UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Quarter Ended June 27, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____________ to
____________
Commission File Number 0-13007
NPC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0817298
(State of Incorporation) (I.R.S. Employer Identification Number)
720 W. 20th Street, Pittsburg, KS 66762
(Address of principal executive offices)
Registrant`s telephone number, including area code (316) 231-3390
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [
]
The number of shares outstanding of each of the registrant`s classes of
common stock as of August 9, 1995:
Common Stock, $0.01 par value - 24,507,324
NPC INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets --
June 27, 1995 and March 28, 1995
Condensed Consolidated Statements of Income --
For the Thirteen Weeks Ended
June 27, 1995 and June 28, 1994
Condensed Consolidated Statements of Cash Flows --
For the Thirteen Weeks Ended
June 27, 1995 and June 28, 1994
Notes to Condensed Consolidated Financial Statements
Management`s Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in securities or rights of holders thereof
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
PART I - FINANCIAL INFORMATION
NPC International, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
June 27, 1995 March 28, 1995
ASSETS
Current assets:
Cash and cash equivalents $ 4,226,000 $ 9,971,000
Accounts receivable, net 2,293,000 2,357,000
Notes receivable, net 826,000 867,000
Inventories of
food and supplies 3,097,000 3,261,000
Deferred income tax asset 3,921,000 5,104,000
Prepaid expenses and
other current assets 1,554,000 2,253,000
Total current assets 15,917,000 23,813,000
Facilities and equipment, net 118,226,000 116,190,000
Assets held for sale, net 6,536,000 7,717,000
Franchise rights, net 44,092,000 33,939,000
Goodwill, less
accumulated amortization 18,506,000 18,710,000
Other assets 9,079,000 8,813,000
$212,356,000 $209,182,000
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable $ 15,205,000 $ 16,350,000
Payroll taxes 1,392,000 1,332,000
Accrued interest 1,617,000 1,992,000
Accrued payroll 4,102,000 2,284,000
Current portion
of closure provision 2,400,000 2,400,000
Health and
worker`s compensation
insurance reserves 10,034,000 8,268,000
Other accrued liabilities 2,222,000 1,242,000
Current portion
of long-term debt 1,359,000 1,308,000
Total current liabilities 38,331,000 35,176,000
Long-term debt
and obligations
under capital leases 80,490,000 82,850,000
Deferred income
tax liability 2,996,000 2,996,000
Closure provision and
other deferred items 6,124,000 7,873,000
Stockholders` equity:
Class A Common Stock 139,000 139,000
Class B Common Stock 137,000 137,000
Paid-in capital 22,016,000 22,020,000
Retained earnings 84,211,000 80,086,000
106,503,000 102,382,000
Less treasury stock (22,088,000) (22,095,000)
Total stockholders` equity 84,415,000 80,287,000
$212,356,000 $209,182,000
See notes to condensed consolidated financial statements.
NPC International, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
For the Thirteen Weeks Ended
June 27, 1995 June 28, 1994
Net sales $82,105,000 $83,148,000
Franchise revenue 1,362,000 1,309,000
Total revenue 83,467,000 84,457,000
Cost of sales 24,471,000 24,367,000
58,996,000 60,090,000
Direct labor costs 22,950,000 24,110,000
Operating expenses 21,389,000 21,954,000
General and
administrative expenses 6,048,000 6,415,000
50,387,000 52,479,000
Operating income 8,609,000 7,611,000
Interest expense (1,704,000) (1,552,000)
Other income (expense) (83,000) 67,000
Income before income taxes 6,822,000 6,126,000
Provision for income taxes 2,697,000 2,371,000
Net income $ 4,125,000 $ 3,755,000
Earnings per share $ 0.17 $ 0.15
Weighted average
shares outstanding 24,514,816 25,028,287
See notes to condensed consolidated financial statements.
NPC International, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Thirteen Weeks Ended
June 27, 1995 June 28, 1994
CASH FLOWS PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 4,125,000 $ 3,755,000
Adjustments to reconcile
net income to net cash
provided by operating activities
Depreciation and amortization 4,881,000 5,428,000
Deferred income taxes and other (458,000 91,000
Change in assets
and liabilities,
net of acquisitions:
Accounts receivable, net 64,000 112,000
Notes receivable, net 41,000 73,000
Inventories of
food and supplies 164,000 292,000
Prepaid expenses and
other current assets 699,000 114,000
Accounts payable (1,145,000) (2,022,000)
Payroll taxes 60,000 573,000
Accrued interest (375,000) (635,000)
Accrued payroll 1,818,000 1,362,000
Health &
worker`s compensation
insurance reserves (146,000) (325,000)
Other accrued liabilities 2,892,000 2,495,000
Net cash flows provided
by operating activities 12,620,000 11,313,000
CASH FLOWS USED
BY INVESTING ACTIVITIES:
Capital expenditures,
including the acquisition
of business assets, net of cash (16,938,000) (2,314,000)
Changes in other assets, net (313,000) 465,000
Proceeds from
sale of capital assets 1,192,000 12,000
Net cash flows used
by investing activities (16,509,000) (1,837,000)
CASH FLOWS USED
BY FINANCING ACTIVITIES:
Purchase of treasury stock ---- (52,000)
Net change in
revolving credit agreements (7,000,000) 3,030,000
Payment of long-term debt (5,309,000) (14,735,000)
Proceeds from
issuance of long-term debt 10,000,000 ---
Exercise of stock options 3,000 3,000
Net cash flows used
by financing activities (2,306,000) (11,754,000)
NET CHANGE IN CASH
AND CASH EQUIVALENTS (5,745,000) (2,278,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 9,971,000 8,119,000
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,226,000 $ 5,841,000
See notes to condensed consolidated financial statements.
NPC International, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1
On August 8, 1995, the stockholders of NPC International, Inc. approved and
adopted two amendments to the Company`s Amended and Restated Articles of
Incorporation to allow for the payment of a dividend to the holders of the
Class A common stock and to subsequently reclassify and convert the
outstanding shares of Class A common stock and Class B common stock into a
single class of new common stock. As of August 9, 1995, the new class of
common stock began trading on the NASDAQ Stock Market under the new
ticker symbol ``NPCI`` and CUSIP 629360 30 6.
To compensate the Class A stockholders for the relinquishment of their
voting rights, a special dividend of $0.421875 per Class A share was also
approved for stockholders of record as of August 8, 1995, payable August
30, 1995. Registered stockholders may retain their previously-issued Class
A and Class B stock certificates to represent their comparable holdings in
the new class of stock, or they may tender their existing stock
certificates to American Stock Transfer, 40 Wall Street, New York, NY 10005
to receive a new certificate.
Note 2
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position of the
Company as of June 27, 1995 and March 28, 1995, the results of
operations for the fiscal quarters ended June 27, 1995 and June 28, 1994
and the statements of cash flows for the fiscal quarters ended June 27,
1995 and June 28, 1994.
On April 19, 1995, the Company acquired 23 Pizza Hut units in eight states
from its franchisor Pizza Hut, Inc. The transaction did not have a
material impact on the financial statements taken as a whole.
These statements should be read in conjunction with the financial
statements and notes contained in the Company`s annual report on Form 10-K
for the fiscal year ended March 28, 1995. Certain reclasses were made to
prior year balances to conform with the current year presentation.
Note 3
There were cash payments for income taxes of $292,000 in the Thirteen weeks
ended June 27, 1995 and $675,000 in the Thirteen weeks ended June 28, 1994.
Cash paid for interest for the Thirteen weeks ended June 27, 1995 and June
28, 1994 was $2.1 million and $2.2 million, respectively.
NPC International, Inc.
Management`s Discussion and Analysis
of Financial Condition and Results of Operations
At June 27, 1995, NPC International, Inc. owned and operated 278 Pizza Hut
restaurants and 92 delivery kitchens in eleven states. The Company`s pizza
restaurants are generally free standing, full table service restaurants
which offer high quality and moderately priced pizza, pasta, sandwiches and
a salad bar. Beverage service includes soft drinks and, in most
restaurants, beer. Delivery kitchens provide home delivery and carry out
of pizza products, but they do not have dining facilities, salad bars or
beer.
On the same date, the Company owned and operated 105 and franchised 11
quick service seafood Skipper`s restaurants in seven western states and
British Columbia. Skipper`s offers a limited menu including fish, shrimp
and clams. Each restaurant features a casual atmosphere and beer is served
in most locations.
The Company is also the owner and operator of 27 Tony Roma`s restaurants in
five states, and franchisor of 101 restaurants in 20 states and 40 foreign
locations at June 25, 1995. Tony Roma`s is a casual theme restaurant chain
known as ``A Place for Ribs,`` but also offers a variety of menu choices
including chicken, steaks and salads. All Tony Roma`s restaurants serve
alcohol.
Pizza Hut Operations
For the Thirteen Weeks Ended
June 27, 1995 June 28, 1994
Restaurants Delivery Restaurants Delivery
Net restaurant sales $45,323,000 $13,950,000 $39,514,000 $13,076,000
Net franchise revenue 3,000 --- 31,000 ---
Total revenue $45,326,000 $13,950,000 $39,545,000 $13,076,000
Percentage of
total revenue:
Cost of sales 26.7% 25.8% 25.8% 24.9%
Direct labor costs 25.5% 30.8% 26.0% 32.2%
Operating expenses 25.3% 24.4% 24.6% 24.7%
77.5% 81.0% 76.4% 81.8%
Operating profit 22.5% 19.0% 23.6% 18.2%
Number of units 278 92 235 87
Comparison of Operating Results for the Thirteen Weeks Ended June 27, 1995
with the Thirteen Weeks Ended June 28, 1994
Total revenue from Pizza Hut operations for the thirteen weeks ended June
27, 1995, was $59.3 million, up $6.7 million or 12.6% from the same period
in the prior fiscal year. Stuffed Crust pizza, introduced in April 1995,
totaled $11.8 million or approximately 20% of the sales mix for the quarter
just ended. Sales in restaurants and delivery kitchens open in excess of
twelve months increased approximately 10.7% over the same quarter a year
earlier, reflecting the introduction of Pizza Hut`s newest pizza product in
April.
Cost of sales in the Pizza Hut operations--as a percentage of net sales--
for the thirteen weeks ended June 27, 1995 (26.5%) increased slightly when
compared with the cost of sales percentage for the thirteen weeks ended
June 28, 1994 (25.6%). Part of this increase is due to the lower-than-
normal introductory price of Stuffed Crust pizza. This new pizza product,
because of its high cheese content, also has a slightly higher-than-normal
food cost. Cheese prices, which traditionally accounts for approximately
40% of a pizza`s cost, were about 4.5% lower in the recent fiscal quarter
compared with the prior fiscal quarter. Cost of sales includes food and
beverage costs and the expense of paper takeout supplies.
Direct labor in the Pizza Hut operations decreased to 26.7% of net sales
for the most recent quarter, compared with 27.5% for the comparable quarter
a year ago. This reduction is due to the significant increase in sales
which was not accompanied by a corresponding increase in labor. Direct
labor includes taxes and benefits, such as vacation and insurance, as well
as restaurant worker`s compensation expense.
Overall operating expenses increased as a percentage of sales, to 25.1% for
the quarter ended June 27, 1995 from 24.6% for the quarter ended June 28,
1994, due to increases in various expenses included herein. Major
operating expenses in the Pizza Hut division include advertising,
depreciation and amortization, franchise fees and rent.
Skipper`s Operations
For the Thirteen Weeks Ended
June 27, 1995 June 28, 1994
Net restaurant sales $11,438,000 $20,013,000
Net franchise revenue 49,000 73,000
Total revenue $11,487,000 $20,086,000
Percentage of revenue:
Cost of sales 41.4% 36.8%
Direct labor costs 31.2% 31.0%
Operating expenses 29.4% 29.8%
101.9% 97.5%
Operating profit (1.9)% 2.5%
Number of Company units 105 186
Number of franchised units 11 16
Comparison of Operating Results for the Thirteen Weeks Ended June 27, 1995
with the Thirteen Weeks Ended June 28, 1994
Because the Company closed 44% of its units in February 1995, sales have
significantly declined when compared with the same period a year ago.
Total revenue has declined 42.8% from the same thirteen week period a year
ago. Comparable store sales are down 15.1% and guest counts are down 20%,
primarily due to the value pricing strategy and advertising which
positively impacted sales and customer traffic during the same quarter of
the prior year.
In an attempt to improve customer satisfaction and traffic, the Company
will return to its original breading formula and cooking procedures, last
utilized in 1982, and will re-introduce quality ``hand-dressed`` fish
products throughout the chain during the quarter ended September 26, 1995.
The company has experienced positive feedback in limited test market
results culminating in the decision to roll the products system-wide during
the Company`s second fiscal quarter.
Cost of sales and direct labor--when expressed as a percentage of net
revenue--rose in the current quarter ended June 27, 1995 when compared with
the quarter ended June 28, 1994. Part of this increase is due to the
higher quality fish products that are being used, which has not been
accompanied by increased menu prices. Management is currently reviewing
various strategies available to it to reduce cost of sales as a percent of
revenue including menu pricing, procurement procedures and food waste
reduction.
To improve cash flow and reduce losses at the chain, the Company closed 77
Skipper`s stores in February 1995. This strategy has resulted in a
reduction in operating losses from 6.9% in the fourth quarter of the prior
year to a 1.9% operating loss during the quarter just ended. As part of
this closure, the Company recorded a reserve of $9.9 million for the
estimated loss on disposal of these underperforming assets and $8.6
million to reserve for the estimated liability exposure on leased units.
As of June 25, 1995, 16 properties have either been sold or subleased, with
21 properties currently pending contract or other final resolution.
Management has stated that the Company may consider alternative strategies
if improvement is not achieved in the fiscal year ended March 26, 1996.
Tony Roma`s Operations
For the Thirteen Weeks Ended
June 27, 1995 June 28, 1994
Net restaurant sales $11,394,000 $10,545,000
Net franchise revenue 1,310,000 1,205,000
Total revenue $12,704,000 $11,750,000
Percentage of revenue:
Cost of sales 31.6% 30.0%
Direct labor costs 27.7% 28.9%
Operating expenses 24.8% 25.6%
84.1% 84.5%
Operating profit 15.9% 15.5%
Number of Company units* 25 24
Number of franchised units 141 139
*Does not include two joint ventures accounted for under the equity method
of accounting.
Certain reclasses were made to the prior year balances to conform with the
current year presentation
Comparison of Operating Results for the Thirteen Weeks Ended June 27, 1995
with the Thirteen Weeks Ended June 28, 1994
Comparable sales for the thirteen weeks ended June 27, 1995 increased 0.5%
when compared with the similar period in the prior year. Comparable sales
were down in California and Texas and up in Florida, the Company`s three
primary markets. Gross franchising revenue increased 14.4% to $2.2 million
for the quarter ended June 27, 1995 from $1.9 million for the same quarter
a year ago. Tony Roma`s management plans to open eight Company restaurants
and add 15 franchised units in the fiscal year ended March 26, 1996.
Cost of sales increased to 31.6% of total revenue from 30.0% because of
increased rib prices. Direct labor and operating expenses decreased as a
percent of revenue due to continued improvement in operating efficiencies
on a higher revenue base.
Consolidated Results
Comparison of Operating Results for the Thirteen Weeks Ended June 27, 1995
with the Thirteen Weeks Ended June 28, 1994
Overall revenue for the thirteen weeks ended June 27, 1995 was $83.5
million, a decrease of $1.0 million or 1.2% when compared with $84.5
million for the thirteen weeks ended June 28, 1994. Revenue for the pizza
operations and Tony Roma`s are up 12.6% and 8.1%, respectively, and
Skipper`s revenue is down 42.8% due to the 77 unit closure in February.
General and administrative expenses decreased in the thirteen weeks ended
June 27, 1995 (to 7.2% of total revenue) when compared with the thirteen
weeks ended June 28, 1994 (7.6%). Major general and administrative
expenses include corporate salaries, amortization of intangible assets, and
bank service charges.
Interest expense increased slightly when comparing the two quarterly
periods due to an increase in average borrowings during the quarter to
finance the acquisition of 23 Pizza Huts in April 1995.
Net income for the thirteen weeks ended June 27, 1995, was $4.1 million, a
9.9% increase from the $3.8 million reported for the thirteen weeks ended
June 28, 1994. The Company experienced improvement in its Pizza Hut and
Tony Roma`s operations, but also incurred slightly increased losses in the
Skipper`s division. The effective tax rate for the quarter ended June 27,
1995 was 39.55% compared with a 39.0% rate used for the comparable quarter
a year earlier.
Liquidity, Capital Resources and Cash Flows
On June 27, 1995, the Company had a working capital deficit of $22.4
million ($23.8 million deficit at June 28, 1994). Like most restaurant
businesses, the Company is able to operate with a working capital deficit
because substantially all of its sales are for cash, while it generally
receives credit from trade suppliers. Further, receivables are not a
significant asset in the restaurant business and inventory turnover is
rapid. Therefore, the Company uses all available liquid assets to reduce
borrowings under its line of credit.
The Company has a $50 million unsecured line of credit, of which $20.6
million was borrowed as of June 27, 1995. On April 25, 1995, the Company
borrowed $10 million under its shelf agreement at a rate of 8.02%, the
proceeds of which were used to partially finance the purchase of 23 stores
acquired on April 19. The principal payments will begin on this note begin
in 1998 and end in the year 2002. On June 29, 1995, the Company increased
the borrowing limit on the $20 million shelf agreement originally dated
June 9, 1994 by an additional $40 million with the opportunity to borrow
under the agreement, at the lender`s discretion, extended for a period of
two years. The Company borrowed $10 million under this increased shelf
agreement on July 18, 1995 at a rate of 6.96%; principal payments for this
note will commence 1998 and will end in the year 2002. The Company was in
compliance with all debt covenants, as amended, as of June 27, 1995.
Net cash flows from operating activities increased $1.3 million when
comparing the Thirteen weeks ended June 27, 1995 with the comparable period
a year earlier. This 12% increase is attributable to higher earnings and
normal fluctuations in working capital components.
Approximately $5.2 million for a special dividend to Class A stockholders
on August 30, 1995 will be funded from the Company`s current line of credit
agreement. Management suspended repurchases of the Company`s common stock
in January 1995 with 454,500 shares still authorized under the Board-
approved stock repurchase program.
The Company anticipates cash flow from operations will provide sufficient
capital to fund continuing expansion and improvements, to service debt
obligations and to develop new restaurants in existing territories. Future
acquisitions may require additional debt or capital resources, which
management believes are readily available to the Company.
Seasonality and Effects of Inflation
As a result of continued concept diversification, the Company has not
experienced significant seasonality in its sales. Skipper`s sales are
typically higher in the fourth quarter of the fiscal year, during the
Lenten period. Tony Roma`s sales are traditionally higher than average in
January to March and lower in July to September.
Inflationary factors such as increases in food and labor costs directly
affect the Company`s operations. Because most of the Company`s employees
are paid hourly rates related to federal and state minimum wage and tip
credit laws, changes in these laws will result in increases in the
Company`s labor costs. Legislation mandating health coverage for
employees, if passed, will increase benefit costs since most hourly
restaurant employees are not currently covered under Company plans. The
Company cannot always effect immediate price increases to offset higher
costs, and no assurance can be given that the Company will be able to do so
in the future.
Increases in interest rates could directly affect the Company`s operations.
To reduce its interest exposure under its line of credit agreement,
however, the Company may select among alternative interest rate options
with terms up to six months in length.
PART II. OTHER INFORMATION
Item 2. Changes in securities or rights of holders thereof
On August 8, 1995, the stockholders of NPC International, Inc.
approved a equity recapitalization plan whereby the Class A common
stock and Class B common stock would be merged into one new class of
common stock. This transaction was completed on August 9, 1995, and
all holders of the new class of common stock will be entitled to vote
on all future matters submitted to a vote of the security holders.
To compensate the Class A stockholders for the relinquishment of
their voting rights, a special dividend of $0.421875 per Class A share
was also approved for stockholders of record as of August 8, 1995,
payable August 30, 1995. Registered stockholders may retain their
previously-issued Class A and Class B stock certificates to represent
their comparable holdings in the new class of stock, or they may
tender their existing stock certificates to American Stock Transfer,
40 Wall Street, New York, NY 10005 to receive a new certificate.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on August 8, 1995.
(b) Proxies were solicited by the Company pursuant to Regulation 14
under the Securities Exchange Act of 1934, there was no
solicitation in opposition of the nominees as listed in the proxy
statement, and all such nominees were elected pursuant to the
vote of the stockholders.
(c) Stockholders approved the stock recapitalization plan, including
the adoption of an amendment to the Restated Articles of
Incorporation to allow the payment of a dividend to the holders
of a Class A common stock and to subsequently amend the Restated
Articles of Incorporation to reclassify and convert the
outstanding stares of Class A common stock and Class B common
stock into a single class of new common stock. Class A
stockholders approved and adopted the proposal with 9,844,703
shares ``FOR``, 10,451 shares ``AGAINST``, 14,444 shares
abstaining, and 2,487,157 shares not voting. Class B stockholders
approved and adopted the proposal with 9,325,514 shares ``FOR``,
23,675 shares ``AGAINST``, 15,638 shares abstaining, and
2,785,742 shares not voting.
Item 6. Exhibits filed as part of this Report and Reports on Form 8-K
(a) Exhibits
The following Exhibit is filed as part of this Report:
Exhibit 10.46 Amendment #1 to the Credit Agreement among
NPC International, Inc., the banks named therein, and
Bank of America Illinois, as Agent dated May 31, 1995.
Exhibit 10.47 Amended and Restated Master Shelf
Agreement for up to $60,000,000 Senior Notes
between Prudential Insurance Company of America and
NPC International, Inc. dated June 29, 1995.
Exhibit 11 - Statement Regarding Computation of Per Share
Earnings.
(b) Reports on Forms 8-K
No reports were filed on Form 8-K for the quarter ended June
27, 1995.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NPC INTERNATIONAL, INC.
(Registrant)
DATE: August 11, 1995 /s Troy D. Cook
Vice President Finance
Chief Financial Officer
Principal Financial Officer
DATE: August 11, 1995 /s Douglas K. Stuckey
Corporate Controller
Chief Accounting Officer
Principal Accounting Officer
FIRST AMENDMENT
Dated as of May 31, 1995
THIS FIRST AMENDMENT dated as of May 31, 1995 amends the Revolving
Credit Agreement dated as of December 13, 1994 (the ``Credit Agreement``)
among NPC INTERNATIONAL, INC. (the ``Company``), various financial
institutions and BANK OF AMERICA ILLINOIS, as Agent (the ``Agent``). Terms
defined in the Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used herein as defined therein.
WHEREAS, the Company, the Agent and the Banks have entered into the
Credit Agreement which provides for the Banks to make Loans to the Company
from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
AMENDMENTS. Effective on (and subject to the occurrence of) the
First Amendment Effective Date (as defined below), the Credit Agreement
shall be amended in accordance with Sections 1.1 through 1.4 below.
Section 10.10. Section 10.10 of the Credit Agreement is amended by
deleting the first sentence thereof and substituting the following
therefor:
Not, and not permit any Significant Subsidiary to, be a party to
any merger or consolidation; not, and not permit any Subsidiary to, in
any one fiscal year, sell, transfer, convey, lease or otherwise
dispose of assets of the Company and its Subsidiaries which exceed in
the aggregate, for the Company and its Subsidiaries taken as a whole,
five percent (5%) (or in the case of the fiscal year of the Company
ending March 26, 1996, eight percent (8%), provided that the sale,
transfer, conveyance, lease or other disposal of assets of the Company
and its Subsidiaries not related to the closing of the Skipper`s
seafood restaurants shall not exceed five percent (5%) during such
fiscal year) of the value of the Company`s consolidated total assets
determined as of the end of the immediately preceding fiscal year, or
purchase or otherwise acquire all or substantially all the assets of
any Person.
Section 10.13. Section 10.13 of the Credit Agreement is amended in
its entirety to read as follows:
10.13 Net Worth. Not permit the Company`s Consolidated Net
Worth during any fiscal quarter ending after March 28, 1995 to be less
than the sum of (a) $72,258,300 plus (b) fifty percent (50%) of the
Company`s Consolidated Net Earnings for each fiscal quarter ending
after March 28, 1995 (excluding any fiscal quarter in which there is a
loss).
Section 10.14 Section 10.14 of the Credit Agreement is amended in
its entirety to read as follows:
10.14 Leverage Ratio. Not permit the ratio of (x) Indebtedness
of the Company and its Subsidiaries as of the last day of any
Computation Period to (y) Adjusted EBITDA for such Computation Period
to exceed (a) prior to June 25, 1996, 3.00 to 1.00 and (b) thereafter,
2.75 to 1.00.
New Definitions. Section 1 of the Credit Agreement is hereby
amended by adding the following definitions in the appropriate alphabetical
order:
Adjusted EBITDA means, for any period, the sum of (i)
consolidated operating income (as defined according to GAAP) plus (ii)
to the extent deducted in determining consolidated operating income
during such period, depreciation and amortization.
Computation Period means any period of four consecutive fiscal
quarters of the Company ending on the last day of a fiscal quarter.
AGREEMENT. The Company, the Agent and the Banks agree that for
purposes of calculating the financial covenants contained in Section 10.14
and 10.15 of the Credit Agreement, there shall be excluded from
Consolidated Net Earnings the one time after tax charge of $26,500,000
taken by the Company in the fourth quarter of its fiscal year ended March
28, 1995 in connection with the closing and disposal of various Skipper`s
seafood restaurants and any reversals of such charge or any reserve
established in connection therewith or any income recognized in connection
with any sale, transfer, conveyance, lease or other disposal related to
such charge.
REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Agent and the Banks that (a) the
execution and delivery by the Company of this First Amendment and the
performance by the Company of its obligations under the Credit Agreement as
amended by this First Amendment (as so amended, the ``Amended Credit
Agreement``) (i) are within the corporate powers of the Company, (ii) have
been duly authorized by all necessary corporate action, (iii) have received
all necessary governmental approvals and (iv) do not and will not
contravene or conflict with any provision of law or of the articles of
incorporation or by-laws of the Company or of any indenture, loan agreement
or other contract, order or decree which is binding upon the Company and
(b) the Amended Credit Agreement is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
EFFECTIVENESS. The amendments set forth in Section 1 above shall
become effective, as of the day and year first above written, on such date
(herein called the ``First Amendment Effective Date``) when the Agent shall
have received counterparts of this First Amendment executed by the parties
hereto.
MISCELLANEOUS.
Continuing Effectiveness, etc. As herein
amended, the Credit Agreement shall remain in full force and
effect and is hereby ratified and confirmed in all respects. After the
First Amendment Effective Date, all references in the Credit Agreement and
the Notes to ``Credit Agreement``, ``Agreement`` or similar terms shall
refer to the Amended Credit Agreement.
Counterparts. This First Amendment may be
executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart shall be deemed
to be an original but all such counterparts shall together constitute one
and the same First Amendment.
Governing Law. This First Amendment shall be a contract made under
and governed by the internal laws of the State of Illinois.
Successors and Assigns. This First Amendment shall be binding upon
the Company, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Company, the Banks and the
Agent and the respective successors and assigns of the Agent and the Banks.
Delivered at Chicago, Illinois, as of the day and year first above
written.
NPC INTERNATIONAL, INC.
By:________________________
Title:___________________
BANK OF AMERICA ILLINOIS, as Agent
By:________________________
Title:___________________
BANK OF AMERICA ILLINOIS
By:________________________
Title:___________________
NATIONSBANK OF TEXAS, N.A.
By:_______________________
Title:____________________
UNITED STATES NATIONAL BANK OF OREGON
By:_________________________
Title:____________________
Exhibit 11
NPC International, Inc.
Statement Regarding Computation of Per Share Earnings
For the Thirteen Weeks Ended
June 27, June 28,
1995 1994
PRIMARY
Shares outstanding
at beginning of period 24,505,324 25,011,493
Weighted average of shares
issued and (reacquired)
during period 110 (25)
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the
proceeds from exercise 21,415 16,819
Shares outstanding for
computation of per share earnings 24,526,850 25,028,287
Net income $4,125,000 $3,755,000
Earnings per share $ 0.17 $ 0.15
FULLY DILUTED
Shares outstanding
at beginning of period 24,505,324 25,011,493
Weighted average of shares
issued and
(reacquired) during period 110 (25)
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with
the proceeds from exercise 25,516 16,819
Shares outstanding for
computation of per share earnings 24,530,950 25,028,287
Net income $4,125,000 $3,755,000
Earnings per share $ 0.17 $ 0.15
NPC International, inc.
(formerly known as National Pizza Company)
up to $60,000,000 Senior Notes
______________________________________________________
Amended and restated Master Shelf Agreement
_______________________________________________________
Dated as of June 9, 1994
(Restated as of June 29, 1995)
Table of Contents
(not part of Agreement)
1. RESTATEMENT AND AMENDMENT; AUTHORIZATION OF ISSUE OF NOTES
1A. Restatement and Amendment of Existing Agreement.
1B. Authorization of Issue of Notes.
2. PURCHASE AND SALE OF NOTES
2A. Facility
2B. Issuance Period
2C. Periodic Spread Information
2D. Request for Purchase
2E. Rate Quotes
2F. Acceptance
2G. Market Disruption
2H. Closing
2I. Fees
3. CONDITIONS OF CLOSING
3A. Certain Documents
3B. Opinion of Purchaser's Special Counsel
3C. Representations and Warranties; No Default
3D. Purchase Permitted by Applicable Laws
3E. New Franchise Agreement
3F. Amendments to Existing Agreements
4. PREPAYMENTS
4A. Required Prepayments
4B. Optional Prepayment With Yield-Maintenance Amount
4C. Notice of Optional Prepayment
4D. Application of Prepayments.
4E. Retirement of Notes.
5. AFFIRMATIVE COVENANTS
5A. Financial Statements
5B. Inspection of Property
5C. Covenant to Secure Notes Equally
5D. Agreement Assuming Liability on Notes
5E. Compliance with Laws, Etc.
5F. Maintenance of Insurance
5G. Maintenance of Properties, Etc.
5H. Corporate Existence
5I. Claims for Labor and Materials
6. NEGATIVE COVENANTS
6A. Consolidated Net Worth Requirement
6B. Consolidated Fixed Charge Requirement
6C. Lien, Debt, and Other Restrictions
6C(1) Liens
6C(2) Debt
6C(3) Loans, Advances, Investments and Contingent Liabilities
6C(4) Subsidiary Debt
6C(5) Sale of Stock and Debt of Subsidiaries
6C(6) Merger and Sale of Assets
6C(7) Sale or Discount of Receivables
6C(8) Transactions with Affiliates
6C(9) Intangible Assets
7. EVENTS OF DEFAULT
7A. Acceleration
7B. Rescission of Acceleration
7C. Notice of Acceleration or Rescission
7D. Other Remedies.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
8A. Organization; Qualification; Corporate Authority
8B. Financial Statements.
8C. Conflicting Agreements and Other Matters.
8D. Governmental Consent.
8E. Enforceability
8F. Actions Pending
8G. Outstanding Debt.
8H. Title to Properties
8I. Taxes.
8J. Offering of Notes
8K. Use of Proceeds.
8L. ERISA
8M. Disclosure.
8N. Investment Company Act.
8O. Public Utility Holding Company Act.
8P. Environmental Compliance
8Q. Funded Debt Agreements
8R. Hostile Tender Offers
9. REPRESENTATIONS OF THE PURCHASER.
9A. Nature of Purchase
9B. Source of Funds
10. DEFINITIONS AND ACCOUNTING TERMS.
10A. Certain Defined Terms.
10B. Accounting Principles, Terms and Determinations
11. MISCELLANEOUS.
11A. Note Payments.
11B. Expenses.
11C. Consent to Amendments.
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes
11E. Persons Deemed Owners; Participations.
11F. Survival of Representations and Warranties; Entire Agreement.
11G. Successors and Assigns.
11H. Disclosure to Other Persons; Confidentiality.
11I. Notices.
11J. Descriptive Headings.
11K. Satisfaction Requirement.
11L. Governing Law.
11M. Integration.
11N. Maximum Interest Payable.
11O. Counterparts.
11P. Payments Due on Non-Business Days
Information Schedule [NOT INCLUDED]
Exhibit A -- Form of Note
Exhibit B -- Form of Request to Purchase
Exhibit C -- Form of Confirmation of Acceptance
Exhibit D -- Form of Opinion of Company's Counsel
Exhibit E -- Form of Amendment to Existing Note Agreements
Schedule 6C(2) -- Existing Funded Debt
Schedule 8C -- List of Agreements Restricting Debt
NPC INTERNATIONAL, INC.
720 West 20th Street
Pittsburg, Kansas 66762
As of June 9, 1994
To: The Prudential Insurance Company
of America (herein called "Prudential")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential, the
"Purchasers")
c/o Prudential Capital Group
1201 Elm St., Suite 4900
Dallas, Texas 75270
Ladies and Gentlemen:
The undersigned, NPC International, Inc., formerly known as National
Pizza Company (the "Company"), hereby agrees with Prudential as follows:
1. RESTATEMENT AND AMENDMENT; AUTHORIZATION OF ISSUE OF NOTES.
1A. Restatement and Amendment of Existing Agreement. The
Company and Prudential entered into a Master Shelf Agreement dated as of
June 9, 1994 as amended by Letter Amendment No. 1 dated December 23, 1994,
Amendment No. 2 dated March 28, 1995 and Amendment No. 3 dated May 24, 1995
(the "Existing Agreement") pursuant to which the Company has issued to
Prudential $20,000,000 aggregate principle amount of Senior Notes (the
"Existing Notes"). The Company and Prudential are entering into this
Agreement to, among other things, increase the Facility to $60,000,000 in
the aggregate and extend the Issuance Period to June 29, 1997.
Accordingly, the Company, Prudential and each Purchaser agrees that the
Existing Agreement is hereby amended and restated in its entirety to read
as provided in this Agreement.
1B. Authorization of Issue of Notes. The Company will authorize
the issue of its senior promissory notes (herein called the "Notes") in the
aggregate principal amount of $60,000,000; to be dated the date of issue
thereof; to mature, in the case of each Note so issued, no more than 8
years after the date of original issuance thereof; to have an average life,
in the case of each Note so issued, of no more than 6 years after the date
of original issuance thereof; to bear interest on the unpaid balance
thereof from the date thereof at the rate per annum, and to have such other
particular terms, as shall be set forth, in the case of each Note so
issued, in the Confirmation of Acceptance with respect to such Note
delivered pursuant to paragraph 2F; and to be substantially in the form of
Exhibit A attached hereto. The term "Notes" as used herein shall include
each Note delivered pursuant to any provision of this Agreement and each
Note delivered in substitution or exchange for any such Note pursuant to
any such provision. Notes which have (a) the same final maturity, (b) the
same installment payment dates, (c) the same installment payment amounts
(as a percentage of the original principal amount of each Note), (d) the
same interest rate, (e) the same interest payment periods, and (vi) the
same original date of issuance are herein called a "Series" of Notes.
2. PURCHASE AND SALE OF NOTES.
2A. Facility. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by
Prudential and Prudential Affiliates from time to time, the purchase of
Notes pursuant to this Agreement. The willingness of Prudential to
consider such purchase of Notes is herein called the "Facility". At any
time, the aggregate principal amount of Notes stated in paragraph 1, minus
the aggregate principal amount of Notes (including the Existing Notes)
purchased and sold pursuant to this Agreement prior to such time, minus the
aggregate principal amount of Accepted Notes (as hereinafter defined) which
have not yet been purchased and sold hereunder prior to such time, is
herein called the "Available Facility Amount" at such time.
NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF
NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT
NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE
OFFERS TO PURCHASE OR ACCEPT OFFERS TO SELL NOTES, OR TO QUOTE RATES,
SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF NOTES, AND THE
FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY
PRUDENTIAL AFFILIATE.
2B. Issuance Period. Notes may be issued and sold pursuant to
this Agreement until the earlier of (i) June 29, 1997 and (ii) the
thirtieth day after Prudential shall have given to the Company, or the
Company shall have given to Prudential, a notice stating that it elects to
terminate the issuance and sale of Notes pursuant to this Agreement (or if
such thirtieth day is not a Business Day, the Business Day next preceding
such thirtieth day). The period during which Notes may be issued and sold
pursuant to this Agreement is herein called the "Issuance Period".
2C. Periodic Spread Information. Not later than 9:30 A.M. (New
York City local time) on a Business Day during the Issuance Period if there
is an Available Facility Amount on such Business Day, the Company may
request by telecopier or telephone, and Prudential will, to the extent
reasonably practicable, provide to the Company on such Business Day (or, if
such request is received after 9:30 A.M. (New York City local time) on such
Business Day, on the following Business Day), information (by telecopier or
telephone) with respect to various spreads at which Prudential or
Prudential Affiliates might be interested in purchasing Notes of different
average lives; provided, however, that the Company may not make such
requests more frequently than once in every five Business Days or such
other period as shall be mutually agreed to by the Company and Prudential.
The amount and content of information so provided shall be in the sole
discretion of Prudential but it is the intent of Prudential to provide
information which will be of use to the Company in determining whether to
initiate procedures for use of the Facility. Information so provided shall
not constitute an offer to purchase Notes, and neither Prudential nor any
Prudential Affiliate shall be obligated to purchase Notes at the spreads
specified. Information so provided shall be representative of potential
interest only for the period commencing on the day such information is
provided and ending on the earlier of the fifth Business Day after such day
and the first day after such day on which further spread information is
provided. Prudential may suspend or terminate providing information
pursuant to this paragraph 2C if, in its sole discretion, it determines
that there has been an adverse change in the credit quality of the Company
after the date of this Agreement.
2D. Request for Purchase. The Company may from time to time
during the Issuance Period make requests for purchases of Notes (each such
request being herein called a "Request for Purchase"). Each Request for
Purchase shall be made to Prudential by telecopier and confirmed by
nationwide overnight delivery service, and shall (i) specify the aggregate
principal amount of Notes covered thereby, which shall not be less than
$5,000,000 and not be greater than the Available Facility Amount at the
time such Request for Purchase is made, (ii) specify the principal amounts,
final maturities, installment payment dates and amounts and interest
payment periods (quarterly or semi-annual in arrears) of the Notes covered
thereby, (iii) specify the use of proceeds of such Notes, (iv) specify the
proposed Closing Day of the purchase and sale of such Notes, which shall be
a Business Day during the Issuance Period not less than 5 Business Days and
not more than 20 Business Days after the making of such Request for
Purchase, (v) specify the number of the account and the name and address of
the depository institution to which the purchase prices of such Notes are
to be transferred on the Closing Day for such purchase and sale, (vi)
certify that the representations and warranties contained in paragraph 8
are true on and as of the date of such Request for Purchase except to the
extent of changes caused by the transactions herein contemplated and that
there exists on the date of such Request for Purchase no Event of Default
or Default, and (vii) be substantially in the form of Exhibit B attached
hereto. Each Request for Purchase shall be in writing and shall be deemed
made when received by Prudential.
2E. Rate Quotes. Not later than five Business Days after the
Company shall have given Prudential a Request for Purchase pursuant to
paragraph 2D, Prudential may provide (by telephone promptly thereafter
confirmed by telecopier, in each case no earlier than 9:30 A.M. and no
later than 1:30 P.M. New York City local time) interest rate quotes for the
several principal amounts, maturities, installment payment schedules, and
interest payment periods of Notes specified in such Request for Purchase.
Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Notes until such balance shall have
become due and payable, at which Prudential or a Prudential Affiliate would
be willing to purchase such Notes at 100% of the principal amount thereof.
2F. Acceptance. Within 30 minutes after Prudential shall have
provided any interest rate quotes pursuant to paragraph 2E or in the event
that due to conditions in the market place it shall not be feasible to hold
such interest rate quotes open 30 minutes, such shorter period as
Prudential may specify to the Company at the time such interest rate quotes
are provided to the Company (such period herein called the "Acceptance
Window"), the Company may, subject to paragraph 2G, elect to accept such
interest rate quotes as to not less than $5,000,000 aggregate principal
amount of the Notes specified in the related Request for Purchase. Such
election shall be made by an Authorized Officer of the Company notifying
Prudential by telephone or telecopier within the Acceptance Window (but not
earlier than 9:30 A.M. or later than 2:00 P.M., New York City local time)
that the Company elects to accept such interest rate quotes, specifying the
Notes (each such Note being herein called an "Accepted Note") as to which
such acceptance (herein called an "Acceptance") relates. The day the
Company notifies an Acceptance with respect to any Accepted Notes is herein
called the "Acceptance Day" for such Accepted Notes. Any interest rate
quotes as to which Prudential does not receive an Acceptance within the
Acceptance Window shall expire, and no purchase or sale of Notes hereunder
shall be made based on such expired interest rate quotes. Subject to
paragraph 2G and the other terms and conditions hereof, the Company agrees
to sell to Prudential or a Prudential Affiliate, and Prudential agrees to
purchase, or to cause the purchase by a Prudential Affiliate of, the
Accepted Notes at 100% of the principal amount of such Notes. As soon as
practicable following the Acceptance Day, the Company, Prudential and each
Prudential Affiliate which is to purchase any such Accepted Notes will
execute a confirmation of such Acceptance substantially in the form of
Exhibit C attached hereto (herein called a "Confirmation of Acceptance").
2G. Market Disruption. Notwithstanding the provisions of
paragraph 2F, if Prudential shall have provided interest rate quotes
pursuant to paragraph 2E and thereafter prior to the time an Acceptance
with respect to such quotes shall have been notified to Prudential in
accordance with paragraph 2F there shall occur a general suspension,
material limitation, or significant disruption of trading in securities
generally on the New York Stock Exchange or in the domestic public market
for U.S. Treasury securities or derivatives thereof, then such interest
rate quotes shall expire, and no purchase or sale of Notes hereunder shall
be made based on such expired interest rate quotes. If the Company
thereafter notifies Prudential of the Acceptance of any such interest rate
quotes, such Acceptance shall be ineffective for all purposes of this
Agreement, and Prudential shall promptly notify the Company that the
provisions of this paragraph 2G are applicable with respect to such
Acceptance.
2H. Closing.
2H(i) Closings -- Not later than 11:30 A.M. (New York City
local time) on the Closing Day for any Accepted Notes, the Company will
deliver to each Purchaser listed in the Confirmation of Acceptance relating
thereto at the offices of the Prudential Capital Group, 1201 Elm St, Suite
4900, Dallas, Texas 75270, the Accepted Notes to be purchased by such
Purchaser in the form of a one or more Notes in authorized denominations as
such Purchaser may request for each Series of Accepted Notes to be
purchased on the Closing Day, dated the Closing Day and registered in such
Purchaser's name (or in the name of its nominee), against payment of the
purchase price thereof by transfer of immediately available funds for
credit to the Company's account specified in the Request for Purchase of
such Notes.
2H(ii) Rescheduled Closings -- If the Company fails to tender to
any Purchaser the Accepted Notes to be purchased by such Purchaser on the
scheduled Closing Day for such Accepted Notes as provided above in this
paragraph 2H, or any of the conditions specified in paragraph 3 shall not
have been fulfilled by the time required on such scheduled Closing Day, the
Company shall, prior to 1:00 P.M., New York City local time, on such
scheduled Closing Day notify such Purchaser in writing whether (i) such
closing is to be rescheduled (such rescheduled date to be a Business Day
during the Issuance Period not less than one Business Day and not more than
10 Business Days after such scheduled Closing Day (the "Rescheduled Closing
Day") and certify to such Purchaser that the Company reasonably believes
that it will be able to comply with the conditions set forth in paragraph 3
on such Rescheduled Closing Day and that the Company will pay the Delayed
Delivery Fee in accordance with paragraph 2I(iii) or (ii) such closing is
to be canceled as provided in paragraph 2I(iv). In the event that the
Company shall fail to give such notice referred to in the preceding
sentence, such Purchaser may at its election, at any time after 1:00 P.M.,
New York City local time, on such scheduled Closing Day, notify the Company
in writing that such closing is to be canceled as provided in paragraph
2I(iv).
2I. Fees.
2I(i) Facility Fee -- In consideration for the time, effort
and expense involved in the preparation, negotiation and execution of this
Agreement, at the time of the execution of the term sheet concerning this
Agreement, the Company paid to Prudential in immediately available funds
fee (herein called the "Facility Fee") in an amount equal to $10,000.
2I(ii) Issuance Fee -- The Company will pay to Prudential in
immediately available funds a fee (herein called the "Issuance Fee") on
each Closing Day in an amount equal to 0.25% (25/100ths of 1%) of the
aggregate principal amount of Notes sold on such Closing Day.
2I(iii) Delayed Delivery Fee -- If the closing of the purchase
and sale of any Accepted Note is delayed for any reason beyond the original
Closing Day for such Accepted Note, the Company will pay to Prudential (a)
on the Cancellation Date or actual closing date of such purchase and sale
and (b) if earlier, the next Business Day following 90 days after the
Acceptance Day for such Accepted Notes and on each Business Day following
90 days after the prior payment hereunder, a fee (herein called the
"Delayed Delivery Fee") calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield
per annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the
yield per annum on a commercial paper investment of the highest quality
selected by Prudential on the date Prudential receives notice of the delay
in the closing for such Accepted Notes having a maturity date or dates the
same as, or closest to, the Rescheduled Closing Day or Rescheduled Closing
Days (a new alternative investment being selected by Prudential each time
such closing is delayed); "DTS" means Days to Settlement, i.e., the number
of actual days elapsed from and including the originally scheduled Closing
Day with respect to such Accepted Note (in the case of the first such
Delayed Delivery Fee payment with respect to such Accepted Note) or from
and including the date of the next preceding Delayed Delivery Fee payment
(in the case of any subsequent Delayed Delivery Fee payment with respect to
such Accepted Note) to but excluding the date of such Delayed Delivery Fee
payment; and "PA" means Principal Amount, i.e., the principal amount of the
Accepted Note for which such calculation is being made. In no case shall
the Delayed Delivery Fee be less than zero. Nothing contained herein shall
obligate any Purchaser to purchase any Accepted Note on any day other than
the Closing Day for such Accepted Note, as the same may be rescheduled from
time to time in compliance with paragraph 2H.
2I(iv) Cancellation Fee -- If the Company at any time
notifies the Purchasers in writing that the Company is canceling the
closing of the purchase and sale of any Accepted Note, or if the Purchasers
notify the Company in writing under the circumstances set forth in the last
sentence of paragraph 2H that the closing of the purchase and sale of such
Accepted Note is to be canceled, or if the closing of the purchase and sale
of such Accepted Note is not consummated on or prior to the last day of the
Issuance Period (the date of any such notification, or the last day of the
Issuance Period, as the case may be, being herein called the "Cancellation
Date"), the Company will pay the Purchasers in immediately available funds
an amount (the "Cancellation Fee") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as reasonably
determined by Prudential) of the Hedge Treasury Note(s) on the Cancellation
Date over the bid price (as reasonably determined by Prudential) of the
Hedge Treasury Notes(s) on the Acceptance Day for such Accepted Note by (b)
such bid price; and "PA" has the meaning ascribed to it in paragraph
2I(iii). The foregoing bid and ask prices shall be as reported by Telerate
Systems, Inc. (or, if such data for any reason ceases to be available
through Telerate Systems, Inc., any publicly available source of similar
market data). Each price shall be based on a U.S. Treasury security having
a par value of $100.00 and shall be rounded to the second decimal place.
In no case shall the Cancellation Fee be less than zero.
2I(v) [This paragraph intentionally omitted.]
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to
purchase and pay for any Accepted Notes is subject to the satisfaction, on
or before the Closing Day for such Accepted Notes, of the following
conditions:
3A. Certain Documents. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Accepted Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of
Directors of the Company approving this Agreement and the Accepted Notes,
and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and the
Accepted Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true signatures of the
officers of the Company authorized to sign this Agreement and the Accepted
Notes and the other documents to be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and By-
laws of the Company.
(v) A favorable opinion of Shook, Hardy & Bacon, special counsel
to the Company satisfactory to such Purchaser and substantially in the form
of Exhibit D-1 attached hereto and as to such other matters as such
Purchaser may reasonably request and a favorable opinion of David G. Short,
[General Counsel] of the Company, satisfactory to such Purchaser and
substantially in the form of Exhibit D-2 attached hereto and as to such
matters as such Purchaser may reasonably request. The Company hereby
directs each such counsel to deliver such opinion, agrees that the issuance
and sale of any Accepted Notes will constitute a reconfirmation of such
direction, and understands and agrees that each Purchaser receiving such an
opinion will and is hereby authorized to rely on such opinion.
(vi) A good standing certificate for the Company from the
Secretary of State of Kansas dated of a recent date and such other evidence
of the status of the Company as such Purchaser may reasonably request.
(vii) Certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports of a recent date listing all effective
financing statements which name the Company or any Subsidiary (under its
present name and previous names) as debtor and which are filed in the
offices of the Secretaries of State of Kansas, Texas, Washington and such
other states in which a "chief executive office" (as such term is used in
the Uniform Commercial Code) is located as may be reasonably requested,
with copies of such financing statements.
(viii) Additional documents or certificates with respect to
legal matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
3B. Opinion of Purchaser's Special Counsel. Such Purchaser
shall have received from Rex C. Mills, Assistant General Counsel of
Prudential or such other counsel, who is acting as special counsel for it
in connection with this transaction, a favorable opinion satisfactory to
such Purchaser as to such matters incident to the matters herein
contemplated as it may reasonably request.
3C. Representations and Warranties; No Default. The
representations and warranties contained in paragraph 8 shall be true on
and as of such Closing Day, except to the extent of changes caused by the
transactions herein contemplated; there shall exist on such Closing Day no
Event of Default or Default; and the Company shall have delivered to such
Purchaser an Officer's Certificate, dated such Closing Day, to both such
effects.
3D. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Accepted Notes to be purchased by such Purchaser on the
terms and conditions herein provided (including the use of the proceeds of
such Notes by the Company) shall not violate any applicable law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act or Regulation G, T or X of the Board of Governors of the
Federal Reserve System) and shall not subject such Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and such Purchaser shall have
received such certificates or other evidence as it may request to establish
compliance with this condition.
3E. New Franchise Agreement. The Company and Pizza Hut, Inc.
shall have executed and delivered a new or amended franchise agreement
relating to the operation of the Company's Pizza Hut restaurants that is
satisfactory in form and substance to Prudential.
3F. Amendments to Existing Agreements. The Company shall have
duly executed and delivered an amendment to (i) the Note Agreement dated as
of March 13, 1991 between the Company and Prudential and (ii) the Note
Agreement dated as of January 25, 1990 between the Company and Prudential
in substantially the form of Exhibit E attached hereto.
4. PREPAYMENTS. Any Accepted Notes shall be subject to
prepayment with respect to any required prepayments set forth in such
Accepted Notes as provided in paragraph 4A and with respect to the optional
prepayments permitted by paragraph 4B.
4A. Required Prepayments. The Notes of each Series shall be
subject to required prepayments, if any, set forth in the Notes of such
Series.
4B. Optional Prepayment With Yield-Maintenance Amount. The
Notes of each Series shall be subject to prepayment, in whole at any time
or from time to time in part (in integral multiples of $1,000,000), at the
option of the Company, at 100% of the principal amount so prepaid plus
interest thereon to the prepayment date and the Yield-Maintenance Amount,
if any, with respect to each such Note. Any partial prepayment of a Series
of Notes pursuant to this paragraph 4B shall be applied in satisfaction of
required payments of principal in inverse order of their scheduled due
dates.
4C. Notice of Optional Prepayment. The Company shall give the
holder of each Note to be prepaid pursuant to paragraph 4B irrevocable
written notice of such prepayment not less than 10 Business Days prior to
the prepayment date, specifying such prepayment date, specifying the
aggregate principal amount of the Notes of the same Series as such Note to
be prepaid on such date, identifying each Note held by such holder, and the
principal amount of each such Note, to be prepaid on such date and stating
that such prepayment is to be made pursuant to paragraph 4B. Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield-Maintenance Amount, if any,
herein provided, shall become due and payable on such prepayment date. The
Company shall, on or before the day on which it gives written notice of any
prepayment pursuant to paragraph 4B, give telephonic notice of the
principal amount of the Notes to be prepaid and the prepayment date to each
Significant Holder which shall have designated a recipient for such notices
in the Information Schedule attached hereto or by notice in writing to the
Company.
4D. Application of Prepayments. In the case of each prepayment
of less than the entire unpaid principal amount of all outstanding Notes,
the amount to be prepaid shall be applied pro rata to all outstanding Notes
of all Series (including, for the purpose of this paragraph 4D only, all
Notes prepaid or otherwise retired or purchased or otherwise acquired by
the Company or any of its Subsidiaries or Affiliates other than by
prepayment pursuant to paragraph 4A or 4B) according to the respective
unpaid principal amounts thereof. The amounts so prepaid on each
outstanding Note shall be credited against the last maturing installment or
installments of principal then remaining unpaid on such Note.
4E. Retirement of Notes. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire
in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to paragraph 4A or 4B or upon acceleration of such
final maturity pursuant to paragraph 7A), or purchase or otherwise acquire,
directly or indirectly, Notes of any Series held by any holder unless the
Company or such Subsidiary or Affiliate shall have offered to prepay or
otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes of such Series
held by each other holder of Notes of such Series at the time outstanding
upon the same terms and conditions. Any Notes so prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates shall not be deemed to be outstanding for any
purpose under this Agreement, except as provided in paragraph 4D.
5. AFFIRMATIVE COVENANTS. During the Issuance Period and
thereafter so long as any Note shall remain unpaid, the Company covenants
as follows:
5A. Financial Statements. The Company will deliver to each
Significant Holder in triplicate:
(i) as soon as practicable and in any event within 50 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, consolidated statements of income, consolidated
statements of shareholder's equity and consolidated statements of cash
flows of the Company and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly period, and
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period or as of the end of such
corresponding period, as applicable, in the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that, so long as such delivery is made within the time requirement
set forth above in this clause (i), delivery pursuant to clause (iv) below
of copies of the Quarterly Report on Form 10-Q of the Company for such
quarterly period filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 50 days after
the end of each quarterly period in each fiscal year (or, at the Company's
option, more frequently), balance sheets at the end of each fiscal quarter
and income statements for the period from the beginning of the current
fiscal year to the end of such fiscal quarter for each material operating
division of the Company (whether incorporated or not), setting forth in
each case in comparative form figures as of the end of the corresponding
period or for the corresponding period, as applicable, in the preceding
fiscal year, all in reasonable detail and certified by an authorized
financial officer of the Company as fairly presenting the financial
condition and operations of such divisions in accordance with prior
practices of the Company consistently applied; provided, however, that, so
long as such delivery is made within the time requirement set forth above
in this clause (ii), it is agreed and acknowledged that the continued
delivery of the financial statements currently provided by the Company in
its director packages shall be deemed to satisfy the requirements of this
clause (ii);
(iii) as soon as practicable and in any event within 95 days
after the end of each fiscal year, consolidated statements of income,
shareholder's equity and cash flows of the Company and its Subsidiaries for
such year, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in scope to the
Required Holders and certified to the Company by independent public
accountants of recognized national standing selected by the Company whose
certificate shall be in scope and substance satisfactory to the Required
Holders; provided, however, that, so long as such delivery is made within
the time requirement set forth above in the clause (iii), delivery pursuant
to clause (iv) below of copies of the Annual Report on Form 10-K of the
Company for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause
(iii);
(iv) promptly upon transmission thereof, copies of all such finan
cial statements, proxy statements, notices and reports as it shall send to
its stockholders and copies of all registration statements (without
exhibits) and all reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
(v) promptly upon receipt thereof, a copy of each other report
submitted to board of directors of the Company (or the executive committee
thereof) or any Subsidiary by independent accountants in connection with
any annual, interim or special audit made by them of the books of the
Company or any Subsidiary;
(vi) promptly after the filing or receiving thereof, copies of
all reports and notices which the Company or any Subsidiary files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Company or any
Subsidiary receives from such corporation; and
(vii) promptly after receipt of notice thereof by the Company
or after the Company obtains knowledge thereof, notice of any default under
any Franchise Agreement and any notice received by the Company pursuant to
Article XXI. C. of the existing Franchise Agreement (or any similar
provision of any Franchise Agreement hereafter entered into by the Company
or any Subsidiary) of any Franchise Agreement in effect on the Date of
Closing; and
(viii) with reasonable promptness, such other information
respecting the condition or operations, financial or otherwise, of the
Company or any of its Subsidiaries as such Significant Holder may
reasonably request.
Together with each delivery of financial statements required by clauses (i)
and (iii) above, the Company will deliver to each Significant Holder an
Officer's Certificate demonstrating (with computations in reasonable
detail) compliance by the Company and its Subsidiaries with the provisions
of paragraph 6 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the
nature and period of existence thereof and what action the Company proposes
to take with respect thereto. Together with each delivery of financial
statements required by clause (iii) above, the Company will deliver to each
Significant Holder a certificate of such accountants stating that, in
making the audit necessary to the certification of such consolidated
financial statements, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event of
Default or Default, specifying the nature and period of existence thereof.
Such accountants, however, shall not be liable to anyone by reason of their
failure to obtain knowledge of any Event of Default or Default which would
not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards.
The Company also covenants that forthwith upon the President or Chief
Financial Officer or principal accounting officer of the Company obtaining
knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature and
period of existence thereof and what action the Company proposes to take
with respect thereto.
5B. Inspection of Property. The Company will permit any Person
designated by any Significant Holder in writing, at such Significant
Holder's expense, to visit and inspect any of the properties of the Company
and its Subsidiaries, to examine the corporate books and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent
public accountants (and by this provision the Company authorizes its
accountants to discuss with such Person the finances and affairs of the
Company and its Subsidiaries), all at such reasonable times with reasonable
notice and as often as such Significant Holder may reasonably request.
5C. Covenant to Secure Notes Equally. If the Company or any
Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted
by the provisions of paragraph 6C(1) (unless prior written consent to the
creation or assumption thereof shall have been obtained pursuant to
paragraph 11C), it will make or cause to be made effective provision
whereby the Notes will be secured by such Lien equally and ratably with any
and all other Debt thereby secured so long as any such other Debt shall be
so secured. In the event the Company shall propose to secure the Notes
pursuant to this paragraph, the mortgage or other instrument creating such
Lien shall be satisfactory in form and substance (including without
limitation the portion thereof pertaining to the release of the collateral
secured thereby and the application of the proceeds from the sale or other
disposition of such collateral) to the Required Holders.
5D. Agreement Assuming Liability on Notes. If at any time any
Person should become liable (as co-obligor, endorser, guarantor or surety)
on any other unsecured obligation of the Company in excess of $500,000 or
on any obligation of any Subsidiary, the Company will, at the same time,
cause such Person to deliver to each holder of any Note an agreement
pursuant to which such Person becomes similarly liable on each Note.
5E. Compliance with Laws, Etc. The Company will comply, and
cause each of its Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders the noncompliance with which
could result in a material adverse effect on the Company or any of its
Subsidiaries, such compliance to include, without limitation, paying before
the same become delinquent all taxes, assessments and governmental charges
imposed upon it or upon its property; provided the Company or such
Subsidiary shall not be required to pay any such taxes, assessments or
governmental charges if (i) the validity, applicability or amount thereof
is being contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any property of the Company or
such Subsidiary or any material interference with the use thereof by the
Company or such Subsidiary, and (ii) the Company or such Subsidiary shall
set aside on its books, reserves deemed by it to be adequate with respect
thereto.
5F. Maintenance of Insurance. The Company and each Subsidiary
will maintain insurance in such amounts and against such liabilities and
hazards as customarily is maintained by other companies of similar size
operating similar businesses, and upon the written request of any
Significant Holder, and together with each delivery of financial statements
under clause (iii) of paragraph 5A, it will deliver an Officer's
Certificate specifying the details of such insurance in effect.
5G. Maintenance of Properties, Etc. The Company will maintain
and preserve, and cause each Subsidiary to maintain and preserve, to the
extent that a failure to so maintain or preserve would have a material
adverse effect on the Company's or any Subsidiary's business, property or
assets (i) all of its properties which are used or useful in the conduct of
its business in good working order and condition, ordinary wear and tear
excepted and (ii) all of its rights, title, licenses, trademarks and other
permits used or useful in the conduct of its business.
5H. Corporate Existence. The Company and its Subsidiaries shall
maintain their corporate existence.
5I. Claims for Labor and Materials. The Company will promptly
pay and discharge, and will cause each Subsidiary promptly to pay and
discharge, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials,
which if unpaid might become a Lien upon any property of the Company or
such Subsidiary; provided the Company or such Subsidiary shall not be
required to pay any such account payable or claim if either (i)(a) the
validity, applicability or amount thereof is being contested in good faith
by appropriate actions or proceedings which will prevent the forfeiture or
sale of any property of the Company or such Subsidiary or any material
interference with the use thereof by the Company or such Subsidiary, and
(b) the Company or such Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto or (ii) the failure to pay
any such account payable or claim would not have a material adverse effect
on the business, prospects, profits, properties or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
6. NEGATIVE COVENANTS. During the Issuance Period and
thereafter so long as any Note shall remain unpaid, the Company covenants
as follows:
6A. Consolidated Net Worth Requirement. The Company will not
permit Consolidated Net Worth at any time to be less than the sum of (i)
$72,258,000 plus (ii) an amount equal to 50% of Consolidated Net Earnings
(without reduction for any deficit in Consolidated Net Earnings for any
quarterly fiscal period) for the period from and after March 28, 1995 to
and including the date of determination thereof, computed on a cumulative
basis for such period.
6B. Consolidated Fixed Charge Requirement. The Company will not
permit Consolidated Net Income Available for Fixed Charges for the four
fiscal quarters most recently ended as of the date of determination, at any
time to be less than 200% of Fixed Charges as of the last day of the fiscal
quarter most recently ended as of the date of determination.
6C. Lien, Debt, and Other Restrictions. The Company will not
and will not permit any Subsidiary to:
6C(1) Liens -- Create, assume or suffer to exist any Lien upon
any of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 5C), except
(i) Liens for taxes or governmental charges and liens
securing claims or demands of mechanics and materialmen provided that the
payment is not at the time required by paragraph 5E or 5I;
(ii) other Liens incidental to the conduct of its business
or the ownership of its property and assets which are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, and which do not in the aggregate materially detract from the value
of its property or assets or materially impair the use thereof in the
operation of its business;
(iii) survey exceptions which, when taken as a whole, would
not have a material adverse effect on the Company;
(iv) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another Subsidiary;
(v) Liens existing on property acquired by the Company or
any Subsidiary at the time such property is acquired or Liens existing on
property of a Person immediately prior to such Person being consolidated
with or merged into the Company or a Subsidiary or such Person becoming a
Subsidiary provided that (x) no such Lien shall have been created or
assumed in contemplation of such acquisition, consolidation or merger or
such Person's becoming a Subsidiary, (y) each such Lien shall at all times
be confined solely to the property so acquired, and (z) any Debt secured by
such Liens shall be within the applicable limitations of paragraph
6C(2)(a); and
(vi) other Liens on the property of the Company and all
Subsidiaries, provided that (a) the aggregate amount of (I) Debt secured by
such Liens plus (II) Debt of Subsidiaries (collectively, "Priority Debt")
does not exceed at any time an amount equal to 20% of Consolidated Net
Worth and (b) all such Debt shall be within the applicable limitations of
paragraph 6C(2)(a).
6C(2) Debt -- (a) Create, incur, assume or in any manner be
or become liable in respect of any Debt, except
(i) Funded Debt of the Company represented by the Notes;
(ii) Funded Debt of the Company existing on the date hereof
and described on Schedule 6C(2) attached hereto;
(iii) Funded Debt or Current Debt of any Subsidiary to the
Company or any other Subsidiary;
(iv) additional Debt of the Company and its Subsidiaries;
provided that (x) the aggregate amount of all Debt of the Company and its
Subsidiaries (determined on a consolidated basis) shall not exceed at any
time an amount equal to (1) prior to and including the last day of the
first fiscal quarter of fiscal year 1997, three (3) times EBITDA, and (2)
thereafter, two and three-fourths (2.75) times EBITDA, in each case for the
four fiscal quarters immediately preceding the date of determination, and
(y) in the case of Priority Debt, such Debt is within the applicable
limitations of paragraphs 6C(1) and 6C(4).
(b) Any entity which becomes a Subsidiary after the date hereof shall
for all purposes of this Agreement be deemed to have created, assumed or
incurred at the time it becomes a Subsidiary all Debt of such entity
existing immediately after it becomes a Subsidiary.
6C(3) Loans, Advances, Investments and Contingent Liabilities --
Make or permit to remain outstanding any loan or advance to, or guarantee,
endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations, stock or dividends of, or
own, purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any Person, except
that the Company or any Subsidiary may
(i) make or permit to remain outstanding loans or advances
to any Subsidiary,
(ii) own, purchase or acquire stock, obligations or
securities of a Subsidiary or of a corporation which immediately after such
purchase or acquisition will be a Subsidiary,
(iii) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Company or any Subsidiary,
(iv) own, purchase or acquire prime commercial paper and
certificates of deposit of United States commercial banks (having capital
surplus in excess of $250,000,000), in each case due within one year from
the date of purchase and payable in the United States in United States
dollars, and obligations of the United States Government or any agency
thereof, and obligations guaranteed by the United States Government, and
repurchase agreements of such banks for terms of less than one year in
respect of the foregoing certificates and obligations,
(v) own, purchase or acquire securities issued by state and
local governments (or subdivisions thereof) maturing in twelve months or
less from the date of acquisition by the Company or any Subsidiary which
securities at the time of acquisition thereof by the Company or such
Subsidiary are rated AA or better by Standard & Poor's Corporation or Aa or
better by Moody's Investors Service, Inc.,
(vi) make or permit to remain outstanding travel and other
like advances to officers and employees in the ordinary course of business,
(vii) make or permit to remain outstanding loans to
officers and employees of the Company pursuant to the Executive Loan
Program in an aggregate amount not to exceed $1,500,000 outstanding at any
time that are approved by the Audit Committee of the Board of Directors of
the Company,
(viii) promissory notes and other receivables arising from
the sale of goods and services or other assets; provided that the aggregate
outstanding amounts of such notes and receivables shall not at any time
exceed $7,500,000, and
(ix) make or permit to remain outstanding loans or advances
to, or guarantee, endorse or otherwise be or become contingently liable in
connection with the obligations, stock or dividends of, or own, purchase or
acquire stock, obligations or securities of, any other Person, provided
that the aggregate principal amount of such loans and advances, plus the
aggregate amount of such contingent liabilities, at any time outstanding
for the Company and all Subsidiaries shall not exceed an amount equal to
10% of Consolidated Net Worth.
6C(4) Subsidiary Debt. The Company will not permit its
Subsidiaries to create, incur or assume or in any manner be or become
liable in any respect of any Debt, if the aggregate amount of Priority Debt
of the Company and its Subsidiaries would exceed an amount equal to twenty
percent (20%) of Consolidated Net Worth.
6C(5) Sale of Stock and Debt of Subsidiaries -- Sell or
otherwise dispose of, or part with control of, any shares of stock or Debt
of any Subsidiary, except to the Company or another Subsidiary, and except
that all shares of stock and Debt of any Subsidiary at the time owned by or
owed to the Company and all Subsidiaries may be sold as an entirety for a
cash consideration which represents the fair value (as determined in good
faith by the Board of Directors of the Company) at the time of sale of the
shares of stock and Debt so sold, provided that the assets of such
Subsidiary could be sold within the limitations of paragraph 6C(6) and that
the earnings of such Subsidiary shall not have constituted more than 5% of
Consolidated Net Earnings for any of the three fiscal years then most
recently ended, and provided further that, at the time of such sale, such
Subsidiary shall not own, directly or indirectly, any shares of stock or
Debt of any other Subsidiary (unless all of the shares of stock and Debt of
such other Subsidiary owned, directly or indirectly, by the Company and all
Subsidiaries are simultaneously being sold as permitted by this paragraph
6C(5)) or any Debt of the Company.
6C(6) Merger and Sale of Assets -- Merge or consolidate with
or into any other Person or during any 12 month period, sell, lease,
transfer or otherwise dispose of any assets which in the aggregate have a
book value in excess of 5% of the consolidated assets of the Company and
all Subsidiaries to any Person (determined as of the end of the fiscal year
immediately preceding the date of such sale or disposition), except that
(i) the Company may consolidate or merge with any other
corporation if (x) the Company shall be the surviving or continuing
corporation, and (y) at the time of such consolidation or merger and after
giving effect thereto no Default or Event of Default shall have occurred or
be continuing.
(ii) any Subsidiary may merge with the Company (provided
that the Company shall be the continuing or surviving corporation) or with
any one or more other Subsidiaries,
(iii) any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to the Company or another
Subsidiary,
(iv) any Subsidiary may sell, or otherwise dispose of all or
substantially all of its assets subject to the conditions specified in
paragraph 6C(5) with respect to a sale of the stock of such Subsidiary, and
(v) the Company or Skipper's, Inc. may sell or dispose of
assets related to discontinued operations or idle properties of Skipper's,
Inc.
6C(7) Sale or Discount of Receivables -- Sell with recourse,
or discount or otherwise sell for less than face value thereof, any of its
notes or accounts receivable.
6C(8) Transactions with Affiliates -- Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease
property (other than shares of stock of the Company) to, or otherwise deal
with, in the ordinary course of business or otherwise (i) any Substantial
Stockholder, or (ii) any corporation (except a Subsidiary) in which a
Substantial Stockholder or the Company (either directly or through
Subsidiaries) owns 5% or more of the outstanding voting stock of such
corporation except that (a) any Substantial Stockholder may be a director,
officer or employee of the Company or any Subsidiary and may be paid
reasonable compensation in connection therewith and (b) such acts and
transactions prohibited by this paragraph 6C(8) may be performed or engaged
in if upon terms not less favorable to Company or any Subsidiary than if no
relationship described in clause (i) and (ii) above existed. The
provisions of this paragraph 6C(8) shall not apply to transactions with
stockholders initiated prior to September 26, 1989 and which have been
reported to the Securities and Exchange Commission or loans to stockholders
permitted by paragraph 6C(3)(vi).
6C(9) Intangible Assets -- (a) The Company will not and
will not permit any Subsidiary to enter into, assume or otherwise be bound
or obligated under any agreement creating or evidencing Debt or any
agreement executed and delivered in connection with any Debt containing one
or more Intangible Asset Covenants unless prior written consent to such
agreement shall have been obtained pursuant to paragraph 11C; provided,
however, in the event the Company or any Subsidiary shall enter into,
assume or otherwise become bound by or obligated under any such agreement
without the prior written consent of the Required Holders, the terms of
this Agreement shall without any further action on the part of the Company
or any of the holders of the Notes, be deemed to be amended automatically
to include each Intangible Asset Covenant contained in such agreement. The
Company further covenants to promptly execute and deliver at its expense an
amendment to this Agreement in form and substance satisfactory to the
Required Holders evidencing the amendment of this Agreement to include such
Intangible Asset Covenants provided that the execution and delivery of such
amendment shall not be a precondition to the effectiveness of such
amendment as provided for in this paragraph 6C(9), but shall merely be for
the convenience of the parities hereto.
(b) For the purposes of this Agreement, the term "Intangible
Asset Covenant" shall mean (i)(A) any affirmative or negative covenant or
similar restriction applicable to the Company or any Subsidiary (regardless
of whether such provision is labeled or otherwise characterized as a
covenant) or (B) any provision which permits the holder of Debt of the
Company or any Subsidiary to accelerate (with the passage of time or giving
of notice or both) the maturity thereof or otherwise require the Company or
any Subsidiary to purchase such Debt prior to its stated maturity and (ii)
such provision provides for a financial covenant or default the calculation
of which involves as a specific component thereof the level of intangible
assets of the Company or any Subsidiary.
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation
of law or otherwise):
(i) the Company defaults in the payment of any principal of or
premium on any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than five (5) Business Days after the date due; or
(iii) the Company or any Subsidiary defaults in any payment
of principal of or interest on any other obligation for money borrowed (or
any Capitalized Lease Obligation, any obligation under a conditional sale
or other title retention agreement, any obligation issued or assumed as
full or partial payment for property whether or not secured by a purchase
money mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event of
default thereunder or under any such agreement shall occur and be continu
ing) and the effect of such failure or other event of default is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due
(or to be repurchased by the Company or any Subsidiary) prior to any stated
maturity or the Company fails to pay any guaranty in accordance with its
terms, provided that the aggregate amount of all obligations as to which
such a payment default shall occur and be continuing or such a failure or
other event causing or permitting acceleration (or resale to the Company or
any Subsidiary) shall occur and be continuing exceeds $2,500,000; or
(iv) any representation or warranty made by the Company herein or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant
or agreement contained in paragraphs 5C, 5D or 6 (other than paragraph
6C(8)) and such failure shall not be remedied within 5 Business Days after
any officer of the Company obtains actual knowledge thereof; or
(vi) the Company fails to perform or observe any other agreement,
covenant, term or condition contained herein including paragraph 6C(8) and
such failure shall not be remedied within 30 days after any officer of the
Company obtains actual knowledge thereof; or
(vii) the Company or any Subsidiary takes any action or fails
to take action which results in the loss of any franchise agreement,
license or other permit which would preclude the Company from operating
such franchise under the name "Pizza Hut", and such loss materially
adversely affects the business operations or profitability of the Company;
or
(viii) the Company or any Subsidiary makes an assignment for
the benefit of creditors or is generally not paying its debts as such debts
become due; or
(ix) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt (with respect to the
bankruptcy or insolvency of the Company or any Subsidiary), dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(x) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(xi) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
30 days; or
(xii) any order, judgment or decree is entered in any pro
ceedings against the Company decreeing the dissolution of the Company and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xiii) any order, judgment or decree is entered in any pro
ceedings against the Company or any Subsidiary decreeing a split-up of the
Company or such Subsidiary which requires the divestiture of assets
representing a substantial part, or the divestiture of the stock of a
Subsidiary whose assets represent a substantial part, of the consolidated
assets of the Company and its Subsidiaries (determined in accordance with
generally accepted accounting principles) or which requires the divestiture
of assets, or stock of a Subsidiary, which shall have contributed a substan
tial part of the Consolidated Net Earnings for any of the three fiscal
years then most recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xiv) any judgment or order, or series of judgments or
orders, for the payment of money in an amount in excess of $2,500,000
(exclusive of any amount covered by insurance and with respect to which the
insurer has assumed responsibility in writing) is rendered against the
Company or any Subsidiary and either (i) enforcement proceedings have been
commenced by any creditor upon such judgment or order or (ii) within 30
days after entry thereof, such judgment is not discharged or execution
thereof stayed pending appeal, or within 30 days after the expiration of
any such stay, such judgment is not discharged; or
(xv) any Termination Event with respect to a Plan shall have
occurred, and, within 30 days after the occurrence thereof, (i) such
Termination Event (if correctable) shall not have been corrected and (ii)
the then present value of such Plan's vested benefits exceeds the then
current value of assets accumulated in such Plan by more than the amount of
$2,500,000 (or in the case of a Termination Event involving the withdrawal
of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA),
the withdrawing employer's proportionate share of such excess shall exceed
such amount); or
(xvi) the Company or any of its ERISA Affiliates as employer
under a Multiemployer Plan shall have made a complete or partial withdrawal
from such Multiemployer Plan and the plan sponsor of such Multiemployer
Plan shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an annual amount exceeding $2,500,000;
then (a) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 7A, any holder of any Note subject to such a payment
default may at its option during the continuance of such Event of Default,
by notice in writing to the Company, declare all of such Notes held by such
holder to be, and all of such Notes held by such holder shall thereupon be
and become, immediately due and payable together with interest accrued
thereon, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Company, (b) if such event is an Event of
Default specified in clause (viii), (ix), (x), (xi) or (xii) of this
paragraph 7A with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable at par
together with interest accrued thereon, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the
Company, and (c) if such event is any other Event of Default, the Required
Holder(s) of the Notes of any Series may at its or their option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes of such Series to be, and all of the Notes of such
Series shall thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note of such Series, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, provided that the Yield Maintenance Amount, if any,
with respect to each Note shall be due and payable upon any declaration
pursuant to this paragraph 7A only if (I) the event whose occurrence
permits such declaration is an Event of Default specified in any of clauses
(i) to (vi), inclusive, of this paragraph 7A, (II) the Required Holders of
the Notes of any Series which shall have been accelerated shall have given
to the Company, at least 10 Business Days before such declaration, written
notice stating its or their intention to declare the Notes held by such
Required Holders (or all of the Notes of such Series) to be immediately due
and payable and identifying one or more such Events of Default whose
occurrence on or before the date of such notice permits such declaration,
and (III) one or more of the Events of Default so identified shall be
continuing at the time of such declaration.
7B. Rescission of Acceleration. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) may, by notice in writing to the
Company, rescind and annul such declaration and its consequences if (i) the
Company shall have paid all overdue interest on the Notes, the principal of
and Yield-Maintenance Amount, if any, payable with respect to any Notes
which have become due otherwise than by reason of such declaration, and
interest on such overdue interest and overdue principal and Yield-
Maintenance Amount at the rate specified in the Notes, (ii) the Company
shall not have paid any amounts which have become due solely by reason of
such declaration, (iii) all Events of Default and Defaults, other than non-
payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 11C, and
(iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement. No such rescission or
annulment shall extend to or affect any subsequent Event of Default or
Default or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any Note
shall be declared immediately due and payable pursuant to paragraph 7A or
any such declaration shall be rescinded and annulled pursuant to paragraph
7B, the Company shall forthwith give written notice thereof to the holder
of each Note at the time outstanding.
7D. Other Remedies. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement
contained in this Agreement or in aid of the exercise of any power granted
in this Agreement. No remedy conferred in this Agreement upon the holder
of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants:
8A. Organization; Qualification; Corporate Authority. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Kansas; each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. The Company has and each
Subsidiary has the corporate power to own its respective property and to
carry on its respective business as now being conducted, and the Company is
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary. The execution,
delivery and performance by the Company of this Agreement and the Notes are
within the Company's corporate powers and have been duly authorized by all
necessary corporate action.
8B. Financial Statements. The Company has furnished each
Purchaser of any Accepted Notes with the following financial statements,
identified by a principal financial officer of the Company: (i) a
consolidated balance sheet of the Company and its Subsidiaries as at the
last day of each of the three fiscal years of the Company most recently
completed prior to the date as of which this representation is made or
repeated to such Purchaser (other than fiscal years completed within 90
days prior to such date for which audited financial statements have not
been released) and consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries for each such year, all
reported on by Ernst & Young; and (ii) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of the quarterly period (if any)
most recently completed prior to such date and after the end of such fiscal
year (other than quarterly periods completed within 60 days prior to such
date for which financial statements have not been released) and the
comparable quarterly period in the preceding fiscal year and consolidated
statements of income, stockholders' equity and cash flows for the periods
from the beginning of the fiscal years in which such quarterly periods are
included to the end of such quarterly periods, prepared by the Company.
Such financial statements (including any related schedules and/or notes)
are true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end adjustments),
have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved and show
all liabilities, direct and contingent, of the Company and its Subsidiaries
required to be shown in accordance with such principles. The balance
sheets fairly present the condition of the Company and its Subsidiaries as
at the dates thereof, and the statements of income, stockholders' equity
and cash flows fairly present the results of the operations of the Company
and its Subsidiaries and their cash flows for the periods indicated. There
has been no material adverse change in the business, property or assets,
condition (financial or otherwise), or operations of the Company and its
Subsidiaries taken as a whole since the end of the most recent fiscal year
for which such audited financial statements have been furnished.
8C. Conflicting Agreements and Other Matters. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially
and adversely affects its business, property or assets, or financial
condition. Neither the execution nor delivery of this Agreement or the
Notes, nor the offering, issuance and sale of the Notes, nor fulfillment of
nor compliance with the terms and provisions hereof and of the Notes will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or by-laws of
the Company or any of its Subsidiaries, any award of any arbitrator or any
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or
any of its Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other contract or
agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type
to be evidenced by the Notes except as set forth in the agreements listed
in Schedule 8C attached hereto.
The Company has received all consents required in connection with
the issuance of the Notes under the Company's Amended and Restated
Revolving Credit Agreement dated as of the November 17, 1989, as amended to
the date as of which this representation is being made,or any replacement,
renewal or successor to such agreement.
8D. Governmental Consent. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or properties,
nor any relationship between the Company or any Subsidiary and any other
Person, nor any circumstance in connection with the offering, issuance,
sale or delivery of the Notes is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing with
any court or administrative or governmental or regulatory body (other than
routine filings after the Date of Closing with the Securities and Exchange
Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or
delivery of the Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
8E. Enforceability. This Agreement is, and the Notes when
delivered hereunder will be, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
8F. Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries, or any properties or rights of the
Company or any of its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which might result in any material
adverse change in the business, condition or operations of the Company and
its Subsidiaries taken as a whole. There is no action, suit, investigation
or proceeding pending or threatened against the Company or any of its
Subsidiaries which purports to affect the validity or enforceability of
this Agreement or any Note.
8G. Outstanding Debt. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted by paragraphs
6C(2) and 6C(4). There exists no default under the provisions of any
instrument evidencing such Debt or of any agreement relating thereto.
8H. Title to Properties. The Company has and each of its Subsid
iaries has good and marketable title to substantially all of its respective
real properties (other than properties which it leases) and good title to
substantially all of its other respective properties and assets, including
the properties and assets reflected in the most recent audited balance
sheet referred to in paragraph 8B (other than properties and assets
disposed of in the ordinary course of business), subject to no Lien of any
kind except Liens permitted by paragraph 6C(1). The Company and each of
its Subsidiaries enjoys peaceful and undisturbed possession under all
leases necessary in any material respect for the operation of their
respective properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation
of such properties and assets. All leases necessary in any material
respect for the conduct of the respective businesses of the Company and its
Subsidiaries are valid and subsisting and are in full force and effect.
8I. Taxes. The Company has and each of its Subsidiaries has
filed all Federal, State and other income tax returns which, to the best
knowledge of the officers of the Company, are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments
received by it to the extent that such taxes have become due, except such
taxes as are being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with generally
accepted accounting principles. Federal income tax returns of the Company
have been examined and reported on by the taxing authorities or closed by
applicable statutes and satisfied for all fiscal years prior to and
including the fiscal year ended on March 26, 1991.
8J. Offering of Notes. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the
Notes or any similar security of the Company from, or otherwise approached
or negotiated with respect thereto with, any Person other than
institutional investors, and neither the Company nor any agent acting on
its behalf has taken or will take any action which would subject the
issuance or sale of the Notes to the provisions of section 5 of the
Securities Act or to the provisions of any securities or Blue Sky law of
any applicable jurisdiction.
8K. Use of Proceeds. Neither the Company nor any Subsidiary
owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "margin stock"). None of the
proceeds of the sale of any Notes will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or
carry any stock that is currently a margin stock or for any other purpose
which might constitute the purchase of such Notes a "purpose credit" within
the meaning of such Regulation G, unless the Company shall have delivered
to the Purchaser which is purchasing such Notes, on the Closing Day for
such Notes, an opinion of counsel satisfactory to such Purchaser stating
that the purchase of such Notes does not constitute a violation of such
Regulation G. Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Notes
to violate Regulation G, Regulation T or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Exchange Act,
in each case as in effect now or as the same may hereafter be in effect.
8L. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived,
exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the Pension Benefit Guaranty Corporation has been, or is
expected by the Company or any Affiliate to be, incurred with respect to
any Plan (other than a Multiemployer Plan) by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries taken as a whole. Neither the Company nor any of its
Subsidiaries has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan
which is or would be materially adverse to the Company and its Subsidiaries
taken as a whole. The execution and delivery of this Agreement and the
issuance and sale of the Notes will be exempt from or will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA
and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company in
the next preceding sentence is made in reliance upon and subject to the
accuracy of the representation of each Purchaser in paragraph 9B as to the
source of funds to be used by it to purchase any Notes.
8M. Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the state
ments contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Subsidiaries which materially
adversely affects or in the future may (so far as the Company can now
foresee) materially adversely affect the business, property or assets, or
financial condition of the Company or any of its Subsidiaries and which has
not been set forth in this Agreement or in the other documents,
certificates and statements furnished to any Purchaser by or on behalf of
the Company prior to the date hereof in connection with the transactions
contemplated hereby.
8N. Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
8O. Public Utility Holding Company Act. The Company is not a
"holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
8P. Environmental Compliance. The Company and its Subsidiaries
and all of their respective properties and facilities have complied at all
times and in all respects with all federal, state, local and regional
statutes, laws, ordinances and judicial or administrative orders,
judgments, rulings and regulations relating to protection of the
environment except, in any such case, where failure to comply would not
result in a material adverse effect on the business, condition (financial
or otherwise) or operations of the Company and its Subsidiaries taken as a
whole.
8Q. Funded Debt Agreements. The forms of (i) the Amended and
Restated Revolving Credit Agreement, dated as of November 17, 1989 among
the Company, the banks named therein and Continental Bank, N.A., as agent,
as amended by [list amendments] (ii) the Note Agreements dated as of March
30, 1993 between the Company and the purchasers named therein and (iii) the
Note Agreements dated as of May 29, 1992 among the Company, Massachusetts
Mutual Life Insurance Company, Pacific Mutual Life Insurance Company and PM
Group Life Insurance Company are true, correct and complete in all respects
and there exists no amendments, waivers or other modifications to such
agreements except as previously provided to Prudential.
8R. Hostile Tender Offers. None of the proceeds of the sale of
any Notes will be used to finance a Hostile Tender Offer.
9. REPRESENTATIONS OF THE PURCHASER.
Each Purchaser represents as follows:
9A. Nature of Purchase. Such Purchaser is not acquiring the
Notes purchased by it hereunder with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act,
provided that the disposition of such Purchaser's property shall at all
times be and remain within its control.
9B. Source of Funds. All of the funds to be used by such
Purchaser to purchase the Notes are assets of an insurance company general
account and, if any assets in the general account are, or may be, assets of
any "employee benefit plan" within the meaning of Section 3(3) of ERISA,
such Purchaser meets the conditions for application of the general
exemption in Section I of the Proposed Class Exemption for Certain
Transactions Involving Insurance Company General Accounts (59 Fed. Reg.
43134 (1994)).
10. DEFINITIONS AND ACCOUNTING TERMS.
10A. Certain Defined Terms. As used in this Agreement the
following terms shall have the meanings specified with respect thereto
below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Acceptance" shall have the meaning specified in paragraph 2F.
"Acceptance Day" shall have the meaning specified in paragraph
2F.
"Acceptance Window" shall have the meaning specified in paragraph
2F.
"Accepted Note" shall have the meaning specified in paragraph 2F.
"Affiliate" shall mean any Person directly or indirectly control
ling, controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract or otherwise.
"Authorized Officer" shall mean (i) in the case of the Company,
its chief executive officer, its chief financial officer, any vice
president of the Company designated as an "Authorized Officer" of the
Company in the Information Schedule attached hereto or any vice president
of the Company designated as an "Authorized Officer" of the Company for the
purpose of this Agreement in an Officer's Certificate executed by the
Company's chief executive officer or chief financial officer and delivered
to Prudential, and (ii) in the case of Prudential, any officer of
Prudential designated as its "Authorized Officer" in the Information
Schedule or any officer of Prudential designated as its "Authorized
Officer" for the purpose of this Agreement in a certificate executed by one
of its Authorized Officers. Any action taken under this Agreement on
behalf of the Company by any individual who on or after the date of this
Agreement shall have been an Authorized Officer of the Company and whom
Prudential in good faith believes to be an Authorized Officer of the
Company at the time of such action shall be binding on the Company even
though such individual shall have ceased to be an Authorized Officer of the
Company, and any action taken under this Agreement on behalf of Prudential
by any individual who on or after the date of this Agreement shall have
been an Authorized Officer of Prudential and whom the Company in good faith
believes to be an Authorized Officer of Prudential at the time of such
action shall be binding on Prudential even though such individual shall
have ceased to be an Authorized Officer of Prudential.
"Available Facility Amount" shall have the meaning specified in
paragraph 2A.
"Bankruptcy Law" shall have the meaning specified in clause (ix)
of paragraph 7A.
"Business Day" shall mean any day other than (i) a Saturday or a
Sunday, (ii) a day on which commercial banks in New York City are required
or authorized to be closed and (iii) for purposes of paragraph 2C hereof
only, a day on which The Prudential Insurance Company of America is not
open for business.
"Cancellation Date" shall have the meaning specified in paragraph
2I(iv).
"Cancellation Fee" shall have the meaning specified in paragraph
2I(iv).
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4B (any
partial prepayment being applied in satisfaction of required payments of
principal in inverse order of their scheduled due dates) or is declared to
be immediately due and payable pursuant to paragraph 7A, as the context
requires.
"Capitalized Lease Obligation" shall mean any rental obligation
which, under generally accepted accounting principles, is or will be
required to be capitalized on the books of the Company or any Subsidiary,
taken at the amount thereof accounted for as indebtedness (net of interest
expense) in accordance with such principles.
"Closing Day" for any Accepted Note shall mean the Business Day
specified for the closing of the purchase and sale of such Note in the
Request for Purchase of such Note, provided that (i) if the Acceptance Day
for such Accepted Note is less than five Business Days after the Company
shall have made such Request for Purchase and the Company and the Purchaser
which is obligated to purchase such Note agree on an earlier Business Day
for such closing, the "Closing Day" for such Accepted Note shall be such
earlier Business Day, and (ii) if the closing of the purchase and sale of
such Accepted Note is rescheduled pursuant to paragraph 2H, the Closing Day
for such Accepted Note, for all purposes of this Agreement except paragraph
2I(iv), shall mean the Rescheduled Closing Day with respect to such
Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confirmation of Acceptance" shall have the meaning specified in
paragraph 2F.
"Consolidated Net Earnings" shall mean for any period the net
income or net loss of the Company and its Subsidiaries on a consolidated
basis as determined in accordance with generally accepted accounting
principles consistent with those followed in the preparation of the
financial statements referred to in paragraph 8B, provided that (i) there
shall not be included in calculating such amount (a) any income
representing the excess of equity in any Subsidiary at the date of
acquisition over the investment in such Subsidiary, (b) any equity in the
undistributed earnings of any corporation which is not a Subsidiary, (c)
any earnings of any Subsidiary for any period prior to the fiscal year of
the Company in which such Subsidiary was acquired, or (d) any gains
resulting from the write-up of assets, (ii) there shall not be included in
calculating such amount any gain resulting from the sale of any capital
assets other than in the ordinary course of business or any extraordinary
or nonrecurring gains, except that such gains may be included only to
offset the aggregate amount of losses (net of any tax effect) resulting
from the sale of capital assets other than in the ordinary course of
business and extraordinary or nonrecurring losses and (iii) there shall not
be including in calculating such amount the losses associated with the sale
or disposition by the Company of the operations of Skipper's, Inc. in an
aggregate amount of up to $30,000,000.
"Consolidated Net Income Available for Fixed Charges" for any
period shall mean the sum of Consolidated Net Earnings during such period
plus (to the extent deducted in determining Consolidated Net Earnings
during such period) consolidated (i) interest expense, (ii) provision for
income taxes, (iii) depreciation and amortization, (iv) operating lease
expense, and (v) any increase (or less any decrease) in deferred taxes.
"Consolidated Net Worth" shall mean the sum of (i) the par value
(or value stated on the books of the corporation) of the capital stock of
all classes of the Company, plus (or minus in the case of a deficit) (ii)
the amount of paid in capital plus retained earnings (netting any treasury
stock, ESOP obligations or similar contra accounts), whether capital or
earned, of the Company.
"Current Debt" shall mean any obligation for borrowed money (and
any notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money) payable on
demand or within a period of one year from the date of the creation
thereof; provided that any obligation shall be treated as Funded Debt,
regardless of its term, if such obligation is renewable pursuant to the
terms thereof or of a revolving credit or similar agreement effective for
more than one year after the date of the creation of such obligation, or
may be payable out of the proceeds of a similar obligation pursuant to the
terms of such obligation or of any such agreement. Any obligation secured
by a Lien on, or payable out of the proceeds of production from, property
of the Company or any Subsidiary shall be deemed to be Funded or Current
Debt, as the case may be, of the Company or such Subsidiary even though
such obligation shall not be assumed by the Company or such Subsidiary.
For purposes of this definition, "borrowed money" shall not include trade
accounts payable, accrued expenses or income taxes payable.
"Current Maturities of Funded Debt" shall mean any Funded Debt
obligation payable on demand or within a period of one year from the date
of determination; provided that an obligation shall not be included herein
if such Funded Debt obligation (i) is renewable beyond one year from the
date of determination at the sole election of the Company (or a Subsidiary,
if applicable) pursuant to the terms thereof, (ii) is created pursuant to a
revolving credit or similar agreement which is renewable beyond one year
from the date of determination at the sole election of the Company (or a
Subsidiary, if applicable) pursuant to the terms thereof, or (iii) may be
repaid out of the uncommitted proceeds of a revolving credit or similar
agreement, the maturity of which is more than one year from the date of
determination.
"Debt" shall mean Funded Debt and/or Current Debt, as the case
may be.
"Delayed Delivery Fee" shall have the meaning specified in
paragraph 2I(iii).
"Discounted Value" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on a semiannual basis) equal to the Reinvestment
Yield with respect to such Called Principal.
"EBITDA" for any period shall mean the sum of Consolidated
Operating Income (as defined according to GAAP) during such period, plus
(to the extent deducted in determining Consolidated Operating Income during
such period) consolidated depreciation and amortization.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which is a member of a group of which the Company is a
member and which is under common control within the meaning of the
regulations under Section 414 of the Code.
"Event of Default" shall mean any of the events specified in para
graph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time,
or the happening of any further condition, event or act, and "Default"
shall mean any of such events, whether or not any such requirement has been
satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Facility" shall have the meaning specified in paragraph 2A.
"Facility Fee" shall have the meaning specified in paragraph
2I(i).
"Fixed Charges" shall mean the sum of (i) interest expense and
(ii) operating lease expense, each for the four fiscal quarters most
recently ended as of the date of determination, and (ii) Current Maturities
of Funded Debt of the Company and all Subsidiaries as of the end of the
fiscal quarter most recently ended as of the date of determination.
"Franchise Agreement" shall mean any franchise agreement, license
or other permit necessary to permit the Company or any Subsidiary to
operate under the name "Pizza Hut".
"Funded Debt" shall mean and include without duplication,
(i) any obligation payable more than one year from the date of
creation thereof, which under generally accepted accounting principles is
shown on the balance sheet as a liability (including Capitalized Lease
Obligations but excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute an obligation),
(ii) indebtedness payable more than one year from the date of
creation thereof which is secured by any Lien on property owned by the
Company or any Subsidiary, whether or not the indebtedness secured thereby
shall have been assumed by the Company or such Subsidiary,
(iii) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of business)
and other contingent liabilities (whether direct or indirect) in connection
with the obligations, stock or dividends of any Person,
(iv) obligations under any contract providing for the making of
loans, advances or capital contributions to any Person, or for the purchase
of any property from any Person, in each case in order to enable such
Person primarily to maintain working capital, net worth or any other
balance sheet condition or to pay debts, dividends or expenses,
(v) obligations under any contract for the purchase of materials,
supplies or other property or services if such contract (or any related
document) requires that payment for such materials, supplies or other
property or services shall be made regardless of whether or not delivery of
such materials, supplies or other property or services is ever made or
tendered,
(vi) obligations under any contract to rent or lease (as lessee)
any real or personal property if such contract (or any related document)
provides that the obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in commercial leases
then in general use or requires that the lessee purchase or otherwise
acquire securities or obligations of the lessor,
(vii) obligations under any contract for the sale or use of
materials, supplies or other property or services if such contract (or any
related document) requires that payment for such materials, supplies or
other property or services, or the use thereof, shall be subordinated to
any indebtedness (of the purchaser or user of such materials, supplies or
other property or the Person entitled to the benefit of such services) owed
or to be owed to any Person,
(viii) obligations under any other contract which, in economic
effect, is substantially equivalent to a guarantee, and
(ix) liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA,
all as determined in accordance with generally accepted accounting
principles.
"Hedge Treasury Note(s)" shall mean, with respect to any Accepted
Note, the United States Treasury Note or Notes whose duration (as
reasonably determined by Prudential) most closely matches the duration of
such Accepted Note.
"Hostile Tender Offer" shall mean, with respect to the use of
proceeds of any Note, any offer to purchase, or any purchase of, shares of
capital stock of any corporation or equity interests in any other entity,
or securities convertible into or representing the beneficial ownership of,
or rights to acquire, any such shares or equity interests, if such shares,
equity interests, securities or rights are of a class which is publicly
traded on any securities exchange or in any over-the-counter market, other
than purchases of such shares, equity interests, securities or rights
representing less than 5% of the equity interests or beneficial ownership
of such corporation or other entity for portfolio investment purposes, and
such offer or purchase has not been duly approved by the board of directors
of such corporation or the equivalent governing body of such other entity
prior to the date on which the Company makes the Request for Purchase of
such Note.
"Issuance Period" shall have the meaning specified in paragraph
2B.
"Lien" shall mean any mortgage, pledge, security interest, encum
brance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code of any jurisdiction)
or any other type of preferential arrangement encumbering property.
"Multiemployer Plan" shall mean any plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of
ERISA).
"Notes" shall have the meaning specified in paragraph 1.
"Officer's Certificate" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or its
Treasurer.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Plan" shall mean an "employee pension benefit plan" (as defined
in section 3 of ERISA) which is or has been established or maintained, or
to which contributions are or have been made, by the Company or by any
trade or business, whether or not incorporated, which, together with the
Company, is under common control, as described in section 414(b) or (c) of
the Code.
"Priority Debt" shall have the meaning specified in paragraph
6C(1).
"Prudential" shall mean The Prudential Insurance Company of
America.
"Prudential Affiliate" shall mean any corporation or other entity
all of the Voting Stock (or equivalent voting securities or interests) of
which is owned by Prudential either directly or through Prudential
Affiliates.
"Purchasers" shall mean, with respect to any Accepted Notes the
Persons, either Prudential or a Prudential Affiliate, who are purchasing
such Accepted Notes.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other
display as may replace Page 678 on the Telerate Service) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or if
such yields shall not be reported as of such time or the yields reported as
of such time shall not be ascertainable, (ii) the Treasury Constant
Maturity Series yields reported, for the latest day for which such yields
shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between reported yields.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date.
"Renewal Fee" shall have the meaning specified in paragraph
2I(v).
"Request for Purchase" shall have the meaning specified in
paragraph 2D.
"Required Holder(s)" shall mean, (i) the holder or holders of at
least 66-2/3% of the aggregate principal amount of all Notes outstanding at
the time of determination, or (ii) with respect to the decision to
accelerate a Series of Notes under paragraph 7A the holder or holders of at
least 66-2/3% of the aggregate principal amount of the Notes of such Series
outstanding at such time.
"Required Prepayment" shall have the meaning specified in
paragraph 4A.
"Rescheduled Closing Day" shall have the meaning specified in
paragraph 2H.
"Responsible Officer" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting
officer of the Company, general counsel of the Company or any other officer
of the Company involved principally in its financial administration or its
controllership function.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series" shall have the meaning specified in paragraph 7.
"Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to paragraph 4B or is declared to be immediately due and
payable pursuant to paragraph 7A, as the context requires.
"Significant Holder" shall mean (i) Prudential, so long as
Prudential or any Prudential Affiliate shall hold (or be committed under
this agreement to purchase) any Note, or (ii) any other holder of at least
10% of the aggregate principal amount of the Notes from time to time
outstanding.
"Subsidiary" shall mean any corporation organized under the laws
of any state of the United States of America, Canada, or any province of
Canada, which conducts the major portion of its business in and makes the
major portion of its sales to Persons located in the United States of
America or Canada, and all of the stock of every class of which, except
directors' qualifying shares shall, at the time as of which any
determination is being made, be owned by the Company either directly or
through Subsidiaries.
"Substantial Stockholder" shall mean (i) any Person owning,
directly or indirectly, either individually or together with all other
Persons to whom such Person is related by blood, adoption or marriage, 5%
or more of the outstanding voting stock of the Company, or (ii) any Person
related by blood, adoption or marriage to any Person coming within the
provisions of clause (i) of this definition.
"Termination Event" shall mean (i) a Reportable Event described
in Section 4043 of ERISA and the regulations issued thereunder (other than
a Reportable Event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation under such regulations), or (ii) the
withdrawal of the Company or any of its ERISA Affiliates from a Plan during
a plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate
a Plan or the treatment of a Plan amendment as a termination under Section
4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan
by the Pension Benefit Guaranty Corporation, or (v) any other event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Plan.
"Transferee" shall mean any direct or indirect transferee of all
or any part of any Note purchased by a Purchaser under this Agreement.
"Yield-Maintenance Amount" shall mean, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of (i) such Called Principal
plus (ii) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal. The Yield-
Maintenance Amount shall in no event be less than zero.
10B. Accounting Principles, Terms and Determinations. All
unaudited financial statements required to be furnished hereunder shall be
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the most recent audited consolidated
financial statements of the Company and its Subsidiaries delivered pursuant
to clause (ii) of paragraph 5A or, if no such statements have been so
delivered, the most recent audited financial statements referred to in
clause (i) of paragraph 8B. Except as provided above, all references in
this Agreement to "generally accepted accounting principles" shall be
deemed to refer to generally accepted accounting principles in effect in
the United States as of the date hereof and applied on a basis consistent
with the Company's audited financial statements for the fiscal year ended
March 27, 1993. All certificates and reports as to financial matters
required to be furnished hereunder shall be prepared so as to illustrate in
reasonably detail all adjustments between the generally accepted accounting
principles used in the Company's financial statements provided pursuant to
paragraph 5A and the generally accepted accounting principles used herein.
11. MISCELLANEOUS.
11A. Note Payments. So long as any Purchaser shall hold any
Note, the Company will make payments of principal thereof and Yield
Maintenance Amount, if any, and interest thereon, which comply with the
terms of this Agreement, not later than 12:00 noon (New York City time) on
the day when due by wire transfer of immediately available funds for credit
to such Purchaser's account or accounts as specified in the Information
Schedule attached hereto, or such other account or accounts in the United
States as such Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Note, it will
make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits
of this paragraph 11A to any Transferee which shall have made the same
agreement as the Purchasers have made in this paragraph 11A.
11B. Expenses. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and save
Prudential, any Prudential Affiliate and any Transferee harmless against
liability for the payment of, all out-of-pocket expenses arising in
connection with such transactions (other than such costs and expenses
associated with or resulting from the resale of the Notes), including (i)
all document production and duplication charges and the fees and expenses
of any special counsel engaged by Prudential in connection with this
Agreement and the transactions contemplated hereby, and all document
production and duplication charges and the fees and expenses of any counsel
or special counsel engaged by Prudential or any Transferee in connection
with any subsequent proposed modification of, or proposed consent under,
this Agreement, whether or not such proposed modification shall be effected
or proposed consent granted, and (ii) to the extent permitted by applicable
law, the costs and expenses, including reasonable attorneys' fees, incurred
by Prudential or any Transferee in enforcing any rights against the Company
under this Agreement or the Notes (whether in the contest of civil action,
adversary proceeding workout or otherwise) or in responding to any subpoena
or other legal process issued in connection with this Agreement or the
transactions contemplated hereby or by reason of Prudential, any Prudential
Affiliate or any Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. The
obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by Prudential,
any Prudential Affiliate or any Transferee and the payment of any Note.
11C. Consent to Amendments. This Agreement may be amended, and
the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the
Required Holder(s) except that, without the written consent of the holder
or holders of all Notes at the time outstanding, no amendment to this
Agreement shall change the maturity of any Note, or change the principal
of, or the rate or time of payment of interest or any premium payable with
respect to any Note, or affect the time, amount or allocation of any
required prepayments, or reduce the proportion of the principal amount of
the Notes required with respect to any consent. Each holder of any Note at
the time or thereafter outstanding shall be bound by any consent authorized
by this paragraph 11C, whether or not such Note shall have been marked to
indicate such consent, but any Notes issued thereafter may bear a notation
referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder
or under any Note shall operate as a waiver of any rights of any holder of
such Note. As used herein and in the Notes, the term "this Agreement" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes; Lost
Notes. The Notes are issuable as registered notes without coupons in
denominations of at least $1,000,000, except as may be necessary to reflect
any principal amount not evenly divisible by $1,000,000. The Company shall
keep at its principal office a register in which the Company shall provide
for the registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office of the
Company, the Company shall, at its expense, execute and deliver one or more
new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. At the option of
the holder of any Note, such Note may be exchanged for other Notes of like
tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office
of the Company. Whenever any Notes are so surrendered for exchange, the
Company shall, at its expense, execute and deliver the Notes which the
holder making the exchange is entitled to receive. Every Note surrendered
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the
holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof
shall carry the rights to unpaid interest and interest to accrue which were
carried by the Note so exchanged or transferred, so that neither gain nor
loss of interest shall result from any such transfer or exchange. Upon
receipt of written notice from the holder of any Note of the loss, theft,
destruction or mutilation of such Note and, in the case of any such loss,
theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
11E. Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, the Company may treat the Person
in whose name any Note is registered as the owner and holder of such Note
for the purpose of receiving payment of principal of and premium, if any,
and interest on such Note and for all other purposes whatsoever, whether or
not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of
any Note may from time to time grant participations in all or any part of
such Note to any Person on such terms and conditions as may be determined
by such holder in its sole and absolute discretion.
11F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection herewith shall survive
the execution and delivery of this Agreement and the Notes, the transfer by
any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any Transferee, regardless
of any investigation made at any time by or on behalf of such Purchaser or
any Transferee until such time as all principal of, interest and Yield
Maintenance Amount (if any) on, the Notes have been paid in full. Subject
to the preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between Prudential and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
11G. Successors and Assigns. All covenants and other agreements
in this Agreement contained by or on behalf of either of the parties hereto
shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto (including, without limitation, any
Transferee) whether so expressed or not.
11H. Disclosure to Other Persons; Confidentiality. The Company
acknowledges that the holder of any Note may deliver copies of any
financial statements and other documents delivered to such holder, and
disclose any other information disclosed to such holder, by or on behalf of
the Company or any Subsidiary in connection with or pursuant to this
Agreement to (i) such holder's directors, officers, employees, agents and
professional consultants, (ii) any other holder of any Note, (iii) any
Person to which such holder offers to sell such Note or any part thereof,
(iv) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note, (v) any federal or state
regulatory authority having jurisdiction over such holder, (vi) the
National Association of Insurance Commissioners or any similar organization
or (vii) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation
or order applicable to such holder, (b) in response to any subpoena or
other legal process, (c) in connection with any litigation to which such
holder is a party, (d) in order to protect such holder's investment in such
Note or (e) to correct any false or misleading information which may become
public concerning the relationship with such holder to the Company or its
Subsidiaries.
Except as provided in the previous sentence, each holder agrees that it
will use its best efforts to hold in confidence and not to disclose the
Confidential Information. As used herein "Confidential Information" means
copies of any financial statements and other documents delivered to such
holder, and any other information disclosed to such holder, by or on behalf
of the Company of any Subsidiary of the Company in connection with or
pursuant to this Agreement, but does not include information (i) which was
publicly known or otherwise known to such holder, at the time of
disclosure, (ii) which subsequently becomes publicly known through no act
or omission of such holder, or (iii) which otherwise becomes known to such
holder, other than through disclosure by the Company or any Subsidiary of
the Company.
11I. Notices. All notices or other communications provided for
hereunder (except for the telephonic notice required by paragraph 4D) shall
be in writing and sent by first class mail or nationwide overnight delivery
service (with charges prepaid) or telecopy (with receipt confirmed by the
recipient) and, (i) if to Prudential, addressed to it at the address
specified for such communications in the Information Schedule attached
hereto, or at such other address as it shall have specified to the Company
in writing, (ii) if to any other holder of any Note, addressed to such
other holder at such address as such other holder shall have specified to
the Company in writing or, if any such other holder shall not have so
specified an address to the Company, then addressed to such other holder in
care of the last holder of such Note which shall have so specified an
address to the Company, and (iii) if to the Company, addressed to it at 720
W. 20th Street, Pittsburg, Kansas 66762, Attention: Chief Financial
Officer (telecopy number (316) 231-1188), or at such other address as the
Company shall have specified to the holder of each Note in writing;
provided, however, that any such communication to the Company may also, at
the option of the holder of any Note, be delivered by any other reasonable
means either to the Company at its address specified above or to any
officer of the Company.
11J. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
11K. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser or to the Required
Holders, the determination of such satisfaction shall be made by such
Purchaser or the Required Holders, as the case may be, in the sole and
exclusive judgment (exercised in good faith) of such Purchaser or the
Required Holders, as the case may be, making such determination.
11L. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE LAW OF THE STATE OF KANSAS.
11M. Integration. This Agreement may not be changed orally, but
(subject to the provisions of paragraph 11C) only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. THIS WRITTEN LOAN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. THIS AGREEMENT, TOGETHER WITH ALL OTHER WRITTEN AGREEMENTS
BETWEEN PRUDENTIAL AND THE COMPANY, IS THE FINAL EXPRESSION OF THE NOTE
AGREEMENT BETWEEN PRUDENTIAL AND THE COMPANY, AND SUCH WRITTEN NOTE
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL AGREEMENT
OR OF A CONTEMPORANEOUS ORAL AGREEMENT BETWEEN PRUDENTIAL AND THE COMPANY.
ANY ADDITIONAL NON-STANDARD TERMS OF THIS AGREEMENT BETWEEN PRUDENTIAL AND
THE COMPANY INCLUDING THE REDUCTION TO WRITING OF A PREVIOUS ORAL AGREEMENT
BETWEEN PRUDENTIAL AND THE COMPANY ARE SET FORTH IN THE SPACE BELOW:
None
NO UNWRITTEN ORAL AGREEMENT BETWEEN PRUDENTIAL AND THE COMPANY
EXISTS.
11N. Maximum Interest Payable. The Company, any Purchaser and
any other holders of the Notes specifically intend and agree to limit
contractually the amount of interest payable under this Agreement, the
Notes and all other instruments and agreements related hereto and thereto
to the maximum amount of interest lawfully permitted to be charged under
applicable law. Therefore, none of the terms of this Agreement, the Notes
or any instrument pertaining to or relating to this Agreement or the Notes
shall ever be construed to create a contract to pay interest at a rate in
excess of the maximum rate permitted to be charged under applicable law,
and neither the Company, any guarantor nor any other party liable or to
become liable hereunder, under the Notes, any guaranties or under any other
instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and
the provisions of this paragraph shall control over all other provisions of
this Agreement, the Notes, any guaranties or any other instrument
pertaining to or relating to the transactions herein contemplated. If any
amount of interest taken or received by any Purchaser or any holder of a
Note shall be in excess of said maximum amount of interest which, under
applicable law, could lawfully have been collected by any Purchaser or such
holder incident to such transactions, then such excess shall be deemed to
have been the result of a mathematical error by all parties hereto and
shall be refunded promptly by the Person receiving such amount to the party
paying such amount, or, at the option of the recipient, credited ratably
against the unpaid principal amount of the Note or Notes held by such
Purchaser or such holder, respectively. All amounts paid or agreed to be
paid in connection with such transactions which would under applicable law
be deemed "interest" shall, to the extent permitted by such applicable law,
be amortized, prorated, allocated and spread throughout the stated term of
this Agreement. "Applicable law" as used in this paragraph means that law
governing this Agreement in effect from time to time which permits the
charging and collection of the highest permissible lawful, nonusurious rate
of interest on the transactions herein contemplated and"maximum rate" as
used in this paragraph means, with respect to each of the Notes, the
maximum lawful, nonusurious rates of interest (if any) which under
applicable law may be charged to the Company from time to time with respect
to such Notes.
11O. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and
it shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.
11P. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or interest on, or Yield-Maintenance Amount payable with
respect to, any Note that is due on a date other than a Business day shall
be made on the next succeeding Business Day. If the date for any payment
is extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the computation
of the interest payable on such Business Day.
If Prudential is in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and return
the same to the Company, whereupon this letter shall become a binding
agreement between Prudential and the Company.
Very truly yours,
NPC International, Inc.
By______________________________
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
The Prudential Insurance Company of America
By______________________________
Vice President
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<BONDS> 80490000
<COMMON> 276000
0
0
<OTHER-SE> 84139000
<TOTAL-LIABILITY-AND-EQUITY> 212356000
<SALES> 82105000
<TOTAL-REVENUES> 83467000
<CGS> 24471000
<TOTAL-COSTS> 24471000
<OTHER-EXPENSES> 50387000
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 1704000
<INCOME-PRETAX> 6822000
<INCOME-TAX> 2697000
<INCOME-CONTINUING> 4125000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4125000
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0<F1>
<FN>
<F1>NOT REQUIRED TO BE SEPARATELY PROVIDED FOR INTERIM
FINANCIAL STATEMENT PURPOSES. RECEIVABLES AND PP&E ARE NET
BALANCES.
</FN>
</TABLE>
