions on certain debt instruments issued with OID. The
Proposed Legislation is proposed to be effective for debt instruments issued on
or after December 7, 1995.
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On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." However, there can be no assurances that the effective date guidance
contained in the Joint Statement will be incorporated in the Proposed
Legislation, if enacted, or that other legislation enacted after the date hereof
will not otherwise adversely affect the tax treatment of the Subordinated Debt
Securities. In addition, there can be no assurances as to whether or in what
form the Proposed Legislation may be enacted into law or whether other
legislation will be enacted that otherwise adversely affects the tax treatment
of the Subordinated Debt Securities and the Trust Preferred Securities.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an Event of Default under the Declaration of a Wendy's Trust occurs and is
continuing, then the holders of Trust Preferred Securities of such Wendy's Trust
would rely on the enforcement by the Property Trustee of its rights as a holder
of the applicable series of Subordinated Debt Securities against the Company. In
addition, the holders of a majority in liquidation amount of the Trust Preferred
Securities of such Wendy's Trust will have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the applicable Declaration, including the right to direct
the Property Trustee to exercise the remedies available to it as a holder of the
Subordinated Debt Securities. If the Property Trustee fails to enforce its
rights under the applicable series of Subordinated Debt Securities, a holder of
Trust Preferred Securities of such Wendy's Trust may institute a legal
proceeding directly against the Company to enforce the Property Trustee's rights
under the applicable series of Subordinated Debt Securities without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default under
the applicable Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
applicable series of Subordinated Debt Securities on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of Trust Preferred Securities of such Wendy's Trust may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the applicable series of Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Trust Preferred Securities of such holder (a "Direct Action") on or after
the respective due date specified in the applicable series of Subordinated Debt
Securities. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Trust Preferred Securities under the
applicable Declaration to the extent of any payment made by the Company to such
holder of Trust Preferred Securities in such Direct Action.
DESCRIPTION OF TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Trust Preferred
Securities Guarantees which will be executed and delivered by the Company for
the benefit of the holders from time to time of Trust Preferred Securities. Each
Trust Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. NBD Bank will act as the independent trustee under each
Trust Preferred Securities Guarantee (the "Preferred Guarantee Trustee") for
purposes of the Trust Indenture Act. The terms of each Trust Preferred
Securities Guarantee will be those set forth in such Trust Preferred Securities
Guarantee and those made part of such Trust Preferred Securities Guarantee by
the Trust Indenture Act. The summary is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
Trust Preferred Securities Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Each Trust Preferred Securities Guarantee will be held by the
Preferred Guarantee Trustee for the benefit of the holders of the Trust
Preferred Securities of the applicable Wendy's Trust.
GENERAL
Pursuant to each Trust Preferred Securities Guarantee, the Company will agree,
to the extent set forth therein, to pay in full, to the holders of the Trust
Preferred Securities issued by a Wendy's Trust, the Guarantee Payments (as
defined herein) (except to the extent paid by such Wendy's Trust), as and when
due, regardless of any defense, right of setoff or counterclaim which such
Wendy's Trust may have or assert. The following payments with respect to Trust
Preferred Securities issued by a Wendy's Trust to the extent not paid by such
Wendy's Trust (the "Guarantee Payments"), will be subject to the Trust Preferred
Securities Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Trust Preferred Securities,
to the extent such Wendy's Trust shall have funds available therefor; (ii) the
redemption price set forth in the applicable Prospectus Supplement (the
"Redemption Price"), which will not be lower than the liquidation amount, and
all accrued and unpaid distributions, to the extent such Wendy's Trust has funds
available therefor with respect to any Trust Preferred Securities called for
redemption by such Wendy's Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of such Wendy's Trust (other than in
connection with the distribution of Subordinated Debt Securities to the holders
of Trust Preferred Securities or the redemption of all of the Trust Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions
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on such Trust Preferred Securities to the date of payment, to the extent such
Wendy's Trust has funds available therefor and (b) the amount of assets of such
Wendy's Trust remaining available for distribution to holders of such Trust
Preferred Securities in liquidation of such Wendy's Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of Trust Preferred Securities or
by causing the applicable Wendy's Trust to pay such amounts to such holders.
Each Trust Preferred Securities Guarantee will not apply to any payment of
distributions on the Trust Preferred Securities except to the extent such
Wendy's Trust shall have funds available therefor. If the Company does not make
interest payments on the Subordinated Debt Securities purchased by a Wendy's
Trust, such Wendy's Trust will not pay distributions on the Trust Preferred
Securities issued by such Wendy's Trust and will not have funds available
therefor. See "Description of Debt Securities -- Certain Covenants of the
Company." The Trust Preferred Securities Guarantee, when taken together with the
Company's obligations under the Subordinated Debt Securities, the Indenture and
the Declaration, including its obligations to pay costs, expenses, debts and
liabilities of such Wendy's Trust (other than with respect to the Trust
Securities), will provide a full and unconditional guarantee on a subordinated
basis by the Company of payments due on the Trust Preferred Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Wendy's Trusts with respect to the Trust Common
Securities (the "Trust Common Securities Guarantees") to the same extent as the
Trust Preferred Securities Guarantee, except that upon an event of default under
the Indenture, holders of Trust Preferred Securities shall have priority over
holders of Trust Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Trust Preferred Securities Guarantee, the Company will covenant that, so
long as any Trust Preferred Securities issued by the applicable Wendy's Trust
remain outstanding, if there shall have occurred any event that would constitute
an event of default under such Trust Preferred Securities Guarantee or the
Declaration of such Wendy's Trust, then (a) the Company shall not declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock of the Company or the
security being converted or exchanged or (iv) purchases or acquisitions of
shares of Wendy's Common Stock to be used in connection with acquisitions of
Wendy's Common Stock by shareholders pursuant to the Company's dividend
reinvestment plan) or make any guarantee payments with respect to the foregoing
and (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company which rank pari passu with or
junior to such Subordinated Debt Securities.
MODIFICATION OF THE TRUST PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not materially adversely affect the
rights of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Preferred Securities Guarantee may be amended only with
the prior approval of the holders of not less than a majority in liquidation
amount of the outstanding Trust Preferred Securities issued by the applicable
Wendy's Trust. The manner of obtaining any such approval of holders of such
Trust Preferred Securities will be as set forth in an accompanying Prospectus
Supplement. All guarantees and agreements contained in a Trust Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Trust Preferred Securities of the applicable Wendy's Trust then outstanding.
TERMINATION
Each Trust Preferred Securities Guarantee will terminate as to the Trust
Preferred Securities issued by the applicable Wendy's Trust (a) upon full
payment of the Redemption Price of all Trust Preferred Securities of such
Wendy's Trust, (b) upon distribution of the Subordinated Debt Securities held by
such Wendy's Trust to the holders of the Trust Preferred Securities of such
Wendy's Trust or (c) upon full payment of the amounts payable in accordance with
the Declaration of such Wendy's Trust upon liquidation of such Wendy's Trust.
Each Trust Preferred Securities Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of Trust Preferred
Securities issued by the applicable Wendy's Trust must restore payment of any
sums paid under such Trust Preferred Securities or such Trust Preferred
Securities Guarantee. The subordination provisions of the Subordinated Debt
Securities provide that in the event payment is made on the Subordinated Debt
Securities or the Trust Preferred Securities Guarantee in contravention of such
provisions such payments shall be paid over to the holders of Senior
Indebtedness.
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EVENTS OF DEFAULT
An event of default under a Trust Preferred Securities Guarantee will occur upon
(a) the failure of the Company to perform any of its payment or other
obligations thereunder or (b) if applicable, the failure by the Company to
deliver Common Stock upon an appropriate election by the holder or holders of
Trust Preferred Securities to convert the Trust Preferred Securities into shares
of Common Stock.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Preferred Securities Guarantee have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee in respect of the Trust Preferred
Securities Guarantee or to direct the exercise of any trust or power conferred
upon the Preferred Guarantee Trustee under such Trust Preferred Securities. If
the Preferred Guarantee Trustee fails to enforce such Trust Preferred Securities
Guarantee, any holder of Trust Preferred Securities relating to such Trust
Preferred Securities Guarantee may institute a legal proceeding directly against
the Company to enforce the Preferred Guarantee Trustee's rights under such Trust
Preferred Securities Guarantee, without first instituting a legal proceeding
against the relevant Wendy's Trust, the Preferred Guarantee Trustee or any other
person or entity. Notwithstanding the foregoing, if the Company has failed to
make a guarantee payment, a holder of Trust Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Trust
Preferred Securities Guarantee for such payment. The Company waives any right or
remedy to require that any action be brought first against such Wendy's Trust or
any other person or entity before proceeding directly against the Company.
STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEES
The Trust Preferred Securities Guarantees will constitute unsecured obligations
of the Company and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Company, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company; and (iii) senior
to Common Stock. The terms of the Trust Preferred Securities provide that each
holder of Trust Preferred Securities issued by the applicable Wendy's Trust by
acceptance thereof agrees to the subordination provisions and other terms of the
Trust Preferred Securities Guarantee relating thereto.
The Trust Preferred Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Trust Preferred Securities Guarantee, undertakes to perform only
such duties as are specifically set forth in such Trust Preferred Securities
Guarantee and, after default, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Preferred Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Trust Preferred
Securities Guarantee at the request of any holder of Trust Preferred Securities,
unless offered reasonable indemnity against the costs, expenses and liabilities
which might be incurred thereby.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through underwriters, (iii)
through dealers or (iv) directly to purchasers (through a specific bidding or
auction process or otherwise). The distribution of Securities may be effected
from time to time in one or more transactions at a fixed price or prices, which
may be changed, or at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices.
Offers to purchase the Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities will be named, and any commissions payable by the Company to such
agent will be set forth in the Prospectus Supplement. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the Securities so
offered and sold.
If an underwriter or underwriters are utilized in the sale of Securities, the
Company will execute an underwriting agreement with such underwriter or
underwriters at the time an agreement for such sale is reached, and the names of
the specific managing underwriter or underwriters, as well as any other
underwriters and the terms of the transactions, including compensation of the
underwriters and dealers, if any, will be set forth in the Prospectus
Supplement, which will be used by the underwriters to make resales of the
Securities.
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If a dealer is utilized in the sale of the Securities, the Company will sell
such Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of the dealer and the terms of the transactions
will be set forth in the Prospectus Supplement relating thereto.
Offers to purchase the Securities may be solicited directly by the Company and
sales thereof may be made by the Company directly to institutional investors or
others. The terms of any such sales, including the terms of any bidding or
auction process, if utilized, will be described in the Prospectus Supplement
relating thereto.
The Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their own accounts or
as agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Securities remarketed thereby.
Agents, underwriters, dealers and remarketing firms may be entitled under
agreements which may be entered into with the Company to indemnification by the
Company against certain liabilities, including liabilities under the 1933 Act,
and any such agents, underwriters, dealers or remarketing firms, or their
affiliates may be customers of, engage in transactions with or perform services
for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize agents
and underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Such Contracts will be subject to only those conditions set forth in
the Prospectus Supplement. A commission indicated in the Prospectus Supplement
will be paid to underwriters and agents soliciting purchases of Debt Securities
pursuant to Contracts accepted by the Company.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995 and
January 1, 1995 and the consolidated statements of income, shareholders' equity
and cash flows for the years ended December 31, 1995, January 1, 1995 and
January 2, 1994 incorporated by reference in this Prospectus have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that Firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Securities, other than the Trust Securities, offered hereby
will be passed upon for the Company by Vorys, Sater, Seymour and Pease ("Vorys
Sater"), Columbus, Ohio and the validity of the Trust Securities will be passed
upon for the Company and the Wendy's Trusts by Richards, Layton & Finger,
Wilmington, Delaware, special Delaware counsel to the Company and the Wendy's
Trusts. Frederick R. Reed, a director of the Company, is a partner in Vorys
Sater and has been named to serve as Executive Vice President of the Company
commencing on September 1, 1996. As of July 24, 1996, members of Vorys Sater and
attorneys employed thereby, together with members of their immediate families,
beneficially owned an aggregate of approximately 72,338 shares of Common Stock
of the Company.
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