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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
62-1283091
DELAWARE 5812 62-1720081
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Numbers)
</TABLE>
PERKINS FAMILY RESTAURANTS L.P.
PERKINS FINANCE CORP.
6075 POPLAR AVENUE
SUITE 800
MEMPHIS, TN 38119
(901) 766-6400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
DONALD F. WISEMAN
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
6075 POPLAR AVENUE
SUITE 800
MEMPHIS, TN 38119
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
WITH A COPY TO:
SCOTT J. DAVIS
JAMES T. LIDBURY
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 1/8% Series B Senior Notes Due 2007..... $130,000,000 100% $130,000,000 $38,350
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 29, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
[LOGO]
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
OFFER TO EXCHANGE ITS 10 1/8% SERIES B SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY
AND ALL OF ITS OUTSTANDING 10 1/8% SERIES A SENIOR NOTES DUE 2007
-----------
Perkins Family Restaurants, L.P., a Delaware limited partnership (the
"Company"), and Perkins Finance Corp., a Delaware Corporation and wholly owned
subsidiary of the Company ("Finance Corp." and, together with the Company, the
"Issuers"), hereby jointly and severally offer, upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying letter of
transmittal (the "Letter of Transmittal") (which together constitute the
"Exchange Offer"), to exchange up to $130 million principal amount of 10 1/8%
Series B Senior Notes due 2007 (the "New Notes"), of the Issuers for a like
principal amount of the Issuers' issued and outstanding 10 1/8% Series A Senior
Notes due 2007 (the "Old Notes" and collectively with the New Notes, the
"Notes"), with the holders (each holder of Old Notes, a "Holder") thereof. The
Issuers will receive no proceeds in connection with the Exchange Offer. The
terms of the New Notes are substantially identical to the terms of the Old Notes
that are to be exchanged therefor. See "Description of Notes."
The Notes will bear interest from the date of issuance at the rate of
10 1/8% per annum, payable semi-annually in arrears, on June 15 and December 15
of each year, commencing June 15, 1998, and will mature on December 15, 2007,
unless previously redeemed. The Notes are redeemable at the option of the
Issuers, in whole or in part, on or after December 15, 2002, at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated Damages
(as defined), if any, thereon to the redemption date. In addition, at any time
on or prior to December 15, 2000, the Issuers may redeem Notes with the net cash
proceeds of one or more public offerings of the Company's equity securities or
the equity securities of any of the Company's direct or indirect parents (to the
extent such net proceeds have been contributed to the Company as common equity
capital), at 110.125% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date,
provided that at least 65% of the principal amount of Notes originally issued
remains outstanding immediately following such redemption. In the event of a
Change of Control (as defined), holders of the Notes will have the right to
require the Issuers to purchase each such holder's Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase. There can be no
assurance that the Company will have access to sufficient funds to repurchase
the Notes in the event of a Change of Control.
The Notes will be general unsecured obligations of the Issuers, and will
rank PARI PASSU in right of payment with all current and future senior
indebtedness of the Issuers, including borrowings under the New Credit Facility
(as defined). However, all borrowings under the New Credit Facility are secured
by a first priority Lien (as defined) on substantially all of the assets of the
Company. At December 31, 1997, no borrowings were outstanding under the New
Credit Facility. However, assuming all Units (as defined) had been surrendered
for payment and all expenses had been paid in connection with the Going Private
Transaction, approximately $6.6 million would have been outstanding under the
New Credit Facility as of December 22, 1997, excluding approximately $3.0
million of standby letters of credit. The Indenture (as defined) permits
additional borrowings by the Issuers, under the New Credit Facility or
otherwise, in the future.
(COVER CONTINUED ON FOLLOWING PAGE)
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THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON, 1998, UNLESS EXTENDED.
--------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF
OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS"
BEGINNING ON PAGE 14 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
The date of this Prospectus is , 1998
<PAGE>
Prior to the Exchange Offer, there has been no established trading market
for the Old Notes or the New Notes. The Issuers do not intend to apply for
listing or quotation of the New Notes on any securities exchange or stock
market. Therefore, there can be no assurance as to the liquidity of any trading
market for the New Notes or that an active public market for the New Notes will
develop. Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a Holder's ability to sell untendered, or tendered but
unaccepted, Old Notes could be adversely affected. Following the consummation of
the Exchange Offer, the Holders of the Old Notes will continue to be subject to
the existing restrictions on transfer thereof and the Company will have no
further obligations to such Holders to provide for the registration of the Old
Notes under the Securities Act. See "The Exchange Offer -- Consequences of Not
Exchanging Old Notes."
The Issuers will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on,
1998, unless the Exchange Offer is extended (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange. However,
the Exchange Offer is subject to certain customary conditions which may be
waived by the Company. The Company will pay the expenses of the Exchange Offer.
The Old Notes were issued and sold as part of an offering on December 22,
1997 (the "Offering"), in a transaction not registered under the Securities Act
of 1933, as amended (the "Securities Act"), in reliance upon an exemption from
registration under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Notes are
being offered for exchange in order to satisfy certain obligations of the
Issuers under a Registration Rights Agreement (as defined ) between the Issuers
and the Initial Purchasers (as defined). The New Notes will be obligations of
the Issuers evidencing the same indebtedness as the Old Notes and will be
entitled to the benefits of the same Indenture, which governs both the Old Notes
and the New Notes. The form and terms (including principal amount, interest
rate, maturity and ranking) of the New Notes are the same as the form and terms
of the Old Notes, except that the New Notes (i) will be registered under the
Securities Act and therefore will not be subject to certain restrictions on
transfer applicable to the Old Notes, (ii) will not be entitled to registration
rights and (iii) will not provide for any Liquidated Damages. See "The Exchange
Offer -- Registration Rights; Liquidated Damages."
The Issuers are making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Issuers have not sought their own no-action letter and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Based on these interpretations by the staff
of the Commission, the Issuers believe that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
Holders thereof (other than (i) any such Holder that is an "affiliate" of the
Issuers within the meaning of Rule 405 under the Securities Act, (ii) an Initial
Purchaser who acquired the Old Notes directly from the Issuers solely in order
to resell pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act or (iii) a broker-dealer who acquired the Old
Notes as a result of market making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holder's business and such Holder is not participating and has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Notes.
By tendering, each Holder which is not a broker-dealer will represent to the
Issuers that, among other things, the person receiving the New Notes, whether or
not such person is the Holder, (i) is not an
i
<PAGE>
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuers,
(ii) will acquire the New Notes in the ordinary course of such person's
business, and (iii) is not engaged in, does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the New Notes. If any Holder or any such other person has an arrangement or
understanding with any person to participate in a distribution of such New
Notes, is engaged in or intends to engage in a distribution of such New Notes,
is an "affiliate," as defined in Rule 405 under the Securities Act, of the
Issuers, or acquired the Old Notes as a result of market making or other trading
activities, then such Holder or any such other person (i) can not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes are acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of 180 days after the
Expiration Date, they will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
ii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. THE TRANSACTIONS RELATING
TO THE BUYOUT OF THE COMPANY'S PUBLIC UNITHOLDERS (AS DEFINED), WHICH OCCURRED
ON DECEMBER 22, 1997, AND THE ELIMINATION THROUGH A MERGER OF THE COMPANY'S
OPERATING PARTNERSHIP SUBSIDIARY ARE COLLECTIVELY REFERRED TO HEREIN AS THE
"GOING PRIVATE TRANSACTION." SEE "THE GOING PRIVATE TRANSACTION." EXCEPT AS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES TO OR DESCRIPTIONS OF ASSETS AND
OPERATIONS OF THE COMPANY IN THIS PROSPECTUS REFER TO THE COMBINED ASSETS AND
OPERATIONS OF THE COMPANY AND ITS OPERATING PARTNERSHIP SUBSIDIARY AFTER THE
CONSUMMATION OF THE GOING PRIVATE TRANSACTION. THIS PROSPECTUS INCLUDES "FORWARD
LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH THE ISSUERS BELIEVE THAT THEIR PLANS,
INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD LOOKING STATEMENTS ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH PLANS, INTENTIONS OR
EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE ISSUERS' FORWARD LOOKING STATEMENTS ARE SET FORTH
IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
The Company is a leading operator and franchisor of full-service, mid-scale
restaurants located primarily in the Midwest, Pennsylvania, upstate New York and
central Florida. The Company's restaurants operate under the names Perkins
Family Restaurant-Registered Trademark- and Perkins Family Restaurant and
Bakery-Registered Trademark-. Perkins restaurants offer a full menu assortment
of breakfast, lunch, dinner, snack and dessert items and many are open 24 hours
a day. The business of Perkins was founded in 1958, and since then Perkins has
continued to adapt its menus, product offerings, building designs and decor to
meet changing consumer preferences. A substantial majority of Company-operated
restaurants and franchised restaurants have added in-store bakeries which offer
a premium line of freshly prepared baked goods including muffins, cookies and
pies.
As of September 30, 1997, the Company operated 135 full-service restaurants
and franchised 333 full-service restaurants located in 32 states and four
provinces of Canada. For the twelve months ended September 30, 1997, system-wide
restaurant revenues (including franchised restaurants), Company revenues and
Company EBITDA (as defined) were $701.4 million, $262.8 million and $36.3
million, respectively. Company-operated restaurants have achieved comparable
restaurant sales increases in each of the last 25 quarters. The Company
continues to focus on increasing its number of franchised restaurants, which
provide a higher margin of cash flow relative to the required capital investment
and create an additional sales outlet for the products of the Company's Foxtail
Foods ("Foxtail") food manufacturing division. From 1988 to 1996, the average
annual royalties per franchised restaurant increased from approximately $38,500
to approximately $55,100 and the number of franchised restaurants increased from
227 to 329.
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large, comfortable dining rooms,
flexible kitchens, broad menu, moderate pricing, extended operating hours, table
service and bakery specialties. Perkins offers a wide menu selection of high
quality, moderately priced food and beverage items consisting of traditional
favorites and seasonal specialties. Perkins offers guests a menu of over 140
items ranging in price from $2.99 to $8.99. The Company also approves additional
items to meet regional and local tastes. Perkins' signature menu items include
buttermilk pancakes, omelettes, bread bowl salads, melt sandwiches and
Butterball-Registered Trademark- turkey dinners. Breakfast items, which are
available throughout the day, account for slightly more than half of the entrees
sold in the Company's restaurants.
Perkins restaurants are primarily located in free-standing buildings with
approximately 90 to 250 seats. Recently, the Company and its franchisees have
begun to test the Perkins concept in various non-traditional locations including
travel plazas, malls, hotels and airports. The Company and its franchisees
operate three alternative formats, including limited menu restaurants and a
stand-alone bakery, in addition
1
<PAGE>
to full-service stand-alone restaurants. These alternative formats are operated
under the names Perkins Cafe and Bakery-Registered Trademark-, Perkins
Bakery-Registered Trademark- and Perkins Express-Registered Trademark-.
In addition to operating and franchising Perkins restaurants, the Company
operates Foxtail and is a partner in a joint venture for the development of Jack
Astor's Bar and Grill-Registered Trademark- restaurants. Foxtail provides cookie
dough, muffin batter, pancake mixes, pies and other bakery products to
Company-operated restaurants, franchisees and third parties. During 1996,
Foxtail accounted for 8.5% of Company revenues. During 1997, the Company entered
into a joint venture with a Canadian casual dining operator for the development
of a minimum of three Jack Astor's Bar and Grill restaurants. Jack Astor's Bar
and Grill is a casual themed dining concept with a high-energy, fun atmosphere
and menu offerings which include chicken, pasta, hamburgers and alcoholic
beverages. The joint venture's first restaurant opened in Greensboro, North
Carolina on October 6, 1997.
In the 12 years under the Company's current leadership, a number of
improvements have been made to the Company's operations, including: (i)
upgrading its menu offerings; (ii) unifying the system's name, restaurant
design, marketing programs, purchasing, training and technology; (iii) creating
in-store bakeries; (iv) strengthening the franchise system; (v) creating
Foxtail; and (vi) developing alternative formats. Also over this time period,
the Company made significant interest payments and distributions to holders (the
"Unitholders") of its limited partnership interests (the "Units"), including 44
consecutive quarterly cash distributions to Unitholders since the Company became
a publicly-traded limited partnership. For the twelve months ended September 30,
1997, the Company's combined interest expense and quarterly cash distributions
to Unitholders was $18.9 million.
COMPETITIVE STRENGTHS
ESTABLISHED, HIGH-VALUE RESTAURANT BRAND. Perkins is a well-established,
highly recognized brand in the geographic areas it serves. Perkins offers its
guests a wide variety of over 140 reasonably priced menu items, including fresh
bakery products, served in a warm and comfortable dining environment with the
convenience of extended operating hours. As of September 30, 1997, entrees
served in Company-operated restaurants ranged in price from $2.99 to $8.99 for
breakfast, $4.29 to $8.99 for lunch and $5.99 to $8.99 for dinner. The Company
operates a 3,000 square foot test kitchen in Memphis, Tennessee which develops
and tests new menu items. Menus are updated at least three times per year and
supplemented with special menus for holiday and promotional events.
STRONG FRANCHISE NETWORK. The Company has 111 franchisees which operate 333
restaurants in 30 states and four Canadian provinces, representing over 70% of
the restaurants in the Perkins system. In addition to providing the Company with
substantial royalty revenues ($18.6 million for the twelve months ended
September 30, 1997), the franchise network allows the Company to significantly
expand the Perkins system without substantial capital investment by the Company.
The Company believes that it enjoys good relations with its franchisees.
UPDATED, MODERN RESTAURANTS. The Company employs an on-going system of
prototype development, testing and remodeling to maintain operationally
efficient, cost-effective and unique interior and exterior facility design and
decor. An accelerated program to upgrade existing Company-operated restaurants
began in 1995 and continues today. The current remodel package features a
modern, distinctive interior and exterior layout that enhances operating
efficiencies and guest appeal. As of September 30, 1997, approximately 86% of
Company-operated restaurants had either been remodeled or initially constructed
since January 1, 1994.
To promote a consistent and current image throughout the Perkins system, the
Company encourages its franchise operators to remodel their restaurants by
providing financial incentives and third-party financing programs. Twenty-two
franchised restaurants were remodeled in 1996 and approximately 35 additional
restaurants were remodeled in 1997, of which 19 were completed by September 30.
2
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MANAGEMENT EXPERTISE. The Company has an experienced management team with
average tenure with the Company of over seven years and average restaurant
industry experience of 20 years. Donald N. Smith, the Company's Chairman and
Chief Executive Officer, has over 30 years of restaurant experience, over 12 of
which have been with the Company. Richard K. Arras, the Company's President and
Chief Operating Officer, has 18 years of restaurant experience, all of which
have been with the Company.
EFFICIENT OPERATIONS. The Company uses a combination of current technology,
on-going operational analyses, hourly employee performance programs and the
operating experience of both its own field management and that of its
franchisees to continuously improve the quality, efficiency and execution of its
operating systems. For example, Company-operated restaurants recently
implemented programs to improve labor efficiency, lower food cost and improve
facility utilization during peak periods.
DAYPART BALANCE. Perkins has successfully evolved over the last 39 years
from its origins as a breakfast-oriented pancake house by developing significant
lunch, dinner and late night product offerings. The flexibility of Perkins'
multi-daypart offerings allows each location to meet the needs of its local
market. During 1996, the revenue breakdown by daypart for Company-operated
restaurants was 25% breakfast, 29% lunch, 32% dinner and 14% late night (10:00
p.m. to 6:00 a.m.).
COMMITMENT TO GUEST SATISFACTION. The Company is focused on continually
improving guest satisfaction. The Company regularly surveys customers to
determine their overall satisfaction with their dining experience, conducts
extensive service quality training programs and operates a toll free number to
monitor guests' dining experiences.
MANAGEMENT INFORMATION SYSTEMS. The Company's information systems not only
provide detailed monthly financial statements for each restaurant but daily
operating statistics such as sales, labor, guest check and average table turns.
The systems also generate weekly restaurant profit and loss statements and food
and labor variance analysis. The Company has also developed a labor scheduling
system which calculates the amount of labor necessary to provide optimal guest
service. The Company's systems are year 2000 compliant.
PURCHASING LEVERAGE. The Company aggregates the purchasing requirements of
all of its Company-operated restaurants and over 90% of its franchised
restaurants to obtain purchasing economies of scale for food items, cleaning
supplies, equipment, maintenance services and regional distribution agreements.
In addition, the Company utilizes outside consultants for information regarding
purchases of commodity items and, together with its franchisees, makes
significant purchases of commodity products, such as sirloin steak or shrimp,
which provide the basis for several product-driven marketing programs throughout
the year.
BUSINESS STRATEGY
INCREASE FRANCHISE REVENUES. The Company plans to continue to add
franchised restaurants in existing and new geographic markets. In addition,
management will continue to encourage franchisees to remodel and renovate
restaurants where appropriate. Franchisees opened 17 new restaurants in 1997, of
which ten had been opened and seven were under construction as of September 30.
Management believes its franchisees will open approximately 40 new franchised
restaurants during 1998. During 1996, ten franchised restaurants closed and, in
1997, six franchised restaurants were closed.
SELECTIVELY DEVELOP NEW COMPANY-OPERATED RESTAURANTS. The Company will
continue to develop and operate new restaurants based upon its current
prototype. Management believes the development of successful Company-operated
restaurants supports the continued development of the Perkins franchise system.
The Company opened three new full-service Company-operated restaurants in 1997
and plans to add six new full-service Company-operated restaurants in 1998.
3
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EXPAND NON-TRADITIONAL LOCATIONS AND ALTERNATIVE FORMATS. The Company and
its franchisees have built, on a limited test basis, restaurants within
non-traditional sites including hotels, airports, travel plazas and strip
shopping centers. Within these non-traditional locations, the Company has
recently opened restaurants with alternative formats, such as limited menu
restaurants and a stand-alone bakery, in addition to full-service, stand-alone
restaurants. The Company intends to continue testing non-traditional locations
and further develop alternative formats in conjunction with its franchisees in
cases where appropriate for the Perkins brand and where anticipated financial
returns are acceptable.
PURSUE COMPLEMENTARY ACQUISITIONS. The Company continually evaluates
potential acquisition opportunities of existing franchised Perkins restaurants
and other restaurant chains. The Company does not currently have any agreements
or understandings to make any acquisitions.
The Company's address is 6075 Poplar Avenue, Suite 800, Memphis, Tennessee
38119-4709, its phone number is (901) 766-6400 and its internet address is
www.perkinsrestaurants.com.
FINANCE CORP.
Finance Corp. is a wholly-owned subsidiary of the Company which has nominal
assets, will not conduct any operations and is acting as co-obligor of the
Notes. As a result, Holders of Old Notes and prospective holders of New Notes
should not expect Finance Corp. to participate in servicing the interest and
principal obligations on the Notes. The Company believes that certain
institutional investors that might otherwise be limited in their ability to
invest in securities issued by limited partnerships by reason of the investment
laws of their states of organization or their charter documents may be able to
invest in the Notes because Finance Corp. is a co-obligor.
THE GOING PRIVATE TRANSACTION
The Company is a limited partnership that currently is indirectly owned
(including its general partner's interest) by The Restaurant Company ("TRC").
Until December 1997, the Company's units of limited partnership interest
("Units") were traded on the New York Stock Exchange under the symbol "PFR." In
September 1997, the Company, TRC and Perkins Acquisition Corp. ("MergerCo.")
entered into an Agreement and Plan of Merger (as amended, the "Merger
Agreement") pursuant to which the Company's operating partnership subsidiary was
eliminated through a merger and a series of transactions were consummated on
December 22, 1997 whereby the Company became an indirect wholly-owned subsidiary
of TRC and the approximately 5.44 million Units held by persons other than TRC
and its subsidiaries were converted into the right to receive $14.00 in cash per
Unit. Such transactions consummated on December 22, 1997 are collectively
referred to herein as the "Going Private Transaction." The offering of the Old
Notes (the "Offering") and the Going Private Transaction were consummated
concurrently. See "The Going Private Transaction."
TRC is owned 33.2% by Donald N. Smith, the Company's Chairman and Chief
Executive Officer, 33.2% by a subsidiary of Harrah's Entertainment, Inc.
("Harrah's"), 28.1% by The Equitable Life Assurance Society of the United States
("Equitable") and 5.5% by others. No change in the Company's management or
business strategy is anticipated as a result of the consummation of the Going
Private Transaction.
Approximately $137 million is required to (i) consummate the Going Private
Transaction, (ii) repay existing indebtedness and (iii) pay related fees and
expenses. Such funds are being obtained from the proceeds of the Offering, from
internally generated funds and from the proceeds of a new revolving credit
facility (the "New Credit Facility") entered into concurrently with the closing
of the Offering. See "Use of Proceeds."
4
<PAGE>
Set forth below is a diagram of the organizational structure of TRC and its
principal subsidiaries, after giving effect to the Going Private Transaction.
[LOGO]
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered.................... $130 million principal amount of 10 1/8% Series B
Senior Notes due 2007. The terms of the New Notes
and the Old Notes are identical in all material
respects, except for certain transfer restrictions
and registration rights relating to the Old Notes
and except for certain Liquidated Damages
provisions relating to the Old Notes described
below under "Issuance of Old Notes; Registration
Rights."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Issuance of Old Notes;
Registration Rights................. The Old Notes were issued on December 22, 1997 to
four initial purchasers (the "Initial Purchasers"),
who placed the Old Notes with "qualified
institutional buyers" (as such term is defined in
Rule 144A promulgated under the Securities Act). In
connection therewith, the Issuers executed and
delivered for the benefit of the holders of Old
Notes a registration rights agreement (the
"Registration Rights Agreement"), pursuant to which
the Issuers agreed (i) to file a registration
statement (the "Registration Statement") on or
prior to February 5, 1998 with respect to the
Exchange Offer and (ii) to use their best efforts
to cause the Registration Statement to be declared
effective by the Commission on or prior to April
21, 1998. In certain circumstances, the Issuers
will be required to provide a shelf registration
statement (the "Shelf Registration Statement") to
cover resales of the Old Notes by the holders
thereof. If the Issuers do not comply with their
obligations under the Registration Rights
Agreement, they will be required to pay liquidated
damages ("Liquidated Damages") to holders of the
Old Notes under certain circumstances. See "The
Exchange Offer -- Registration Rights; Liquidated
Damages." Holders of Old Notes do not have any
appraisal rights in connection with the Exchange
Offer.
The Exchange Offer.................... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy the
obligations of the Company contained in the
Registration Rights Agreement. Based upon the
position of the staff of the Commission set forth
in no-action letters issued to other parties in
other transactions substantially similar to the
Exchange Offer, the Issuers believe that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any
such holder that is an "affiliate" of the Issuers
within the meaning of Rule 405 under the Securities
Act; (ii) an Initial Purchaser who acquired the Old
Notes directly from the Issuers solely in order to
resell pursuant to Rule 144A of the Securities Act
or any other available exemption under the
Securities Act; or (iii) a broker-dealer who
acquired the Old Notes as a result of market making
or other trading activities) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Notes are acquired in the
ordinary course of such holder's business and such
holder is not participating and has no arrangement
or understanding with any person to participate in
a distribution (within the meaning of the
Securities Act) of such New Notes. By tendering,
each
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Holder which is not a broker-dealer will represent
to the Issuers that, among other things, the person
receiving the New Notes, whether or not such person
is the Holder, (i) is not an "affiliate," as
defined in Rule 405 under the Securities Act, of
the Issuers, (ii) will acquire the New Notes in the
ordinary course of such person's business, and
(iii) is not engaged in, does not intend to engage
in, and has no arrangement or understanding with
any person to participate in, a distribution of the
New Notes. If any Holder or any such other person
has an arrangement or understanding with any person
to participate in a distribution of such New Notes,
is engaged in or intends to engage in a
distribution of such New Notes, is an "affiliate,"
as defined in Rule 405 under the Securities Act, of
the Issuers, or acquired the Old Notes as a result
of market making or other trading activities, then
such Holder or any such other person (i) cannot
rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
such New Notes. Although there has been no
indication of any change in the staff's position,
there can be no assurance that the staff of the
Commission would make a similar determination with
respect to the resale of the New Notes. See "Risk
Factors."
Procedures for Tendering.............. Tendering Holders of Old Notes must complete and
sign the Letter of Transmittal in accordance with
the instructions contained therein and forward the
same by mail, facsimile or hand delivery, together
with any other required documents, to the Exchange
Agent, either with the Old Notes to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Notes. Holders of the
Old Notes desiring to tender such Old Notes in
exchange for New Notes should allow sufficient time
to ensure timely delivery. Certain brokers,
dealers, commercial banks, trust companies and
other nominees may also effect tenders by
book-entry transfer. Holders of Old Notes
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish
to tender Old Notes pursuant to the Exchange Offer.
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender
the requests for information
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
should be directed to the Exchange Agent. See "The
Exchange Offer -- Procedures for Tendering Old
Notes."
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal.......................... York City time, on , 1998 or such later date
and time to which it is extended. The tender of Old
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
Any Old Note not accepted for exchange for any
reason will be returned without expense to the
tendering Holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer. See "The Exchange Offer -- Terms of the
Exchange Offer; Period for Tendering Old Notes" and
"-- Withdrawal Rights."
Certain Conditions to the
Exchange offer...................... The Exchange Offer is subject to certain customary
conditions, all of which may be waived by the
Company, including the absence of (i) threatened or
pending proceedings seeking to restrain the
Exchange Offer or resulting in a material delay to
the Exchange Offer; (ii) a general suspension of
trading on any national securities exchange or in
the over-the-counter market; (iii) a banking
moratorium; (iv) a commencement of war, armed
hostilities or other similar international calamity
directly or indirectly involving the United States;
and (v) change or threatened change in the
business, properties, assets, liabilities,
financial condition, operations, results of
operations or prospects of the Company and its
subsidiaries taken as a whole that, in the sole
judgment of the Issuers, is or may be adverse to
the Issuers. The Issuers shall not be required to
accept for exchange, or to issue New Notes in
exchange for, any Old Notes, if at any time before
the acceptance of such Old Notes for exchange or
the exchange of New Notes for such Old Notes, any
of the foregoing events occurs which, in the sole
judgment of the Issuers, make it inadvisable to
proceed with the Exchange Offer and/or with such
acceptance for exchange or with such exchange. In
the event the Issuers assert or waive a condition
to the Exchange Offer which constitutes a material
change to the terms of the Exchange Offer, the
Issuers will disclose such change in a manner
reasonably calculated to inform prospective
investors of such change, and will extend the
period of the Exchange Offer by five business days.
If the Issuers fail to consummate the Exchange
Offer because the Exchange Offer is not permitted
by applicable law or Commission policy, they are
obligated pursuant to the Registration Rights
Agreement to file with the Commission a Shelf
Registration Statement to cover resales of the
Transfer Restricted Securities (as defined) by the
holders thereof who satisfy certain conditions. If
the Issuers fail to consummate the Exchange
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Offer or file a Shelf Registration Statement in
accordance with the Registration Rights Agreement,
the Issuers will pay Liquidated Damages to each
holder of Transfer Restricted Securities until the
cure of all defaults thereunder. The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer -- Registration
Rights; Liquidated Damages" and "-- Certain
Conditions to the Exchange Offer."
Federal Income Tax Consequences....... The exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not result in any income,
gain or loss to the Holders or the Issuers. See
"Certain Federal Income Tax Considerations" for a
discussion of the material federal tax consequences
expected to result from the Exchange Offer.
Use of Proceeds....................... There will be no proceeds to the Issuers from
exchanges pursuant to the Exchange Offer.
Appraisal Rights...................... Holders of Old Notes will not have dissenters'
rights or appraisal rights in connection with the
Exchange Offer.
Exchange Agent........................ State Street Bank and Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
</TABLE>
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers do not currently anticipate that
they will register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain outstanding
will not be entitled to any rights to have such Old Notes registered under the
Securities Act or to any rights under the Registration Rights Agreement. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, or tendered but unaccepted, Old Notes could
be adversely affected. See "Risk Factors -- Consequences of Exchange and Failure
to Exchange" and "The Exchange Offer -- Consequences of Exchanging Old Notes."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by April 21, 1998 (or any other Registration Default (as defined)
has occurred), subject to certain exceptions, with respect to the first 90-day
period immediately following thereafter, the Company will be obligated to pay
liquidated damages to each Holder of Transfer Restricted Securities affected
thereby in an amount equal to $.05 per week for each $1,000 principal amount of
Transfer Restricted Securities, as applicable, held by such Holder ("Liquidated
Damages"). The amount of Liquidated Damages will increase by an additional $.05
per week with respect to each subsequent 90-day period until the Exchange Offer
is consummated, or any other Registration Default (as defined) is cured,
9
<PAGE>
up to a maximum of $.50 per week for each $1,000 principal amount of Transfer
Restricted Securities, as applicable.
<TABLE>
<S> <C>
Issuers............................... Perkins Family Restaurants, L.P. and Perkins
Finance Corp.
Securities Offered.................... $130 million in aggregate principal amount of
10 1/8% Series B Senior Notes due 2007.
Maturity Date......................... December 15, 2007
Payment Dates......................... The Notes bear interest from the date of issuance
at the rate of 10 1/8% per annum, payable
semi-annually in arrears on June 15 and December 15
of each year, commencing June 15, 1998.
Ranking............................... The Notes are general unsecured joint and several
obligations of the Issuers. The Notes will rank
PARI PASSU in right of payment with all current and
future senior indebtedness of the Issuers,
including borrowings under the New Credit Facility.
However, all borrowings under the New Credit
Facility are secured by a first priority Lien on
substantially all of the assets of the Company. As
a result, the claims of Holders (as defined in the
Indenture) are effectively subordinated to the
extent of such security interests. At December 31,
1997, no borrowings were outstanding under the New
Credit Facility. However, assuming all Units had
been surrendered for payment and all expenses had
been paid in connection with the Going Private
Transaction, approximately $6.6 million would have
been outstanding under the New Credit Facility as
of December 22, 1997, excluding approximately $3.0
million of standby letters of credit. The Indenture
pursuant to which the Notes were issued (the
"Indenture") permits additional borrowings by the
Issuers, under the New Credit Facility or
otherwise, in the future.
Optional Redemption................... The Notes will be redeemable, in whole or in part,
at the option of the Issuers, on or after December
15, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the
redemption date. In addition, at any time on or
prior to December 15, 2000, the Issuers may redeem
Notes with the net cash proceeds of one or more
public offerings of the Company's equity securities
or the equity securities of any of the Company's
direct or indirect parents (to the extent such net
proceeds have been contributed to the Company as
common equity capital) at 110.125% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
redemption date, provided that at least 65% of the
principal amount of Notes originally issued remains
outstanding immediately following such redemption.
See "Description of Notes -- Optional Redemption."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Mandatory Redemption.................. The Issuers are not required to make mandatory
redemption or sinking fund payments with respect to
the Notes.
Subsidiary Guarantees................. The Issuers' payment obligations under the Notes
will be jointly and severally guaranteed (the
"Subsidiary Guarantees") by the Company's future
Restricted Subsidiaries other than Finance Corp.,
if any (the "Subsidiary Guarantors").
Change of Control..................... Upon a Change of Control, each Holder (as defined
in the Indenture) of Notes will have the right to
require the Issuers to purchase all or any part of
such Holder's Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. There can be no
assurance that the Issuers will have adequate funds
available to repurchase the Notes. See "Risk
Factors -- Possible Inability to Fund Change of
Control Offer."
Certain Covenants..................... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as
defined) to incur additional Indebtedness and issue
preferred stock, pay distributions or make other
restricted payments, engage in sale and leaseback
transactions, create certain liens, enter into
certain transactions with affiliates, sell assets
of the Company or its subsidiaries, incur dividend
and other payment restrictions affecting Restricted
Subsidiaries, issue or sell Equity Interests (as
defined) of the Company's subsidiaries or enter
into certain mergers and consolidations. In
addition, under certain circumstances, the Company
will be required to offer to purchase Notes at a
price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase, with the proceeds of certain Asset Sales
(as defined). See "Description of Notes."
Transfer Restrictions................. The Old Notes were not registered under the
Securities Act and are subject to restrictions on
transferability and resale. See "Risk Factors --
Consequences of Exchange and Failure to Exchange."
Use of Proceeds of the Offering....... The proceeds from the Offering, together with
initial borrowings under the New Credit Facility,
are being used to (i) purchase Units from the
public Unitholders in the Going Private
Transaction, (ii) repay existing indebtedness and
(iii) pay related fees and expenses. See "Use of
Proceeds."
</TABLE>
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<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The historical financial information under the caption "Statement of
Operations Data" for each of the years in the five-year period ended December
31, 1996 has been derived from the Company's audited historical financial
statements, which financial statements have been audited by Arthur Andersen LLP,
independent public accountants. The financial statements for each of the years
in the three-year period ended December 31, 1996, and the report thereon are
included elsewhere herein. The historical financial information under the
captions "Statement of Operations Data," "Other Financial Data" and "Balance
Sheet Data" as of September 30, 1997, and for the nine months ended September
30, 1997 and 1996, has been derived from the unaudited financial statements
which are included elsewhere herein. In the opinion of the Company, such
information reflects all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
such periods. The results of operations for the nine months ended September 30,
1997 are not necessarily indicative of the results to be expected for the entire
year. The summary financial information should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Food sales..................................... $ 181,072 $ 197,090 $ 205,675 $ 228,259 $ 234,164 $ 175,792 $ 185,069
Franchise revenues............................. 14,079 15,544 16,227 17,492 18,629 13,914 14,603
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................... 195,151 212,634 221,902 245,751 252,793 189,706 199,672
Depreciation and amortization.................... 10,712 11,851 12,107 14,401 15,748 11,748 11,898
Earnings before net interest and taxes(1)........ $ 17,820 $ 15,379 $ 15,274 $ 14,622 $ 18,588 $ 14,340 $ 15,328
OTHER FINANCIAL DATA:
EBITDA(2)........................................ $ 28,687 $ 31,695 $ 29,381 $ 31,441 $ 34,473 $ 26,194 $ 27,995
EBITDA margin(2)(3).............................. 14.7% 14.9% 13.2% 12.8% 13.6% 13.8% 14.0%
Net cash provided by operating activities........ $ 25,101 $ 29,696 $ 24,761 $ 25,277 $ 35,245 $ 25,557 $ 25,899
Capital expenditures
Maintenance.................................... $ 1,512 $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 2,142 $ 2,673
Renovation..................................... 3,559 4,401 4,118 8,431 4,064 3,273 2,486
New restaurant development..................... 7,037 9,851 20,908 12,626 1,947 1,870 3,324
Manufacturing and other........................ 3,324 3,793 3,643 4,439 2,860 1,997 1,831
--------- --------- --------- --------- --------- --------- ---------
Total capital expenditures................... $ 15,432 $ 20,068 $ 30,799 $ 28,931 $ 11,858 $ 9,282 $ 10,314
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net interest expense............................. $ 2,467 $ 2,777 $ 3,266 $ 4,826 $ 5,066 $ 3,841 $ 3,558
Cash distributions paid to Unitholders........... $ 13,744 $ 13,765 $ 13,780 $ 13,870 $ 13,904 $ 10,428 $ 10,428
Ratio of EBITDA to net interest expense
and cash distributions paid to
Unitholders(2)................................. 1.8x 1.9x 1.7x 1.7x 1.8x 1.8x 2.0x
PRO FORMA DATA:(4)
Net interest expense......................................................................... $ 15,888 $ 12,142 $ 11,661
Ratio of EBITDA to net interest expense(2)................................................... 2.2x 2.2x 2.4x
Ratio of long-term debt and capital lease obligations to EBITDA(2)(5)........................ -- -- 3.9x
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-------------------------
ACTUAL PRO FORMA(6)
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net.............................................................. $ 114,312 $ 129,011
Total assets............................................................................. 156,204 207,352
Total long-term debt and capital lease obligations....................................... 50,460 144,213
Total partners' capital.................................................................. 63,542 25,561
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE CHECK)
<S> <C> <C> <C> <C> <C> <C> <C>
RESTAURANT OPERATING DATA:
Restaurant sales
Company-operated(7)............................ $ 170,765 $ 183,416 $ 187,711 $ 208,057 $ 212,787 $ 160,482 $ 167,843
Franchised..................................... 372,507 404,339 425,812 440,446 465,172 350,912 367,025
--------- --------- --------- --------- --------- --------- ---------
Total........................................ $ 543,272 $ 587,755 $ 613,523 $ 648,503 $ 677,959 $ 511,394 $ 534,868
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Restaurants open (at period end)(7)
Company-operated............................... 123 127 132 139 134 134 135
Franchised..................................... 290 298 300 317 329 324 333
--------- --------- --------- --------- --------- --------- ---------
Total........................................ 413 425 432 456 463 458 468
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Company-operated restaurant data:
Average sales per restaurant(7)................ $ 1,418 $ 1,478 $ 1,535 $ 1,535 $ 1,576 $ 1,185 $ 1,254
Percentage change over prior period.......... 2.1% 4.2% 3.9% 0.0% 2.7% 2.2% 5.8%
Comparable restaurant sales increase(8)........ 4.5% 2.5% 0.8% 0.9% 2.6% 2.1% 5.9%
Average check(7)............................... $ 4.85 $ 5.04 $ 5.16 $ 5.29 $ 5.36 $ 5.35 $ 5.53
Franchised restaurant data:
Average royalties per restaurant............... $ 48.1 $ 51.6 $ 53.3 $ 55.0 $ 55.2 $ 41.6 $ 42.9
Average sales per restaurant................... $ 1,299 $ 1,381 $ 1,418 $ 1,441 $ 1,431 $ 1,083 $ 1,109
</TABLE>
- ------------------------------
(1) Includes unusual items as follows: year ended December 31, 1993 -- provision
for disposition of assets ($4.3 million); year ended December 31, 1994 --
provision for litigation costs ($1.1 million) and provision for disposition
of assets ($0.8 million); year ended December 31, 1995 -- asset write-down
($1.9 million), provision for disposition of assets ($0.6 million) and
benefit from litigation costs ($0.2 million); and nine months ended
September 30, 1997 -- tax-related reorganization costs ($0.7 million). The
Company is not subject to federal income taxes and, accordingly, no income
taxes were recorded for any of the periods presented.
(2) As used herein, "EBITDA" represents net income plus (i) net interest, (ii)
depreciation and amortization, (iii) provision for disposition of assets,
(iv) asset write-down (SFAS No. 121), (v) provision for (benefit from)
litigation costs, (vi) tax-related reorganization costs and (vii) provision
for minority interest. The Company has included information concerning
EBITDA in this Prospectus because it believes that such information is used
by certain investors as one measure of an issuer's historical ability to
service debt. EBITDA should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional indications
of an issuer's operating performance.
(3) EBITDA margin represents EBITDA divided by total revenues.
(4) Pro forma data gives effect to (i) the Offering, (ii) estimated initial
borrowings under the New Credit Facility, (iii) application of the proceeds
of the foregoing, as set forth in "Use of Proceeds" and (iv) the Going
Private Transaction, as if each occurred on January 1, 1996. The pro forma
data has been derived from the unaudited pro forma financial statements
included elsewhere in this Prospectus.
(5) For purposes of this ratio, EBITDA represents EBITDA for the twelve months
ended September 30, 1997.
(6) Pro forma data gives effect to (i) the Offering, (ii) estimated initial
borrowings under the New Credit Facility, (iii) application of the proceeds
of the foregoing, as set forth in "Use of Proceeds" and (iv) the Going
Private Transaction, as if each occurred on September 30, 1997. The pro
forma data has been derived from the unaudited pro forma financial
statements included elsewhere in this Prospectus.
(7) Represents full-service restaurants only.
(8) Comparable restaurant sales increase for each period is calculated using
sales of restaurants that have been open during such period and the entire
corresponding period of the prior fiscal year. Comparable restaurant sales
data excludes those days and dayparts for which the restaurant was not open
in both periods.
13
<PAGE>
RISK FACTORS
Holders of the Old Notes should consider carefully the risk factors set
forth below as well as the other information set forth in this Prospectus before
tendering their Old Notes in the Exchange Offer. The risk factors set forth
below (other than "Consequences of Exchange and Failure to Exchange") are
generally applicable to the Old Notes as well as the New Notes. This Prospectus
contains certain forward-looking statements, including statements containing the
words "believes," "anticipates," "expects" and words of similar import. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
adverse changes in national or local economic conditions, increased competition,
changes in availability, cost and terms of financing, changes in operating
expenses and other factors referenced in this Prospectus, including, without
limitation, under the captions "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and "Business." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Issuers disclaim any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements contained in this Prospectus to reflect
future events or developments.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Issuers do not
currently anticipate that they will register the Old Notes under the Securities
Act. In addition, upon the consummation of the Exchange Offer holders of Old
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any rights under the
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer -- Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to other parties in other transactions substantially
similar to the Exchange Offer, the Issuers believe that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act; (ii) an Initial Purchaser who acquired the Old Notes directly from the
Issuers solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act; or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and that such holder
is not participating and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes. The Issuers have not, however, sought their own no-action letter
from the staff of the Commission. Although there has been no indication of any
change in the staff's position, there can be no assurance that the staff of the
Commission would make a similar determination with respect to the resale of the
New Notes. By tendering, each Holder which is not a broker-dealer will represent
to the Issuers that, among other things, the person receiving the New Notes,
whether or not such person is a Holder, (i) is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Issuers, (ii) will acquire the New
Notes in the ordinary course of such person's business, and (iii) is not engaged
in, does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the
14
<PAGE>
New Notes. If any Holder or any such other person has an arrangement or
understanding with any person to participate in a distribution of such New
Notes, is engaged in or intends to engage in a distribution of such New Notes,
is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Issuers, or acquired the Old Notes as a result of market making or other trading
activities, then such Holder or any such other person (i) cannot rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction, unless such sale is made
pursuant to an exemption from such requirements. See "The Exchange Offer --
Purpose of the Exchange Offer."
SUBSTANTIAL LEVERAGE
The Company is highly leveraged. On September 30, 1997, after giving pro
forma effect to the Offering and estimated initial borrowings of $6.8 million
under the New Credit Facility, the Company would have had total indebtedness of
approximately $145.6 million (of which $130 million would have consisted of the
Notes) and partners' capital of approximately $25.6 million. On such pro forma
basis, the Company's ratio of earnings to pro forma fixed charges for the year
ended December 31, 1996 and the nine months ended September 30, 1997 would have
been 1.0 to 1.0 and 1.2 to 1.0, respectively. The Company and its subsidiaries
are permitted to incur substantial additional indebtedness in the future. See
"Capitalization" and "Selected Historical and Pro Forma Financial and Other
Data" and "Description of Notes."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings under the New Credit Facility, will be adequate to
meet the Company's liquidity needs for the foreseeable future. The Company may,
however, need to refinance all or a portion of the principal of the Notes on or
prior to maturity. There can be no assurance that the Company's business will
generate sufficient cash flow from operations, or that future borrowings will be
available under the New Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to fund its other
liquidity needs. In addition, there can be no assurance that the Company will be
able to effect any such refinancing on commercially reasonable terms or at all.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Capital Resources and Liquidity."
The degree to which the Company is leveraged could have important
consequences to Holders of the Notes, including, but not limited to: (i) making
it more difficult for the Company to satisfy its obligations with respect to the
Notes, (ii) increasing the Company's vulnerability to general adverse economic
and industry conditions, (iii) limiting the Company's ability to obtain
additional financing to fund future working capital, capital expenditures and
other general corporate requirements, (iv) requiring the dedication of a
substantial portion of the Company's cash flow from operations to the payment of
principal of, and interest on, its indebtedness, thereby reducing the
availability of such cash flow to fund working capital, capital expenditures,
research and development or other general corporate purposes, (v) limiting the
Company's flexibility in planning for, or reacting to, changes in its business
and the industry, and (vi) placing the Company at a competitive disadvantage as
compared to less leveraged competitors. In addition, the Indenture and the New
Credit Facility contain financial and other restrictive covenants that limit the
ability of the Company to, among other things, borrow additional funds. Failure
by the Company to comply with such covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company. In addition, the degree to which the Company is leveraged could prevent
it from repurchasing all of the Notes tendered to it upon the occurrence of a
Change of Control. See "-- Possible Inability to Fund Change of Control Offer,"
"Description of Notes -- Repurchase at the Option of Holders -- Change of
Control" and "Description of Other Indebtedness."
15
<PAGE>
SECURED INDEBTEDNESS; EFFECTIVE SUBORDINATION
Holders of any secured indebtedness of the Company or its subsidiaries will
have claims that are prior to the claims of the Holders of the Notes with
respect to the assets securing such other indebtedness. Notably, the Company is
a party to the New Credit Facility which is secured by liens on substantially
all of the Company's and its subsidiaries' assets. The Notes are effectively
subordinated to all such secured indebtedness. In the event of any distribution
or payment of the assets of the Company in any foreclosure, dissolution,
winding-up, liquidation, reorganization, or other bankruptcy proceeding, holders
of secured indebtedness will have a prior claim to the assets of the Company and
its subsidiaries that constitute their collateral. Holders of the Notes will
participate ratably with all holders of unsecured indebtedness of the Company
that is deemed to be of the same class as the Notes, and potentially with all
other general creditors of the Company, based upon the respective amounts owed
to each holder or creditor, in the remaining assets of the Company. In any of
the foregoing events, there can be no assurance that there would be sufficient
assets to pay amounts due on the Notes. As a result, Holders of the Notes may
receive less, ratably, than holders of secured indebtedness.
As of September 30, 1997, on an as adjusted basis after giving effect to the
Offering and estimated initial borrowings under the New Credit Facility, the
aggregate amount of secured indebtedness of the Company and its subsidiaries
(representing borrowings under the New Credit Facility) would have been
approximately $6.8 million, outstanding standby letters of credit would have
been approximately $3.0 million and approximately $40.2 million would have been
available for additional borrowings and letters of credit under the New Credit
Facility. The Indenture permits the incurrence of substantial additional secured
indebtedness by the Company and its subsidiaries, under the New Credit Facility
or otherwise, in the future. See "Description of Notes."
RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY
Food service businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions, demographic trends, traffic
patterns, the cost and availability of labor, purchasing power, availability of
products and the type, number and location of competing restaurants. The Company
could also be substantially adversely affected by publicity resulting from food
quality, illness, injury or other health concerns or alleged discrimination or
other operating issues stemming from one location or a limited number of
locations, whether or not the Company is liable. In addition, factors such as
increased costs of goods, regional weather conditions and the potential scarcity
of experienced management and hourly employees may also adversely affect the
food service industry in general and the results of operations and financial
condition of the Company.
RELIANCE ON KEY MANAGEMENT
The Company's business is managed, and its business strategies formulated,
by a relatively small number of key executive officers and managers. The loss of
these key management persons, including Mr. Smith and Mr. Arras, could have a
material adverse effect on the Company. See "Management."
COMPETITION
The Company's business (including Foxtail) and the restaurant and food
services industries in general are highly competitive. The Company competes
directly or indirectly with all restaurants, from national and regional chains
to local establishments. Some of its competitors are significantly larger than
the Company and have substantially greater capital resources at their disposal.
EXPOSURE TO COMMODITY PRICING
The Company's purchasing department contracts for the purchase of food
products in large quantities. Although the Company does not hedge its positions
in any of these commodities as a matter of policy,
16
<PAGE>
it may opportunistically contract for some of these items in advance of a
specific need. As a result, the Company is subject to the risk of substantial
and sudden price increases, shortages or interruptions in supply of such items,
which could have a material adverse effect on the Company.
FRANCHISE OPERATIONS
At September 30, 1997, the Company franchised 333 full-service restaurants.
The opening and success of franchised restaurants depends on various factors,
including the availability of suitable sites, the negotiation of acceptable
lease or purchase terms for new locations, permitting and regulatory compliance,
the ability to meet construction schedules and the financial and other
capabilities of the Company's franchisees and developers. There can be no
assurance that developers planning the opening of multiple restaurants under
area development agreements will have the business abilities or sufficient
access to financial resources necessary to open the restaurants required by
their agreements. There can also be no assurances that franchisees will
successfully operate their restaurants in a manner consistent with the Company's
concept and standards.
The Company's largest franchisee operates 41 restaurants, 37 of which are
leased from unaffiliated lessors, pursuant to a temporary license agreement
initially expiring December 31, 1997, but which the Company has agreed to extend
for an additional 90 days. The temporary license agreement was entered into as a
result of negotiations following the franchisee's defaults in its payments and
certain other obligations under its prior agreements with the Company and in
order to give the franchisee an opportunity to seek permanent financing in an
amount sufficient to permit it to refinance its existing obligations to its
creditors, including the Company, and to remodel its restaurants. While the
franchisee has represented to the Company that it is currently in discussions
with possible financing sources, the Company believes that if the franchisee is
ultimately unsuccessful and loses control of its properties, a majority of the
restaurants can continue to be operated as Perkins Family Restaurants pursuant
to arrangements between the Company and the owners of the properties. During the
past three years, the franchisee's average net royalty payments to the Company
were approximately $1.75 million and at December 31, 1997, the franchisee was
delinquent in its royalty obligations in the amount of approximately $250,000.
SEASONALITY
The Company's revenues are subject to seasonal fluctuations. Customer
traffic and consequently revenues are highest in the summer months and lowest
during the winter months because of the high proportion of restaurants located
in states where inclement weather adversely affects guest visits.
GEOGRAPHIC CONCENTRATION
Perkins restaurants are concentrated in the Midwest, Pennsylvania, upstate
New York and central Florida. As a result, a severe or prolonged economic
recession or changes in demographic mix, employment levels, population density,
weather, real estate market conditions or other factors unique to these
geographic regions may adversely affect the Company more than certain of its
competitors which are more geographically diverse.
ABSENCE OF A PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Old Notes were not registered under the Securities Act. Accordingly, the
Old Notes may only be offered or sold pursuant to an exemption from the
registration requirements of the Securities Act or pursuant to an effective
registration statement. See "-- Consequences of Exchange and Failure to
Exchange" above. Although the Old Notes are eligible for trading in PORTAL,
there can be no assurance as to the liquidity of any markets that may develop
for the Notes, the ability of Holders of the Notes to sell their Notes, or the
prices at which Holders would be able to sell their Notes. Future trading prices
of the
17
<PAGE>
Notes will depend on many factors, including, among other things, the Company's
ability to effect the Exchange Offer, prevailing interest rates, the Company's
operating results and the market for similar securities. However, they are not
obligated to do so and any market making may be discontinued at any time without
notice. In addition, such market making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act (as defined) and may be
limited during the Exchange Offer and the pendency of any Shelf Registration
Statement. See "Description of Notes -- Registration Rights; Liquidated
Damages." The Company does not intend to apply for listing of the Notes on any
securities exchange.
REGULATION
The restaurant and food distribution industries are subject to numerous
federal, state and local government regulations, including those relating to the
preparation and sale of food and building and zoning requirements. Also, the
Company is subject to laws governing its relationship with employees, including
minimum wage requirements, overtime, working conditions and citizenship
requirements. The failure to obtain or retain food licenses or an increase in
the minimum wage rate, employee benefit costs or other costs associated with
employees could adversely affect the Company. In September 1997, the second
phase of an increase in the minimum wage was implemented in accordance with the
Federal Fair Labor Standards Act of 1996. See "Business -- Government
Regulation."
CONTROL OF THE COMPANY; RELATIONSHIP WITH FRIENDLY ICE CREAM CORPORATION;
POTENTIAL CONFLICTS OF INTEREST
Since the consummation of the Going Private Transaction, all of the
Company's outstanding equity interests are indirectly held by TRC. TRC's
outstanding equity interests are owned 33.2%, 33.2% and 28.1% by Donald N.
Smith, Harrah's and Equitable, respectively. These shareholders, if they were to
act together, would have the ability to make significant decisions affecting the
operations of the Company.
Mr. Smith and Equitable own 10.3% and 2.1%, respectively, of Friendly Ice
Cream Corporation ("Friendly's"), which operates and franchises full-service
restaurants. Mr. Smith, the Chairman of the Board and Chief Executive Officer of
Perkins Management Company, Inc. ("PMC"), is the Chairman, Chief Executive
Officer and President of Friendly's. In addition, three of the directors of PMC
are directors of Friendly's. In the ordinary course of business, the Company
enters into transactions with Friendly's. The Company's policy is to only enter
into a transaction with an affiliate in the ordinary course of, and pursuant to
the reasonable requirements of, its business and upon terms that are no less
favorable to the Company than could be obtained if the transaction was entered
into with an unaffiliated third party. See "Certain Transactions."
Circumstances could arise in which the interests of TRC and its stockholders
could be in conflict with the interests of the Holders of the Notes. In
addition, Friendly's competes with the Company in certain markets and
circumstances could arise in which the interests of Friendly's could be in
conflict with the interests of the Company. Since Mr. Smith serves as Chairman,
Chief Executive Officer and President of Friendly's and as Chairman and Chief
Executive Officer of PMC and, consequently, devotes a portion of his time to the
affairs of each company, he may be required to limit his involvement in those
areas, if any, where the interests of the Company conflict with those of
Friendly's. Mr. Smith does not have an employment agreement with the Company nor
is he contractually prohibited from engaging in other business ventures in the
future, any of which could compete with the Company or its subsidiaries.
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company, Finance Corp. or any Subsidiary Guarantor, at the time it incurred the
indebtedness evidenced by the Notes or the Subsidiary Guarantees, (i) (a) was or
is
18
<PAGE>
insolvent or rendered insolvent by reason of such incurrence or (b) was or is
engaged in a business or transaction for which the assets remaining with the
Company, Finance Corp. or any Subsidiary Guarantor constituted unreasonably
small capital or (c) intended or intends to incur, or believed or believes that
it would incur debts beyond its ability to pay such debts as they mature, and
(ii) received or receives less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, then the Notes or the
Subsidiary Guarantees, and any pledge or other security interest securing such
indebtedness, could be voided, or claims in respect of the Notes or the
Subsidiary Guarantees could be subordinated to all other debts of the Company,
Finance Corp. or any Subsidiary Guarantor. In addition, the payment of interest
and principal by the Company, Finance Corp. or any Subsidiary Guarantor pursuant
to the Notes could be voided and required to be returned to the person making
such payment, or to a fund for the benefit of the creditors of the Company,
Finance Corp. or any Subsidiary Guarantor.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company, Finance Corp. or any Subsidiary
Guarantor would be considered insolvent if (i) the sum of its debts, including
contingent liabilities, were greater than the saleable value of all of its
assets at a fair valuation or if the present fair saleable value of its assets
were less than the amount that would be required to pay its probable liability
on its existing debts, including contingent liabilities, as they become absolute
and mature or (ii) it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Issuers believe that, after giving effect to the
indebtedness incurred in connection with the Offering and the establishment of
the New Credit Facility, the Company was not insolvent, does not have
unreasonably small capital for the business in which it is engaged and has not
incurred debts beyond its ability to pay such debts as they mature. There can be
no assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with the Issuers' conclusions in this
regard.
POSSIBLE INABILITY TO FUND CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Notes tendered or that restrictions in the New Credit Facility will allow the
Company to make such required repurchases. In addition, under the New Credit
Facility, in the event of circumstances which are similar to a Change of
Control, repayment of borrowings under the New Credit Facility will be subject
to acceleration. Notwithstanding these provisions, the Company could enter into
certain transactions, including certain recapitalizations, that would not
constitute a Change of Control but would increase the amount of debt outstanding
at such time. See "Description of Notes -- Repurchase at the Option of Holders."
19
<PAGE>
THE GOING PRIVATE TRANSACTION
The Company is a limited partnership that currently is indirectly owned
(including its general partner's interest) by The Restaurant Company ("TRC").
Until December 1997, the Company's Units were traded on the New York Stock
Exchange under the symbol "PFR." In September 1997, the Company, TRC and Perkins
Acquisition Corp. ("MergerCo.") entered into an Agreement and Plan of Merger (as
amended, the "Merger Agreement") pursuant to which the Company's operating
partnership subsidiary was eliminated through a merger and a series of
transactions were consummated on December 22, 1997 whereby the Company became an
indirect wholly-owned subsidiary of TRC and the approximately 5.44 million Units
held by persons other than TRC and its subsidiaries were converted into the
right to receive $14.00 in cash per Unit. Such transactions consummated on
December 22, 1997 are collectively referred to herein as the "Going Private
Transaction." The offering of the Old Notes (the "Offering") and the Going
Private Transaction were consummated concurrently. See "The Going Private
Transaction."
TRC is owned 33.2% by Donald N. Smith, the Company's Chairman and Chief
Executive Officer, 33.2% by a subsidiary of Harrah's Entertainment, Inc.
("Harrah's"), 28.1% by The Equitable Life Assurance Society of the United States
("Equitable") and 5.5% by others. No change in the Company's management or
business strategy is anticipated as a result of the consummation of the Going
Private Transaction.
Approximately $137 million is required to (i) consummate the Going Private
Transaction, (ii) repay existing indebtedness and (iii) pay related fees and
expenses. Such funds are being obtained from the proceeds of the Offering,
internally generated funds and the New Credit Facility. See "Use of Proceeds."
20
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any proceeds from the Exchange Offer.
The Company is using the proceeds from the issuance of the Old Notes,
together with anticipated initial borrowings under the New Credit Facility, to
(i) purchase Units from the public Unitholders in the Going Private Transaction,
(ii) repay existing indebtedness and (iii) pay related fees and expenses. The
following table sets forth estimated sources and uses of funds based on debt
balances existing at December 22, 1997.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
SOURCES OF FUNDS
- ----------------------------------------------------------------
New Credit Facility(1).......................................... $ 6,585
10 1/8% Senior Notes due 2007................................... 130,000
--------------
Total sources of funds........................................ $136,585
--------------
--------------
USES OF FUNDS
- ----------------------------------------------------------------
Purchase of public Units........................................ $ 76,189
Repayment of existing debt
Existing Credit Facility(2)................................... 13,590
7.19% Senior Notes due 2005................................... 19,394
8.6% Senior Notes due 2002.................................... 9,300
6.99% Senior Notes due 2003................................... 3,550
Fees and expenses(3)............................................ 14,562
--------------
Total uses of funds........................................... $136,585
--------------
--------------
</TABLE>
- ------------------------
(1) Pursuant to the New Credit Facility, a group of banks provided the Company
with a new $50 million revolving line of credit facility which, together
with the proceeds of the Offering, is being used to finance the Going
Private Transaction, refinance the Existing Credit Facility and other
existing indebtedness and provide future capital for general corporate
purposes.
Borrowings under the New Credit Facility mature on January 1, 2003 and the
New Credit Facility contains a $5 million sublimit for letters of credit.
Advances under the New Credit Facility may be borrowed, repaid and
reborrowed until maturity.
(2) Includes the Company's $40 million revolving line of credit facility and $15
million term loan facility existing prior to the closing of the Going
Private Transaction (collectively the "Existing Credit Facility").
(3) Includes fees and expenses of the Going Private Transaction and the
financing thereof, including investment banking fees and expenses, financing
and refinancing fees and expenses, legal fees and expenses, accounting fees
and expenses, filing fees, solicitation, printing and mailing fees and other
expenses.
21
<PAGE>
CAPITALIZATION
The following table sets forth information regarding cash and capitalization
of the Company as of September 30, 1997, and as adjusted to give effect to the
Going Private Transaction, the financing thereof, and the repayment of existing
indebtedness, as if each occurred on September 30, 1997. The information
presented below should be read in conjunction with the financial statements and
related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------
AS
ACTUAL ADJUSTED(1)
-------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................... $ 2,054 $ 2,054
-------- -----------
-------- -----------
Short-term debt:
Current maturities of long-term debt.................. $ 4,624 $ --
Current maturities of capital lease obligations....... 1,430 1,430
-------- -----------
Total short-term debt........................... 6,054 1,430
Long-term debt, less current maturities:
New Credit Facility................................... -- 6,779
10 1/8% Senior Notes due 2007......................... -- 130,000
7.19% Unsecured Senior Notes due 2005................. 17,576 --
8.6% Unsecured Senior Notes due 2002.................. 7,950 --
6.99% Unsecured Senior Notes due 2003................. 3,250 --
Capital lease obligations............................. 7,434 7,434
Existing Credit Facility.............................. 14,250 --
-------- -----------
Total long-term debt.............................. 50,460 144,213
Total Partners' capital................................. 63,542 25,561
-------- -----------
Total capitalization............................ $120,056 $171,204
-------- -----------
-------- -----------
</TABLE>
- ------------------------
(1) Adjusted to give effect to (i) the Offering, (ii) initial borrowings under
the New Credit Facility, (iii) application of the proceeds of the foregoing,
as set forth in "Use of Proceeds" and (iv) the Going Private Transaction, as
if each occurred on September 30, 1997.
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The historical financial information under the captions "Statement of
Operations Data" and "Balance Sheet Data" for each of the years in the five-year
period ended December 31, 1996 has been derived from the Company's audited
historical financial statements, which financial statements have been audited by
Arthur Andersen LLP, independent public accountants. The financial statements as
of December 31, 1995 and December 31, 1996 and for each of the years in the
three-year period ended December 31, 1996, and the report thereon, are included
elsewhere herein. The historical financial information under the captions
"Statement of Operation Data," "Other Financial Data" and "Balance Sheet Data"
as of September 30, 1997 and for the nine months ended September 30, 1997 and
1996, has been derived from the unaudited financial statements which are
included elsewhere herein. In the opinion of the Company, such information
reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations for such periods.
The results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year. The
selected financial information should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Food sales................................ $ 181,072 $ 197,090 $ 205,675 $ 228,259 $ 234,164 $ 175,792 $ 185,069
Franchise revenues........................ 14,079 15,544 16,227 17,492 18,629 13,914 14,603
--------- --------- --------- --------- --------- --------- ---------
Total revenues........................ 195,151 212,634 221,902 245,751 252,793 189,706 199,672
Cost of sales............................... 150,267 163,290 171,703 192,798 195,710 146,684 152,825
General and administrative expenses......... 16,627 18,337 21,779 22,251 23,741 17,655 19,593
Depreciation and amortization............... 10,712 11,851 12,107 14,401 15,748 11,748 11,898
Asset write-down (SFAS 121)................. -- -- -- 1,900 -- -- --
Provisions for disposition of assets and
litigation................................ -- 4,338 1,879 419 -- -- --
Other expenses (income)..................... (275) (561) (840) (640) (994) (721) 28
--------- --------- --------- --------- --------- --------- ---------
Earnings before net interest and taxes(1)... 17,820 15,379 15,274 14,622 18,588 14,340 15,328
Net interest expense........................ 2,467 2,777 3,266 4,826 5,066 3,841 3,558
--------- --------- --------- --------- --------- --------- ---------
Net income(1)............................... $ 15,353 $ 12,602 $ 12,008 $ 9,796 $ 13,522 $ 10,499 $ 11,770
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per Unit $ 1.48 $ 1.21 $ 1.16 $ .94 $ 1.30 $ 1.01 $ 1.13
OTHER FINANCIAL DATA:
EBITDA(2)................................... $ 28,687 $ 31,695 $ 29,381 $ 31,441 $ 34,473 $ 26,194 $ 27,995
EBITDA margin(2)(3)......................... 14.7% 14.9% 13.2% 12.8% 13.6% 13.8% 14.0%
Net cash provided by operating activities... $ 25,101 $ 29,696 $ 24,761 $ 25,277 $ 35,245 $ 25,557 $ 25,899
Capital expenditures
Maintenance............................... $ 1,512 $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 2,142 $ 2,673
Renovation................................ 3,559 4,401 4,118 8,431 4,064 3,273 2,486
New restaurant development................ 7,037 9,851 20,908 12,626 1,947 1,870 3,324
Manufacturing and other................... 3,324 3,793 3,643 4,439 2,860 1,997 1,831
--------- --------- --------- --------- --------- --------- ---------
Total capital expenditures............ $ 15,432 $ 20,068 $ 30,799 $ 28,931 $ 11,858 $ 9,282 $ 10,314
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Cash distributions paid to Unitholders...... $ 13,744 $ 13,765 $ 13,780 $ 13,870 $ 13,904 $ 10,428 $ 10,428
Ratio of EBITDA to net interest expense and
cash distributions paid to
Unitholders(2)............................ 1.8x 1.9x 1.7x 1.7x 1.8x 1.8x 2.0x
Ratio of earnings to fixed charges(4)....... 4.2x 3.2x 2.9x 2.3x 2.8x 2.8x 3.2x
PRO FORMA DATA:(5)
Net income.............................................................................. $ 616 $ 691 $ 2,126
Net income per unit..................................................................... $ 0.12 $ 0.14 $ 0.42
Net interest expense.................................................................... $ 15,888 $ 12,142 $ 11,661
Ratio of EBITDA to net interest expense(2).............................................. 2.2x 2.2x 2.4x
Ratio of long-term debt and capital lease obligations to EBITDA(2)(6)................... -- -- 3.9x
Ratio of earnings to fixed charges(4)................................................... 1.0x 1.0x 1.2x
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1997
----------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(7)
--------- --------- --------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net............... $ 80,700 $ 87,488 $ 105,404 $ 117,435 $ 115,086 $ 114,312 $ 129,011
Total assets.............................. 125,972 131,709 150,407 161,829 155,656 156,204 207,352
Total long-term debt and capital lease
obligations............................. 33,196 35,794 50,737 66,660 56,817 50,460 144,213
Total partners' capital................... 66,960 66,255 64,778 61,096 61,557 63,542 25,561
</TABLE>
- --------------------------
(1) Includes unusual items as follows: year ended December 31, 1993 -- provision
for disposition of assets ($4.3 million); year ended December 31, 1994 --
provision for litigation costs ($1.1 million) and provision for disposition
of assets ($0.8 million); year ended December 31, 1995 -- asset write-down
($1.9 million), provision for disposition of assets ($0.6 million) and
benefit from litigation costs ($0.2 million); and nine months ended
September 30, 1997 -- tax-related reorganization costs ($0.7 million). The
Company is not subject to federal income taxes and, accordingly, no income
taxes were recorded for any of the periods presented.
(2) As used herein, "EBITDA" represents net income plus (i) net interest, (ii)
depreciation and amortization, (iii) provision for disposition of assets,
(iv) asset write-down (SFAS No. 121), (v) provision for (benefit from)
litigation costs, (vi) tax-related reorganization costs and (vii) provision
for minority interest. The Company has included information concerning
EBITDA in this Prospectus because it believes that such information is used
by certain investors as one measure of an issuer's historical ability to
service debt. EBITDA should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional indications
of an issuer's operating performance.
(3) EBITDA margin represents EBITDA divided by total revenues.
(4) The ratio of earnings to fixed charges is computed by dividing (i) the sum
of pre-tax income (equivalent to net income as the Company is not subject to
federal income taxes), minority interest, amortization of previously
capitalized interest and fixed charges (excluding capitalized interest) by
(ii) fixed charges. Fixed charges consist of total interest incurred,
amortization of debt financing costs and the portion of rental expense on
operating leases considered to represent interest cost.
(5) Pro forma data gives effect to (i) the Offering, (ii) estimated initial
borrowings under the New Credit Facility, (iii) application of the proceeds
of the foregoing, as set forth in "Use of Proceeds" and (iv) the Going
Private Transaction, as if each occurred on January 1, 1996. The pro forma
data has been derived from the unaudited pro forma financial statements
included elsewhere in this Prospectus.
(6) For purposes of this ratio, EBITDA represents EBITDA for the twelve months
ended September 30, 1997.
(7) Pro forma data gives effect to (i) the Offering, (ii) estimated initial
borrowings under the New Credit Facility, (iii) application of the proceeds
of the foregoing, as set forth in "Use of Proceeds" and (iv) the Going
Private Transaction, as if each occurred on September 30, 1997. The pro
forma data has been derived from the unaudited pro forma financial
statements included elsewhere in this Prospectus.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS OF
THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company is a leading operator and franchisor of full-service, mid-scale
restaurants located primarily in the Midwest, Pennsylvania, upstate New York,
and central Florida. As of September 30, 1997, the Company owned and operated
135 full-service restaurants, franchised 333 full-service restaurants and
manufactured and distributed bakery products which were sold to Company-operated
restaurants, franchisees and third parties. The Company's revenues are derived
primarily from the operation of full-service restaurants, franchise revenues and
the sale of bakery products produced by Foxtail. Foxtail offers cookie dough,
muffin batters, pancake mixes, pies and other food products to Company-operated
and franchised restaurants through food service distributors in order to ensure
consistency and availability of Perkins' proprietary products to each restaurant
in the system. Additionally, Foxtail manufactures certain proprietary and
non-proprietary products for sale to non-Perkins operations. Sales from Foxtail
to Company-operated restaurants are eliminated in the income statements. For the
twelve months ended September 30, 1997, revenues from Company-operated
restaurants, Foxtail and franchise revenues accounted for 84.0%, 8.7% and 7.3%
of total revenues, respectively.
Since January 1, 1996, the Company has opened six full-service Perkins
restaurants, each of which is based upon the Company's current prototype
building design. The average investment, excluding land and pre-opening
expenses, was approximately $1.1 million. The Company purchased five of the
sites for these six restaurants at an average cost of approximately $472,000.
The sixth site was acquired under a ground lease. Management believes the
average investment for new Company-operated full-service restaurants scheduled
to be built during the remainder of 1997 and 1998 will range from $1.1 to $1.3
million and land cost will range from $300,000 to $450,000 in cases in which the
Company purchases the site. The Company targets a minimum sales to investment
ratio of 1:1 or greater for all new Company-operated restaurants for its first
year of operation. Pre-opening expenses consist principally of non-recurring
costs, such as hourly employee recruiting and training, meals, lodging and
travel. Pre-opening costs are amortized over 12 months beginning in the month
the restaurant opens. Average annual revenues for the year ended December 31,
1996 for all Company-operated restaurants were approximately $1.6 million.
The Company employs an on-going system of prototype development, testing and
remodeling to maintain operationally efficient, cost-effective and unique
interior and exterior facility design and decor. An accelerated program to
upgrade existing Company-operated restaurants began in 1995 and continues today.
The current remodel package features a modern, distinctive interior and exterior
layout that enhances operating efficiencies and guest appeal. As of September
30, 1997, approximately 86% of Company-operated restaurants had either been
remodeled or initially constructed since January 1, 1994.
During 1997, the Company entered into a joint venture with a Canadian casual
dining operator for the development of a minimum of three Jack Astor's Bar and
Grill restaurants. Jack Astor's Bar and Grill is a casual themed dining concept
with a high-energy, fun atmosphere and menu offerings which include chicken,
pasta, hamburgers and alcoholic beverages. The joint venture's first restaurant
opened in Greensboro, North Carolina on October 6, 1997.
The Company currently sponsors financing programs on competitive terms
designed to provide its franchisees with access to financing options to support
the remodeling of existing restaurants. The financing is provided by two
financial services companies with extensive experience in franchise and cash
flow based lending. The programs were designed to allow each franchisee's
request for financing to be evaluated solely on the basis of the financial
performance of the franchisee without support from the Company. However, under
both programs, the Company has the option to extend differing levels of support
in its sole discretion, if it determines that such support will have a positive
strategic impact on the
25
<PAGE>
future growth of the Company. Although not specifically part of the current
programs, both financial services companies are also offering competitive
financing options to both new and existing franchisees for equipment and real
estate financing outside of the current remodel initiative.
In the past, the Company has sponsored financing programs offered by certain
lending institutions to help its franchisees obtain funds for the construction
of new franchised restaurants and to purchase and install in-store bakeries. The
Company provided a limited guaranty of the funds borrowed for such purposes. As
of September 30, 1997, there were approximately $3.7 million in borrowings
outstanding under these programs. The Company has guaranteed $1.2 million of
these borrowings. No additional borrowings are available under these programs.
The Company's revenues have increased steadily over the last five years.
System-wide restaurant revenues (including franchised restaurants) have
increased 29.1% from $543.3 million in 1992 to $701.4 million for the twelve
months ended September 30, 1997. Revenues from Company-operated restaurants have
increased 28.9% from $170.8 million to $220.1 million and franchise revenues
have increased 37.2% from $14.1 million to $19.3 million, over the same period.
Average revenue per Company-operated restaurant has increased approximately 16%
from $1.4 million to $1.6 million over the same period. EBITDA (as defined) for
the same periods were $28.7 million and $36.3 million, respectively,
representing a 26.5% increase. Company-operated restaurants have achieved
comparable restaurant sales increases in each of the last 25 quarters.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operating
and other data of the Company. All revenues, costs and expenses are expressed as
a percentage of total revenues. Certain prior year amounts have been
reclassified to conform to current year presentation.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Food sales........................................................... 92.7% 92.9% 92.6% 92.7% 92.7%
Franchise revenues................................................... 7.3 7.1 7.4 7.3 7.3
--------- --------- --------- --------- ---------
Total revenues....................................................... 100.0 100.0 100.0 100.0 100.0
Costs and expenses
Cost of sales:
Food cost.......................................................... 26.1 26.9 27.1 27.0 26.6
Labor and benefits................................................. 32.0 32.1 31.2 31.3 31.4
Operating expenses................................................. 19.2 19.4 19.1 19.1 18.6
General and administrative........................................... 9.8 9.1 9.4 9.3 9.8
Depreciation and amortization........................................ 5.5 5.9 6.2 6.2 6.0
Interest, net........................................................ 1.5 2.0 2.0 2.0 1.8
Tax-related reorganization costs..................................... -- -- -- -- 0.3
Other, net........................................................... 0.5 0.6 (0.3) (0.4) (0.3)
--------- --------- --------- --------- ---------
Total costs and expenses............................................. 94.6 96.0 94.7 94.5 94.2
--------- --------- --------- --------- ---------
Net income............................................................. 5.4% 4.0% 5.3% 5.5% 5.8%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
REVENUES
Total revenues for the first nine months of 1997 increased approximately
5.3% over the same period in 1996 due primarily to higher comparable restaurant
sales and the net addition of seven new franchised
26
<PAGE>
restaurants. Comparable restaurant sales for Company-operated restaurants
increased approximately 5.9%, due primarily to selective menu price increases,
guest preferences for higher-priced entrees and an increase in comparable
restaurant guest visits. The shift in customer preference to higher-priced
entrees can be attributed to the Company's development and promotion of
higher-priced menu items. Management believes remodeling of Company-operated
restaurants, increased promotional events and implementation of new products
resulted in increased guest visits.
Revenues from Foxtail increased 9.1% for the nine months ended September 30,
1997 versus the same period in the prior year and comprised approximately 8.4%
of the Company's revenues for the period. The increase in Foxtail revenues can
be primarily attributed to price increases effective in August 1996 and January
1997, increased sales outside the Perkins system and an increased number of
franchised restaurants. The increase in outside sales is due to the Company
developing external sales in order to maintain plant utilization during slower
production periods.
Franchise revenues, which consist primarily of franchise royalties and
initial license fees, increased 5.0% in the first nine months of 1997 versus the
same period in the prior year. Although comparable franchised restaurant sales
remained constant with the prior year, revenues of franchised restaurants opened
during 1995 and 1996 averaged 16% higher than the franchise system average
resulting in overall greater franchise revenues. Additionally, 18 new franchised
restaurants have opened since September 30, 1996. Revenues from these openings
were partially offset by the closing of 11 under-performing franchised
restaurants.
COST AND EXPENSES
FOOD COSTS
Food costs for the nine months ended September 30, 1997 decreased 0.4
percentage points as a percent of total revenues. Restaurant food costs
decreased due to selective menu price increases and a decline in the costs of
certain commodities which include eggs and frozen products. The decrease was
partially offset by higher food costs associated with pork and poultry products.
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, increased 0.1
percentage points for the nine months ended September 30, 1997. This increase
was primarily due to increased hourly labor costs in the Company's restaurants.
The wage rates of the Company's hourly employees are impacted by Federal and
state minimum wage laws. Legislation which raised the Federal minimum wage rate
in 1996 and has further increased the minimum wage rate in 1997 has had an
impact on the Company's labor costs. Certain states do not allow tip credits for
servers which results in higher payroll costs as well as greater exposure to
increases in minimum wage rates. In the past, the Company has been able to
offset increases in labor costs through selective menu price increases and
improvements in productivity. The Company anticipates that it can offset the
majority of the current increases through selective menu price increases.
However, there is no assurance that future increases can be mitigated through
raising menu prices.
OPERATING EXPENSES
Operating expenses for the first nine months of 1997 decreased 0.5
percentage points. Operating expenses such as utilities and local restaurant
marketing costs increased at a lower rate than revenues.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 0.5 percentage points for the
nine months ended September 30, 1997. The difference was due to increases in
compensation costs, restaurant development costs, training costs and promotional
expenses for Foxtail.
27
<PAGE>
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 1.3% for the nine months ended
September 30, 1997 over the same period in the prior year due primarily to the
continuing refurbishment program to upgrade and maintain existing restaurants as
well as the addition of new Company-operated restaurants.
INTEREST, NET
Net interest expense for the nine months ended September 30, 1997 decreased
7.4% over the same period in 1996 due primarily to lower debt outstanding during
the period. In addition, interest expense associated with capital lease
obligations decreased.
TAX-RELATED REORGANIZATION COSTS
Tax-related reorganization costs of approximately $650,000 were incurred
during 1997 associated with analyzing the alternatives to becoming a tax-paying
entity beginning January 1998.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Total revenues increased 2.9% over 1995 due primarily to increased
restaurant food sales, increased sales at Foxtail and increased franchise
royalties. Increased restaurant food sales can be primarily attributed to the
addition of three new restaurants in 1996 and ten new restaurants in 1995,
partially offset by the closing of four Company-operated restaurants and
refranchising of three Company-operated restaurants. Comparable restaurant sales
increased approximately 2.6% over 1995 due primarily to selective price
increases and an increase in comparable guest visits of 0.8%. Revenues from
Foxtail increased approximately 5.8% over 1995 and constituted approximately
8.5% of the Company's total 1996 revenues. This increase can be attributed
primarily to increased bakery sales at franchised restaurants to which Foxtail
sells various mixes, doughs and pies.
Franchise revenues, which increased 6.5% over the prior year due primarily
to the addition of nineteen new franchised restaurants, were partially offset by
a decrease in sales for franchised restaurants open for more than one year. Ten
franchised restaurants were closed during 1996 and three Company-operated
restaurants began operations as franchised restaurants during the year.
COSTS AND EXPENSES
FOOD COSTS
In terms of total revenues, food costs increased 0.2 percentage points over
1995. Restaurant division food costs expressed as a percentage of restaurant
division sales remained relatively constant as compared to 1995. Slight
decreases in commodity costs were partially offset by changes in the menu mix
due to promotions such as steak and eggs, shrimp, and turkey. Additionally, the
costs of certain product enhancements were offset by selective menu price
increases. Promotional discounts remained relatively constant as compared with
1995.
The cost of Foxtail sales, in terms of total Foxtail revenues, increased
approximately 1.7 percentage points from 1995 due primarily to certain commodity
cost and packaging increases. As a manufacturing operation, Foxtail typically
has higher food costs as a percent of revenues than the Company's restaurants.
Although the restaurants provide the majority of the Company's revenues, as
Foxtail becomes a more significant source of revenues to the Company, management
expects total food costs to increase as a percent of total revenues.
28
<PAGE>
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, decreased 0.9
percentage points from 1995, primarily due to improved productivity in the
Company's restaurants and pie manufacturing facility. These expenses also
benefited from reduced claims costs associated with the Company's group health
and workers compensation programs. As a percentage of revenues, Foxtail labor
and benefit charges are significantly lower than the Company's restaurants. As
Foxtail becomes a more significant component of the Company's total operations,
labor and benefits expense, expressed as a percent of total revenue, should
decrease.
The wage rates of the Company's hourly employees are impacted by Federal and
state minimum wage laws. Legislation which raised the Federal minimum wage rate
in 1996 has had an impact on the Company's labor costs. In the past, the Company
has been able to offset increases in labor costs through selective menu price
increases and improvements in productivity. The Company anticipates that it can
offset the majority of the current increase through selective menu price
increases. However, there is no assurance that future wage increases can be
mitigated through raising menu prices.
OPERATING EXPENSES
Operating expenses, expressed as a percentage of total revenues, decreased
0.3 percentage points from 1995 to 1996. Decreases in direct operating and
pre-opening expenses, as a percent of restaurant division sales, were partially
offset by an increase in repairs and maintenance expense. A decrease in Foxtail
operating expenses, as a percentage of Foxtail revenue, was primarily due to
decreases in net freight costs, repairs and maintenance and advertising expenses
offset by higher promotional costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased approximately 6.7% over 1995,
which is primarily the result of an increase in incentive costs due to the
Company's positive operating results in 1996. Additional factors contributing to
this increase were increased administrative support related to growth at Foxtail
and an increase in the Company's match of 401(k) contributions from 25% in 1995
to 50% in 1996.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately 9.4% over 1995 due to
the addition of three new Company-operated restaurants and recent refurbishments
to upgrade and improve existing restaurants.
INTEREST, NET
Net interest expense was approximately 5% higher than 1995 primarily as the
result of a higher average debt balance. This increase was partially offset by a
decrease in the interest expense associated with capital lease obligations.
OTHER
Other income increased approximately $354,000 during 1996 due primarily to
rental income on four restaurant properties which were leased to franchisees in
late 1995 and 1996 and one property leased to another restaurant chain in 1996.
Depreciation expense associated with these five properties totaling $324,000 is
included in depreciation and amortization expense.
29
<PAGE>
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES
Total revenues increased 10.7% over 1994 due primarily to the addition of
new Company-operated and franchised restaurants, increased comparable restaurant
sales and increased Foxtail sales.
Increased restaurant food sales can be primarily attributed to the addition
of ten new restaurants in 1995 and an approximate 1% increase in comparable
restaurant sales. Comparable restaurant sales increased due primarily to
selective menu price increases, a shift in sales to higher-priced entrees and
decreased promotional discounting, partially offset by a decline in comparable
guest visits.
Revenues in 1995 from Foxtail increased 12.5% over 1994. The increase in
Foxtail's revenue can be primarily attributed to increased production at the pie
plant opened in July 1993 as well as the addition of in-store bakeries at
franchised restaurants, to which Foxtail sells various mixes, doughs, and pies.
Sales to parties outside of the Perkins system increased approximately 11% over
1994.
Franchise revenues increased 7.8% over the prior year due to the addition of
twenty-three new franchised restaurants and bakeries partially offset by
slightly lower sales in franchised restaurants open for more than one year. Five
franchised restaurants were closed and one Company-operated restaurant was
converted to a franchised restaurant during 1995.
COSTS AND EXPENSES
FOOD COSTS
In terms of total revenues, food costs increased 0.8 percentage points over
1994. Restaurant division food costs increased 0.7 percentage points over 1994
due primarily to the higher cost of certain commodities, particularly coffee and
fresh produce, as well as selective product upgrades. Additionally, marketing
promotions during the year, which impact food cost percentages by reducing net
revenue generated, were heavily concentrated on certain entrees that carry
higher food cost percentages. Selective menu price increases partially negated
the increases in food costs. The addition of new Company-operated restaurants
during the year also adversely impacted food costs as new restaurants typically
generate higher food cost percentages due to sales in these restaurants being
weighted more heavily toward higher percentage cost dinner items.
The cost of Foxtail's sales, in terms of total Foxtail revenues, increased
approximately 0.3 percentage points from 1994, due primarily to certain
commodity cost increases that were not completely passed on to customers.
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, increased 0.1
percentage points over 1994. This increase can primarily be attributed to
increased production at Foxtail's pie manufacturing facilities which requires
significantly higher labor and benefit costs than the division's other two
manufacturing facilities. Additionally, significantly higher workers'
compensation costs in the state in which Foxtail's manufacturing facilities are
located also contributed to the increase.
While total restaurant division labor and benefits expense, as a percentage
of total revenues, did not increase between 1994 and 1995, wage rate inflation
due to continued low unemployment, a shrinking labor pool and increased
competition for employees, combined with lower than average productivity, in new
Company-operated restaurants increased labor costs as percentage of restaurant
sales by 0.4 percentage points. Programs in place to control group health
insurance and restaurant division workers compensation insurance costs and a
reduction in the Company's match of 401(k) contributions from 50% of employee
contributions in 1994 to 25% in 1995 offset this increase.
30
<PAGE>
OPERATING EXPENSES
Operating expenses, expressed as a percentage of total revenues, increased
0.2 percentage points over 1994. Opening costs related to new franchised
restaurants, pre-opening expenses for new Company-operated restaurants and the
increased cost of paper supplies increased as a percentage of total revenues.
These increases were offset by lower repairs and maintenance expense and
efficiencies gained due to increased production at Foxtail.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 2.2% over 1994, which
primarily reflects the impact of inflation combined with increased
administrative support related to growth at Foxtail. Reduced outside services
and legal expenses related to non-recurring projects in 1994 and a reduction in
the Company's match of 401(k) contributions from 50% in 1994 to 25% in 1995
partially offset these increases.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately 19% over 1994 due to
the addition of new Company-operated restaurants. Significant remodels of older
restaurants undertaken to maintain consistency of appearance within the chain
also contributed to the increase.
INTEREST, NET
Net interest expense was approximately 48% higher than 1994 due to a higher
average debt balance stemming from the Company's expansion during the year. This
increase was partially offset by a decrease in interest expense associated with
capital lease obligations.
OTHER
Results of operations for 1995 reflect a $1.9 million non-cash charge
against earnings as a result of the adoption of SFAS No. 121.
In 1995, the Company recorded losses totaling $609,000 primarily related to
the disposition of an underperforming property and the write-off of
predevelopment costs for cancelled restaurant locations that were estimated to
provide less than acceptable returns.
Net income for the year also included a benefit as a result of a litigation
settlement associated with a lawsuit brought by a former employee. This lawsuit
was settled for $190,000 less than the original reserve expensed in 1994.
CAPITAL RESOURCES AND LIQUIDITY
Principal uses of cash during the nine months ended September 30, 1997
included distributions paid to Unitholders, capital expenditures and a net
reduction in long-term debt. Capital expenditures consisted primarily of land,
building and equipment purchases for new Company-operated restaurants,
maintenance capital and costs related to remodels of existing restaurants.
Remodels and restaurant upgrades constituted approximately 24% of the capital
expenditures during the first nine months of 1997. The Company's primary source
of funding was cash provided by operations. The Company's capital budget for
1997 is $18.6 million. Actual capital expenditures for the year were
approximately $16.3 million.
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<PAGE>
The following table summarizes capital expenditures for each of the years in
the three-year period ended December 31, 1996 and for the nine months ended
September 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------
1994 1995 1996 1997
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Maintenance....................................................... $ 2,130 $ 3,435 $ 2,987 $ 2,673
Renovation........................................................ 4,118 8,431 4,064 2,486
New restaurant development........................................ 20,908 12,626 1,947 3,324
Manufacturing..................................................... 809 859 651 328
Other............................................................. 2,834 3,580 2,209 1,503
--------- --------- --------- -------------
Total capital expenditures...................................... $ 30,799 $ 28,931 $ 11,858 $ 10,314
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>
The Company expects its capital budget in 1998 to be approximately $21.9
million. The Company plans to add six new full-service Company-operated
restaurants in 1998. The remaining capital budget will be applied to remodels of
existing restaurants and upgrades of restaurant technology. The primary source
of funding for these projects is expected to be cash provided by operations.
Capital spending could vary significantly from planned amounts as certain of
these expenditures are discretionary in nature.
As is typical in the restaurant industry, the Company ordinarily operates
with a working capital deficit since the majority of its sales are for cash,
while credit is received from its suppliers. Therefore, operating with a working
capital deficit does not impair the Company's short-term liquidity. At September
30, 1997, this deficit was $21.5 million, which was primarily the result of
utilizing available cash for capital expenditures, repayment of debt and
distributions to Unitholders.
Pursuant to the New Credit Facility a group of banks provided the Company
with a new $50 million revolving line of credit. See "Description of Other
Indebtedness." The Company anticipates using the proceeds from expected initial
borrowings under the New Credit Facility, together with the proceeds of the
Offering, to repay existing indebtedness and finance the Going Private
Transaction. At December 31, 1997, no borrowings were outstanding under the New
Credit Facility. However, assuming all Units had been surrendered for payment
and all expenses had been paid in connection with the Going Private Transaction,
approximately $6.6 million would have been outstanding under the New Credit
Facility as of December 22, 1997, excluding approximately $3.0 million of
standby letters of credit, and approximately $40.4 million would have been
available for future borrowings and letters of credit under the New Credit
Facility.
Prior to the fourth quarter of 1997, the Company has paid regular quarterly
cash distributions to Unit-holders. Following the consummation of the Going
Private Transaction, the Company does not expect to pay distributions to its
general partner or limited partner except distributions sufficient to satisfy
any tax liabilities of its partners arising out of the allocation of taxable
income or gain from the Company. The Indenture and the New Credit Facility
restrict the Company's ability to pay distributions to its partners.
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings under the New Credit Facility, will be adequate to
meet the Company's liquidity needs for the forseeable future. The Company may,
however, need to refinance all or a portion of the principal of the Notes on or
prior to maturity. There can be no assurance that the Company will generate
sufficient cash flow from operations, or that future borrowings will be
available under the New Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to fund its other
liquidity needs. In addition, there can be no assurance that the
32
<PAGE>
Company will be able to effect any such refinancing on commercially reasonable
terms or at all. See "Risk Factors--Substantial Leverage."
FEDERAL INCOME TAXATION
For state and Federal income tax purposes, the Company is not a taxpaying
entity. As a result, taxable income, which may vary substantially from income
reported for financial reporting purposes, is included in the state and Federal
income tax returns of its partners. Accordingly, no current provision for income
taxes is reflected in the accompanying financial statements. Following the
consummation of the Going Private Transaction, the Company will pay
distributions to its general partner and/or limited partner from available cash
flow in amounts sufficient to satisfy any tax liabilities of the partners
arising out of the allocation of taxable income or gain from the Company.
NEW ACCOUNTING PRONOUNCEMENTS
Effective December 31, 1995, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," which is discussed in Note 13 to the financial statements.
IMPACT OF INFLATION
Management believes that inflation has not had a material effect on earnings
during the past several years. Inflationary increases in the cost of labor, food
and other operating costs could adversely affect the Company's restaurant
operating margins. In the past, however, the Company generally has been able to
modify its operations to offset increases in its operating costs.
IMPACT OF GOVERNMENTAL REGULATION
A majority of the Company's employees are paid hourly rates as determined by
Federal and state minimum wage rate laws. Future increases in these rates could
materially affect the Company's cost of labor.
SEASONALITY
The Company's revenues are subject to seasonal fluctuations. Customer counts
(and consequently revenues) are higher in the summer months and lower during the
winter months because of the high proportion of restaurants located in northern
states where inclement weather adversely affects guest visits.
33
<PAGE>
BUSINESS
The Company is a leading operator and franchisor of full-service, mid-scale
restaurants located primarily in the Midwest, Pennsylvania, upstate New York and
central Florida. The Company's restaurants operate under the names Perkins
Family Restaurant-Registered Trademark- and Perkins Family Restaurant and
Bakery-Registered Trademark-. Perkins restaurants offer a full menu assortment
of breakfast, lunch, dinner, snack and dessert items and many are open 24 hours
a day. The business of Perkins was founded in 1958, and since then Perkins has
continued to adapt its menus, product offerings, building designs and decor to
meet changing consumer preferences. A substantial majority of Company-operated
restaurants and franchised restaurants have added in-store bakeries which offer
a premium line of freshly prepared baked goods including muffins, cookies and
pies.
As of September 30, 1997, the Company operated 135 full-service restaurants
and franchised 333 full-service restaurants located in 32 states and four
provinces of Canada. For the twelve months ended September 30, 1997, system-wide
restaurant revenues (including franchised restaurants), Company revenues and
Company EBITDA were $701.4 million, $262.8 million and $36.3 million,
respectively. Company-operated restaurants have achieved comparable restaurant
sales increases in each of the last 25 quarters. The Company continues to focus
on increasing its number of franchised restaurants, which provide a higher
margin of cash flow relative to the required capital investment and create an
additional sales outlet for the products of Foxtail. From 1988 to 1996, the
average annual royalties per franchised restaurant increased from approximately
$38,500 to approximately $55,100 and the number of franchised restaurants
increased from 227 to 329.
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large, comfortable dining rooms,
flexible kitchens, broad menu, moderate pricing, extended operating hours, table
service and bakery specialties. Perkins offers a wide menu selection of high
quality, moderately priced food and beverage items consisting of traditional
favorites and seasonal specialties. Perkins offers guests a menu of over 140
items ranging in price from $2.99 to $8.99. The Company also approves additional
items to meet regional and local tastes. Perkins' signature menu items include
buttermilk pancakes, omelettes, bread bowl salads, melt sandwiches and
Butterball-Registered Trademark- turkey dinners. Breakfast items, which are
available throughout the day, account for slightly more than half of the entrees
sold in the Company's restaurants.
Perkins restaurants are primarily located in free-standing buildings with
approximately 90 to 250 seats. Recently, the Company and its franchisees have
begun to test the Perkins concept in various non-traditional locations including
travel plazas, malls, hotels and airports. The Company and its franchisees
operate three alternative formats, including limited menu restaurants and a
stand-alone bakery, in addition to full-service stand-alone restaurants. These
alternative formats are operated under the names Perkins Cafe and
Bakery-Registered Trademark-, Perkins Bakery-Registered Trademark- and Perkins
Express-Registered Trademark-.
In addition to operating and franchising Perkins restaurants, the Company
operates Foxtail and is a partner in a joint venture for the development of Jack
Astor's Bar and Grill restaurants. Foxtail provides cookie dough, muffin batter,
pancake mixes, pies and other bakery products to Company-operated restaurants,
franchisees and third parties. During 1996, Foxtail accounted for 8.5% of
Company revenues. During 1997, the Company entered into a joint venture with a
Canadian casual dining operator for the development of a minimum of three Jack
Astor's Bar and Grill restaurants. Jack Astor's Bar and Grill is a casual themed
dining concept with a high-energy, fun atmosphere whose offerings include
chicken, pasta, hamburgers and alcoholic beverages. The joint venture's first
restaurant opened in Greensboro, North Carolina on October 6, 1997.
During the tenure of the Company's current senior management, a number of
improvements have been made to the Company's operations, including: (i)
upgrading its menu offerings; (ii) unifying the system's name, restaurant
design, marketing programs, purchasing, training and technology; (iii) creating
in-store bakeries; (iv) strengthening the franchise system; (v) creating
Foxtail; and (vi) developing
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<PAGE>
alternative formats. Also over this time period, the Company has made
significant interest payments and Unit distributions, including 44 consecutive
quarterly cash distributions to Unitholders since the Company became a
publicly-traded limited partnership. For the twelve months ended September 30,
1997, the Company's combined interest expense and quarterly cash distributions
to Unitholders was $18.9 million.
COMPETITIVE STRENGTHS
ESTABLISHED, HIGH-VALUE RESTAURANT BRAND. Perkins is a well-established,
highly recognized brand in the geographic areas it serves. Perkins offers its
guests a wide variety of over 140 reasonably priced menu items, including fresh
bakery products served in a warm and comfortable dining environment with the
convenience of extended operating hours. As of September 30, 1997, entrees
served in Company-operated restaurants ranged in price from $2.99 to $8.99 for
breakfast, $4.29 to $8.99 for lunch and $5.99 to $8.99 for dinner. The Company
operates a 3,000 square foot test kitchen in Memphis, Tennessee which develops
and tests new menu items. Menus are updated at least three times per year and
supplemented with special menus for holiday and promotional events.
STRONG FRANCHISE NETWORK. The Company has 111 franchisees which operate 333
restaurants in 30 states and four Canadian provinces, representing over 70% of
the restaurants in the Perkins system. In addition to providing the Company with
substantial royalty revenues ($18.6 million for the twelve months ended
September 30, 1997), the franchise network allows the Company to significantly
expand the Perkins system without significant capital investment by the Company.
The Company believes that it enjoys good relations with its franchisees.
UPDATED, MODERN RESTAURANTS. The Company employs an on-going system of
prototype development, testing and remodeling to maintain operationally
efficient, cost-effective and unique interior and exterior facility design and
decor. An accelerated program to upgrade existing Company-operated restaurants
began in 1995 and continues today. The current remodel package features a
modern, distinctive interior and exterior layout that enhances operating
efficiencies and guest appeal. As of September 30, 1997, approximately 86% of
Company-operated restaurants had either been remodeled or initially constructed
since January 1, 1994.
To promote a consistent and current image throughout the Perkins system, the
Company encourages its franchise operators to remodel their restaurants by
providing financial incentives and third-party capital programs. Twenty-two
franchised restaurants were remodeled in 1996 and [35] additional restaurants
were remodeled in 1997, of which 19 were completed by September 30, 1997.
MANAGEMENT EXPERTISE. The Company has an experienced management team with
average tenure with the Company of over seven years and average restaurant
industry experience of 20 years. Donald N. Smith, the Company's Chairman and
Chief Executive Officer, has over 30 years of restaurant experience, over 12 of
which have been with the Company. Richard K. Arras, the Company's President and
Chief Operating Officer, has 18 years of restaurant experience, all of which
have been with the Company.
EFFICIENT OPERATIONS. The Company uses a combination of current technology,
on-going operational analyses, hourly employee performance programs and the
operating experience of both its own field management and that of its
franchisees to continuously improve the quality, efficiency and execution of its
operating systems. For example, Company-operated restaurants recently
implemented programs to improve labor efficiency, lower food cost and improve
facility utilization during peak periods.
DAYPART BALANCE. Perkins has successfully evolved over the last 39 years
from its origins as a breakfast-oriented pancake house by developing significant
lunch, dinner and late night product offerings. The flexibility of Perkins'
multi-daypart offerings allows each location to meet the needs of its local
market. During 1996, the revenue breakdown by daypart for Company-operated
restaurants was 25% breakfast, 29% lunch, 32% dinner and 14% late night (10:00
p.m. to 6:00 a.m.).
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COMMITMENT TO GUEST SATISFACTION. The Company is focused on continually
improving guest satisfaction. The Company regularly surveys customers to
determine their overall satisfaction with their dining experience, conducts
extensive service quality training programs and operates a toll free number to
monitor guests' dining experiences.
MANAGEMENT INFORMATION SYSTEMS. The Company's information systems not only
provide detailed monthly financial statements for each restaurant but daily
operating statistics such as sales, labor, guest check and average table turns.
The systems also generate weekly restaurant profit and loss statements and food
and labor variance analysis. The Company has also developed a labor scheduling
system which calculates the amount of labor necessary to provide optimal guest
service. The Company's systems are year 2000 compliant.
PURCHASING LEVERAGE. The Company aggregates the purchasing requirements of
all of its Company-operated restaurants and over 90% of its franchised
restaurants to obtain purchasing economies of scale for food items, cleaning
supplies, equipment, maintenance services and regional distribution agreements.
In addition, the Company utilizes outside consultants for information regarding
purchases of commodity items and, together with its franchisees, makes
significant purchases of commodity products, such as sirloin steak or shrimp,
which provide the basis for several product-driven marketing programs throughout
the year.
BUSINESS STRATEGY
INCREASE FRANCHISE REVENUES. The Company plans to continue to add
franchised restaurants in existing and new geographic markets. In addition,
management will continue to encourage franchisees to remodel and renovate
restaurants where appropriate. Management believes its franchisees will open 17
new restaurants in 1997, of which ten had been opened and seven were under
construction as of September 30. Management believes its franchisees will open
approximately 40 new franchised restaurants during 1998. During 1996, ten
franchised restaurants closed and, in 1997, six franchised restaurants had been
closed as of September 30.
SELECTIVELY DEVELOP NEW COMPANY-OPERATED RESTAURANTS. The Company will
continue to develop and operate new restaurants based upon its current
prototype. Management believes the development of successful Company-operated
restaurants supports the continued development of the Perkins franchise system.
The Company opened three new full-service Company-operated restaurants in 1997
and plans to add six new full-service Company-operated restaurants in 1998.
EXPAND NON-TRADITIONAL LOCATIONS AND ALTERNATIVE FORMATS. The Company and
its franchisees have built, on a limited test basis, restaurants within
non-traditional sites including hotels, airports, travel plazas and strip
shopping centers. Within these non-traditional locations, the Company has
recently opened restaurants with alternative formats, such as limited menu
restaurants and a stand-alone bakery, in addition to full-service, stand-alone
restaurants. The Company intends to continue testing non-traditional locations
and further develop alternative formats in conjunction with its franchisees in
cases where appropriate for the Perkins brand and where anticipated financial
returns are acceptable.
PURSUE COMPLEMENTARY ACQUISITIONS. The Company continually evaluates
potential acquisition opportunities of existing franchised Perkins restaurants
and other restaurant chains. The Company does not currently have any agreements
or understandings to make any acquisitions.
CONCEPT
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large comfortable dining rooms,
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<PAGE>
flexible kitchens, broad menu, moderate pricing, extended operating hours, table
service and bakery specialties.
MENU. Each Perkins restaurant offers a diverse menu of high quality,
moderately priced food and beverage items consisting of traditional favorites
and seasonal specialties. Each Perkins restaurant offers guests a core menu
consisting of certain required menu items that each Company-operated and
franchised restaurant must offer, providing the consistency necessary to support
the Perkins brand. Additional items are offered to meet regional and local
tastes. All menu items served in franchised restaurants must be approved by the
Company's research and development department. Menu offerings continually evolve
to meet changing consumer tastes.
The menu currently features over 140 items comprised of a broad selection of
breakfast, lunch, dinner and bakery products. Signature breakfast items include
premium omelettes, buttermilk pancakes and traditional egg dishes. Breakfast
entrees generally range in price from $2.99 to $8.99. Signature lunch items
include bread bowl salads, melt sandwiches and specialty burgers generally
ranging in price from $4.29 to $8.99. Signature dinner items include chicken
puff pastry pie, country fried steak, New York Strip steak and
Butterball-Registered Trademark- turkey and dressing. Price points for dinner
entrees generally range from $5.99 to $8.99. Entree selections are complemented
by appetizers and dessert products. Coffee, iced tea and soft drinks are served
as "Bottomless Beverages"-TM- with free refills. Perkins restaurants do not
generally serve alcoholic beverages.
Most Perkins restaurants have an in-store bakery, with bakery products
offered both for in-house consumption and for carry-out. Bakery breakfast
products include freshly baked Mammoth Muffins-Registered Trademark-, cinnamon
rolls and sticky buns. Bakery desserts include freshly prepared cookies,
brownies, eclairs and pies.
RESTAURANT DESIGN. In 1993, the Company began testing a major prototype
redesign which features a series of expandable and differentiated dining rooms
set around a central kitchen and pantry area. This design reduces the distance
servers travel from food pick-up to guest tables. The interior decor package,
which was introduced in 1995 with related but distinct decor for each dining
area, can be utilized in traditional rectangular buildings and other building
designs. Management believes the new prototype and related decor packages add
significantly to the value perceptions of its guests. In addition, the Company
has developed an exterior design which updates its restaurants while maintaining
an identifiable Perkins image. By selectively modifying key concept identifiers,
such as entry construction, roof lines and window treatments, the Company can
upgrade older restaurants, convert existing buildings used for other purposes
into Perkins restaurants and modify non-traditional locations such as shopping
center locations into easily recognizable, modern Perkins restaurants.
RESTAURANT OPERATIONS AND TRAINING. All restaurants are operated pursuant
to uniform operating standards and specifications relating to the quality and
preparation of menu items, selection of menu items, maintenance and cleanliness
of facilities and employee conduct. The Company's operating standards are based
upon the Perkins Promise-Registered Trademark-, a guarantee of 100% guest
satisfaction. This operating and training system utilizes employee empowerment
and feedback to ensure the delivery of a satisfactory dining experience to all
guests. All standards and specifications are developed by the Company, with
input from franchisees, and applied on a system-wide basis.
The Company has an extensive eight to twelve week Management Development
Program for general managers, kitchen managers and other salaried restaurant
managers. This 44-module program consists of in-store, task-oriented training
and formal administrative, customer service and financial training. Upon
completion of this program, management candidates attend Perkins Leadership
Institute, a two-week in-store internship where they can practice skills in a
certified training restaurant. Certified trainers conduct hands-on training for
all hourly restaurant employees using the Foundations Training Program. This
state-of-the-art program utilizes both printed material and video and is
designed to improve the confidence,
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productivity and skill level of new employees. The Company provides on-going
training for its restaurant employees on new products and other important topics
such as food sanitation and customer and employee relations.
ADVERTISING. The Company focuses its advertising and marketing efforts on
six to eight food-specific promotions each year. Each promotion features a
specific theme or product. Several commodity buys each year enable the Company
to offer attractive price points on popular products such as steak and eggs or
fried shrimp. Two of the Company's most popular recent promotions have been the
Summer Menu featuring eight new entrees and a new line of "Dill Melt"
sandwiches. The Company advertises on a regional and local basis, utilizing
primarily television, radio and print media. In 1996, the Company spent
approximately 4.0% of Company-operated restaurants' net revenues on advertising,
of which 3.1% was contributed to the system advertising fund which develops and
funds the specific system-wide promotions. Substantially all franchisees are
also required to contribute 3.0% of their gross revenues to the advertising
fund. The remainder of the Company's advertising expenditures are focused on
local advertising in areas with Company-operated restaurants.
AVERAGE CHECK. For the nine months ended September 30, 1997, the average
guest check for Company-operated restaurants was $5.53.
FRANCHISE OPERATIONS
As of September 30, 1997, the Company had 336 franchised restaurants
(including alterative formats) operated by 111 franchisees. The Company actively
seeks experienced multi-unit restaurant operators as franchisees and requires
each franchisee to satisfactorily complete the Company's extensive training
program. Seven of the 111 franchisees operate a total of 143 full-service
Perkins restaurants. The remaining franchisees each currently operate ten or
fewer units.
The majority of the Company's new franchised restaurants are opened by
existing franchisees. Of the 30 new franchised restaurants opened since January
1996, 22 were opened by existing franchisees. In order to attract new
franchisees, the Company employs direct mail, attends trade shows, places print
advertising in industry-specific publications and receives referrals. Applicants
are screened for financial stability and relevant management experience and
undergo training programs between 8 and 12 weeks, depending on prior experience.
In selected markets with candidates of proven experience and ability, the
Company may enter into area development agreements requiring the applicant to
open a specified number of restaurants during the term of the agreement, which
is usually 5 years or less. The Company currently has 6 existing area
development agreements covering 21 restaurants through 2002.
As of September 30, 1997, the Company's three largest franchisees operated a
total of 93 restaurants. The respective distribution of restaurants operated by
such franchisees was: 41 restaurants primarily in upstate New York; 31
restaurants in Pennsylvania, Ohio and New York; and 21 restaurants in Ohio and
Kentucky. During 1996, the Company received net royalties and license fees of
approximately $1.5 million, $2.0 million and $1.0 million, respectively, from
these franchisees. See "Risk Factors -- Franchise Operations."
FRANCHISE ARRANGEMENTS. Franchised restaurants operate pursuant to license
agreements generally having an initial term of 20 years and pursuant to which
each franchisee pays the Company a royalty fee (usually 4.0% of gross revenues)
and an advertising contribution (typically 3.0% of gross revenues). New
franchisees currently pay a non-refundable license fee of $35,000 per
restaurant. Franchisees opening their third and subsequent restaurants pay a
non-refundable license fee of $25,000 per restaurant. Beginning in 1998, these
fees were increased to $40,000 and $30,000, respectively. License agreements are
typically terminable by franchisees on 12 to 15 months prior notice and upon
payment of specified liquidated damages. Franchisees do not typically have
express renewal rights, although franchisees typically apply for and receive new
license agreements at the end of existing contract terms.
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DEVELOPMENT OF RESTAURANTS. The Company makes available to franchisees
prototype plans and specifications for a typical restaurant which the franchisee
and its architect adapt to each site. The Company retains the right to approve
all final plans and specifications. Each franchisee, with assistance from the
Company, is responsible for selecting the site for each restaurant within its
territory, subject to Company approval. The Company conducts a physical
inspection, reviews any proposed lease or purchase agreements and makes
available demographic studies. A real estate representative of the Company
assists franchisees in identifying possible sites and trade areas, managing
broker relationships and preparing site packages for submission to the Company
for approval.
DESIGN AND CONSTRUCTION. The Perkins Construction Management Program is
available for a fee to assist franchisees in coordinating the design,
construction and equipping of their restaurants. In conjunction with this
program, the Company provides advice on critical design and contracting
decisions and oversees day-to-day construction work, providing comprehensive
support during all phases of construction.
FINANCING. The Company currently sponsors financing programs on competitive
terms designed to provide its franchisees with access to financing options to
support the remodeling of existing restaurants. The financing is provided by two
financial services companies with extensive experience in franchise and cash
flow based lending. These programs were designed to allow each franchisee's
request for financing to be evaluated solely on the basis of the financial
performance of the franchisee without support from the Company. However, under
both programs, the Company has the option to extend differing levels of support
in its sole discretion, if it determines that such support will have a positive
strategic impact on the future growth of the Company. Although not specifically
part of the current programs, both financial services companies are also
offering competitive financing options to both new and existing franchisees for
equipment and real estate financing outside of the current remodel initiative.
In the past, the Company has sponsored financing programs offered by certain
lending institutions to help its franchisees obtain funds for the construction
of new franchised restaurants and to purchase and install in-store bakeries. The
Company provided a limited guaranty of the funds borrowed for such purposes. As
of September 30, 1997, there were approximately $3.7 million in borrowings
outstanding under these programs. The Company has guaranteed $1.2 million of
these borrowings. No additional borrowings are available under these programs.
RESTAURANT OPENING. Thirteen-member New Store Opening Teams ("NSOT") assist
franchisees in opening their first two restaurants. For approximately six weeks,
team members train staff, help operate the restaurant and help the franchisee
establish control over labor and food costs. The NSOT arrives prior to a
restaurant opening to help ensure a successful opening. The only expense to
franchisees for the NSOT services for their first two restaurants is the cost of
travel, lodging and local transportation for the team members during their days
on site. For each additional restaurant opening in which the franchisee utilizes
the services of the NSOT, the franchisee is required to pay $10,000.
TRAINING. Central to the Perkins system is a comprehensive and continually
evolving training system. All aspects of the program incorporate
state-of-the-art, easy-to-use materials designed to facilitate self-teaching
whenever possible and to gain maximum guest impact from time spent on training.
Training is provided for all restaurant positions.
FRANCHISE ADVISORY COUNCIL. The Franchise Advisory Council (the "Council")
consists of representatives of 15 franchisees who represent a broad cross
section of the franchise organization from both a size and geographic
perspective. The Council meets three times per year along with the Company's
senior management to review and discuss numerous issues that affect the
franchise system. The Council advises the Company with respect to matters such
as menu development, restaurant design and product and equipment purchasing.
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REPORTING AND ROYALTY COLLECTIONS. Franchisees are required to report
monthly sales and other operating information, including monthly profit and loss
statements to the Company. Franchisees make monthly royalty payments based on
sales for the previous month. Payments for royalties are typically received at
the Company's corporate headquarters while the advertising fees are paid
directly to a lockbox account.
ACCOUNTING. The Company provides optional accounting services to
franchisees for a monthly fee. These services include the processing of payroll
and accounts payable and the preparation of monthly financial statements.
QUALITY CONTROL
The Company maintains a high level of quality standards and emphasizes the
importance of these standards in all aspects of its purchasing, training and
management development systems. These systems are promoted not only within
Company-operated restaurants but also throughout the franchise system. The
quality standards of the Company-operated restaurants as well as Foxtail are
monitored by the Company's research and development and quality assurance
staffs. The system standards are detailed in The Confidential Management and
Operating Systems Manual maintained in all Company-operated and franchised
restaurants and are reinforced through on-going training programs at both the
salaried and hourly employee levels.
The Company utilizes several quality control systems. All Company-operated
and franchised restaurants are reviewed periodically throughout the year in
quality assurance audits conducted by multi-unit management level personnel.
Additionally, guest and employee comments are collected through toll-free
telephone lines specifically dedicated to employee and guest feedback. Outside
providers also conduct guest service surveys in each Company-operated restaurant
and a separate formal quarterly consumer tracking study covering both
Company-operated and franchised restaurants is monitored closely by management.
Aspects of each of these programs are utilized in performance evaluation and
incentive compensation determination for all levels of field management
personnel.
OTHER FINANCIAL ARRANGEMENTS
The Company's predecessors entered into several agreements with several
different parties under which specified payments are to be made by the Company
based on a percentage of gross sales from certain restaurants and for new
restaurants opened within certain geographic regions. During 1996, the Company
paid an aggregate of $3.2 million under such agreements. In 1997, the Company
terminated two such agreements. Had such agreements been terminated at the
beginning of 1996, payments by the Company during 1996 would have been $1.8
million.
PURCHASING
The Company negotiates directly with suppliers for food and beverage
products and raw materials to ensure consistent quality and freshness of
products and to obtain competitive prices. Essential restaurant supplies and
products are available from several sources and the Company is not dependent
upon any one source for its supplies and products. The Company has not
experienced any significant delays in receiving restaurant products, supplies
and equipment. The Company allows its franchisees to benefit from the purchasing
economies it receives by providing and administering purchasing programs and
passing through purchasing rebates to franchisees. All Company-operated
restaurants are supplied through two national distributors.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
The Company believes that its trademarks and service marks, especially the
mark "Perkins-Registered Trademark-," are of substantial economic importance to
its business. These include signs, logos and marks relating to specific
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menu offerings in addition to marks relating to the Perkins name. Certain of
these marks are registered in the U.S. Patent and Trademark Office and in
Canada. Common law rights are claimed with respect to other menu offerings and
certain promotions and slogans. The Company has copyrighted architectural
drawings for Perkins restaurants and claims copyright protection for most of its
manuals, menus, advertising and promotional materials. The Company does not have
any patents.
COMPETITION
The Company's business and the restaurant industry in general are highly
competitive and are often affected by changes in consumer tastes and eating
habits, by local and national economic conditions and by population and traffic
patterns. The Company competes directly or indirectly with all restaurants, from
national and regional chains to local establishments. Some of its competitors
are significantly larger than the Company and have substantially greater capital
resources at their disposal.
PROPERTIES
The following table lists the location of each of the Company-operated and
franchised restaurants and bakeries as of September 30, 1997 (excluding
alternative formats):
<TABLE>
<CAPTION>
COMPANY-
OPERATED FRANCHISED TOTAL
------------- ------------- -----
<S> <C> <C> <C>
Arizona........................................................ -- 8 8
Arkansas....................................................... -- 4 4
Colorado....................................................... -- 16 16
Delaware....................................................... -- 1 1
Florida........................................................ 20 21 41
Idaho.......................................................... -- 8 8
Illinois....................................................... 8 -- 8
Indiana........................................................ -- 5 5
Iowa........................................................... 16 1 17
Kansas......................................................... 4 3 7
Kentucky....................................................... -- 4 4
Maryland....................................................... -- 2 2
Michigan....................................................... 5 1 6
Minnesota...................................................... 40 30 70
Mississippi.................................................... -- 1 1
Missouri....................................................... 11 1 12
Montana........................................................ -- 7 7
Nebraska....................................................... 5 2 7
New Jersey..................................................... -- 7 7
New York....................................................... -- 45 45
North Carolina................................................. -- 4 4
North Dakota................................................... 3 5 8
Ohio........................................................... -- 55 55
Oklahoma....................................................... 3 -- 3
Pennsylvania................................................... 6 42 48
South Carolina................................................. -- 1 1
South Dakota................................................... -- 10 10
Tennessee...................................................... 1 11 12
Virginia....................................................... -- 1 1
Washington..................................................... -- 7 7
Wisconsin...................................................... 13 14 27
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
COMPANY-
OPERATED FRANCHISED TOTAL
------------- ------------- -----
<S> <C> <C> <C>
Wyoming........................................................ -- 4 4
Canada......................................................... -- 12 12
--- --- ---
Total.......................................................... 135 333 468
--- --- ---
--- --- ---
</TABLE>
The following table sets forth certain information regarding
Company-operated restaurants and other properties, as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES (1)(2)
-------------------------------------
<S> <C> <C> <C>
USE OWNED LEASED TOTAL
- --------------------------------------------------------------------- ----------- ----------- -----
Offices and Manufacturing Facilities (3)............................. 1 8 9
Restaurants (4)...................................................... 55 80 135
</TABLE>
- ------------------------
(1) In addition, the Company leases 26 properties, 22 of which are subleased to
others (six of which are subleased to franchisees), one of which is vacant,
and three of which are held for future development. The Company also owns 15
properties, 13 of which are leased to others (11 of which are leased to
franchisees) and two of which are held for future development.
(2) The Company currently leases spaces in three malls which are used to operate
Perkins Cafe and Bakeries. These leases are not included in the totals
shown.
(3) The Company's principal office is located in Memphis, Tennessee, and
currently comprises 53,340 square feet of floor area under a lease expiring
on May 31, 2003, subject to renewal by the Company for a maximum of 60
months. In addition, the Company owns a 25,149 square-foot manufacturing
facility in Cincinnati, Ohio and leases two other properties in Cincinnati,
Ohio, consisting of 36,000 square feet and 60,000 square feet for use as
manufacturing facilities.
(4) The average term of the remaining leases is six years, excluding renewal
options. The longest lease term will mature in 44 years and the shortest
lease term will mature in approximately four years, assuming the exercise of
all renewal options.
EMPLOYEES
As of September 30, 1997, the Company employed approximately 9,500 persons,
of whom approximately 310 were administrative and manufacturing personnel and
the balance of whom were restaurant personnel. Approximately 70% of the
restaurant personnel are part-time employees. The Company competes in the job
market for qualified restaurant management and operational employees. The
Company maintains ongoing restaurant management training programs and has on its
staff full-time restaurant training managers and a training director. The
Company believes that its restaurant management compensation and benefits
package compares favorably with those offered by its competitors. Management
believes its employee relations are good. None of the Company's employees are
represented by a union.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws affecting
its business. Restaurants generally are required to comply with a variety of
regulatory provisions relating to zoning of restaurant sites, sanitation, health
and safety and employment. No material amounts have been or are expected to be
expensed to comply with environmental protection regulations.
The Company is subject to a number of state laws regulating franchise
operations and sales. Those laws impose registration and disclosure requirements
on franchisors in the offer and sale of franchises and,
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in certain cases, also apply substantive standards to the relationship between
franchisor and franchisee. The Company must also adhere to Federal Trade
Commission regulations governing disclosures in the sale of franchises.
The wage rates of the Company's hourly employees are affected by federal and
state minimum wage rate laws. Future increases in these rates could materially
affect the Company's cost of labor.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings in the ordinary course
of business. Management does not believe that these proceedings, either
individually or in the aggregate, are likely to have a material adverse effect
on the Company's financial position or results of operations.
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MANAGEMENT
The following individuals are currently serving as directors and executive
officers of the Company's general partner, PMC:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PMC
- ------------------------------ --- ------------------------------------------
<S> <C> <C>
Donald N. Smith............... 57 Chairman of the Board and Chief Executive
Officer
Lee N. Abrams................. 62 Director
Charles L. Atwood............. 48 Director
Steven L. Ezzes............... 51 Director
Charles A. Ledsinger, Jr...... 47 Director
D. Michael Meeks.............. 55 Director
Richard K. Arras.............. 46 President and Chief Operating Officer
Michael D. Kelly.............. 51 Executive Vice President, Marketing
Steven R. McClellan........... 42 Executive Vice President, Chief Financial
Officer
Jack W. Willingham............ 52 Executive Vice President, Restaurant
Development
James F. Barrasso............. 47 Vice President, Foodservice Development
Michael P. Donahoe............ 47 Vice President, Controller
William S. Forgione........... 44 Vice President, Human Resources
Clyde J. Harrington........... 39 Vice President, Operations Services
Patrick W. Ortt............... 51 Vice President, Operations--Eastern
Division
Steven J. Pahl................ 42 Vice President, Operations--Western
Division
Anthony C. Seta............... 50 Vice President, Research and Development
Robert J. Winters............. 46 Vice President, Franchise Development
Donald F. Wiseman............. 51 Vice President, General Counsel and
Secretary
</TABLE>
DONALD N. SMITH
Donald N. Smith has been the Chairman of the Board and Chief Executive
Officer of PMC, PRI and TRC since 1986. Mr. Smith also has been the Chairman of
the Board and Chief Executive Officer of Friendly's since 1988. Prior to joining
TRC, Mr. Smith was President and Chief Executive Officer of Diversifoods, Inc.
from 1983 to October 1985. From 1980 to 1983, Mr. Smith was a Senior Vice
President of PepsiCo, Inc. and was President of its Food Service Division. Mr.
Smith was responsible for the operations of Pizza Hut Inc. and Taco Bell Corp.,
as well as North American Van Lines, Lee Way Motor Freight, Inc. PepsiCo Foods
International and La Petite Boulangerie. Prior to 1980, Mr. Smith was President
and Chief Executive Officer of Burger King Corporation and Senior Executive Vice
President and Chief Operations Officer for McDonald's Corporation.
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<PAGE>
LEE N. ABRAMS
Lee N. Abrams was elected a Director of PMC in September 1986 and appointed
Chairman of the Audit Committee for PMC in October 1986. He is a senior partner
in the Chicago, Illinois law firm of Mayer, Brown & Platt. He has been
associated with that firm since his graduation from the University of Michigan
Law School in 1957. He specializes in franchise and antitrust law. He is also a
Certified Public Accountant.
CHARLES L. ATWOOD
Charles L. Atwood was elected a Director of PMC, Perkins Restaurants, Inc.
("PRI") and TRC in July 1997 and was a director of Friendly's from July 1997 to
November 1997. He has been employed by Harrah's and its predecessors as Vice
President and Treasurer and in various other financial related positions for
more than the past five years. Mr. Atwood also serves on the board of directors
of Interactive Entertainment, Ltd.
STEVEN L. EZZES
Steven L. Ezzes was elected a Director of PMC, PRI, TRC and Friendly's.
Since October 1996 Mr. Ezzes has been a Managing Director of Scotia Capital
Markets (U.S.A.), Inc. From January 1995 to October 1996, Mr. Ezzes was a
private investor and from May 1992 to January 1995, Mr. Ezzes was a Managing
Director of Lehman Brothers, Inc. Mr. Ezzes previously served as a Director of
PMC, PRI, TRC and Friendly's from January 1991 to May 1992. Mr. Ezzes is a
director of OzEMail, a company that provides internet telephony in Australia and
New Zealand.
CHARLES A. LEDSINGER, JR.
Charles A. Ledsinger, Jr. was elected a Director of PMC in October 1991.
Since May 1997, Mr. Ledsinger has served as Senior Vice President and Chief
Financial Officer of St. Joe Corporation. From June 1995 until May 1997, Mr.
Ledsinger was Senior Vice President and Chief Financial Officer of Harrah's
Entertainment, Inc. and from August 1996 to October 1996 Mr. Ledsinger served as
Treasurer of Harrah's Entertainment, Inc. For more than three years prior, Mr.
Ledsinger served as Senior Vice President and Chief Financial Officer of The
Promus Companies Incorporated, Harrah's former parent. Mr. Ledsinger is also a
director of Friendly's and of TBC Corporation, a company specializing in the
production and sale of tires and batteries.
D. MICHAEL MEEKS
D. Michael Meeks was elected a Director of PMC and became a member of the
Audit Committee for PMC in August 1996. Mr. Meeks has been a private investor
for more than the past five years. Mr. Meeks previously served as a director of
PMC, PRI, TRC and Friendly's from December 1987 to October 1991.
RICHARD K. ARRAS
Richard K. Arras has been President and Chief Operating Officer of PMC since
November 1988 and has held varying positions with Perkins since 1979. Prior to
being named to his current position, Mr. Arras was Vice President of Operations.
He has also served as a Director of Operations and as a regional manager for
Perkins restaurants in Minnesota.
MICHAEL D. KELLY
Michael D. Kelly was elected Executive Vice President, Marketing, of PMC in
March 1993. From January 1991 to February 1993, Mr. Kelly was Vice President,
Marketing, for Friendly's. Prior to that, Mr. Kelly was Executive Vice President
of Marketing for Bakers Square for four years. He has also held positions at
Pizza Hut, Inc., Weight Watchers, Stouffers and Fuddruckers.
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<PAGE>
STEVEN R. MCCLELLAN
Steven R. McClellan has served as Executive Vice President and Chief
Financial Officer of PMC since September 1996. From June 1994 to September 1996
Mr. McClellan was Executive Vice President and General Banking Group Head of
First Union National Bank of South Carolina, a subsidiary of First Union
Corporation. For more than two years prior, he was Senior Vice President of
NationsBank.
JACK W. WILLINGHAM
Jack W. Willingham was elected Executive Vice President, Restaurant
Development of PMC in April 1994. From July 1991 to April 1994, Mr. Willingham
served as Vice President, Corporate Development, of PMC.
JAMES F. BARRASSO
James F. Barrasso has been Vice President, Foodservice Development of PMC
since February 1994. For more than two years prior, he served as Vice President,
Operations Administration of PMC.
MICHAEL P. DONAHOE
Michael P. Donahoe has been Vice President, Controller of PMC since October
1993. He has also been Vice President, Controller and Treasurer of TRC and PRI
since January 1986 and November 1988, respectively. From May 1989 to October
1993, he was Vice President, Chief Financial Officer and Treasurer of PMC. He is
a Certified Public Accountant.
WILLIAM S. FORGIONE
William S. Forgione was elected Vice President, Human Resources of PMC
effective August 11, 1997. From 1994 to August 1997, he was Vice President,
Human Resources of UT Medical Group, Inc. and from 1992 to 1994, Worldwide
Program Manager for Digital Equipment Corporation.
CLYDE J. HARRINGTON
Clyde J. Harrington was elected Vice President, Operations Services of PMC
in September 1996. From August 1995 to September 1996 he was Director, Systems
Operations of the Partnership and from March 1995 to August 1995 he served as
Director in Training for PROC. From November 1992 to March 1995 Mr. Harrington
served as Director, Operations for the Restaurant Division of PepsiCo., Inc. and
from March 1992 to November 1992 he served as Director of Delivery Development
for Pizza Hut, Inc.
PATRICK W. ORTT
Patrick W. Ortt was elected Vice President, Operations Eastern Division of
PMC in September 1996. From March 1993 to September 1996, Mr. Ortt served as
Director, Systems Operations of PROC. For more than two years prior, he was Vice
President, Operations of Pasta Lovers Trattoria, Inc.
STEVEN J. PAHL
Steven J. Pahl was elected Vice President, Operations Western Division of
PMC in September 1996. From November 1988 to September 1996 Mr. Pahl served as
Director, System Operations of PROC.
ANTHONY C. SETA
Anthony C. Seta was elected Vice President, Research and Development of PMC
in April 1994. From August 1992 to April 1994 he served as Vice President, Food
and Beverage for Blackeyed Pea Restaurants, Inc. For more than a year prior, he
was the owner and chef of an independent restaurant. Mr. Seta also acted as a
consultant to Kenny Rogers Roasters from January 1992 to August 1992.
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<PAGE>
ROBERT J. WINTERS
Robert J. Winters was elected Vice President, Franchise Development of PMC
in October 1996. From March 1993 to October 1996 he served as Senior Director,
Franchise Development of PMC. For more than a year prior, he was Director,
Training and Development of PMC.
DONALD F. WISEMAN
Donald F. Wiseman has been Vice President, General Counsel and Secretary of
PMC since December 1991 and the Secretary of TRC and PRI since September 1997.
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid or accrued for services
rendered to the Company's general partner in all capacities during each of the
three years in the period ended December 31, 1996 with respect to the Chief
Executive Officer of PMC and the four most highly compensated executive officers
of PMC whose total annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------- RESTRICTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER UNIT AWARD (4) COMPENSATION
- -------------------------------------- --------- ---------- ---------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald N. Smith ...................... 1996 $ 212,912 $ 110,000 $ 8,832(1)(2) -- $ 550(5)
Chairman & Chief Executive Officer 1995 205,319 -- 8,832(1)(2) -- 550(5)
1994 199,690 -- 7,809(1)(2) -- 853(5)
Richard K. Arras ..................... 1996 226,788 99,000 18,097(1)(2) -- 6,490(5)(6)
President & Chief Operating Officer 1995 216,269 -- 17,529(1)(2) 97,335 3,448(5)(6)
1994 208,915 -- 17,340(1)(2) -- 5.758(5)(6)
Michael D. Kelly ..................... 1996 176,287 60,000 12,726(1)(2) -- 4,808(5)(6)
Exec. Vice President Marketing 1995 166,250 -- 11,848(1)(2) 64,890 2,772(5)(6)
1994 166,642 -- 13,077(1)(2)(3) -- 5,957(5)(6)
Jack W. Willingham ................... 1996 161,582 56,500 15,135(1)(2) -- 7,630(5)(6)
Exec. Vice President Restaurant 1995 153,538 -- 14,345(1)(2) 64,890 5,190(5)(6)
Development 1994 148,654 -- 13,925(1)(2) 39,000 6,430(5)(6)
Donald F. Wiseman .................... 1996 143,654 43,500 14,366(1)(2) -- 7,630(5)(6)
Vice President, General Counsel and 1995 137,487 -- 13,628(1)(2) 48,668 4,149(5)(6)
Secretary 1994 132,229 -- 13,360(1)(2) -- 6,459(5)(6)
</TABLE>
- ------------------------
(1) Includes premiums paid for medical and disability insurance during 1996 for
the named executive officers in the following amounts: Mr. Smith -- $6,312;
Mr. Arras -- $10,447; Mr. Kelly -- $5,076; Mr. Willingham -- $7,485; and Mr.
Wiseman -- $6,716 Premiums paid on behalf of the named executive officers
during 1995 were: Mr. Smith -- $6,312; Mr. Arras -- $10,329; Mr. Kelly --
$4,648; Mr. Willingham -- $7,145; and Mr. Wiseman -- $6,428. The following
premiums were paid on behalf of the named officers during 1994; Mr. Smith --
$5,289; Mr. Arras -- $10,140; Mr. Kelly -- $4,397; Mr. Willingham -- $6,725;
and Mr. Wiseman -- $6,160.
(2) Includes auto allowance paid to the named executive officers during 1996 in
the following amounts: Mr. Smith -- $2,520; Mr. Arras -- $7,650; Mr. Kelly
-- $7,650; Mr. Willingham -- $7,650; and Mr. Wiseman -- $7,650. During 1995
and 1994, Mr. Smith received an auto allowance of $2,520; Mr. Arras --
$7,200; Mr. Kelly -- $7,200; Mr. Willingham -- $7,200; and Mr. Wiseman --
$7,200.
(3) Includes relocation expenses in the amount of $1,480 for 1994 for Mr. Kelly.
(4) The restricted period applicable to each award of Units under Perkins Family
Restaurants, L.P. Restricted Limited Partnership Unit Plan (the "Plan") were
established by the Plan Committee (the
47
<PAGE>
"Committee") and could not exceed ten (10) years. For awards granted prior
to 1995, restrictions on ten percent (10%) of the units were released each
year. For awards granted after 1994, restrictions on ten percent (10%) of
the units were released in any year in which the Partnership exceeded ninety
percent (90%) of its profit plan. For each fiscal year in which Perkins met
or exceeded its profit plan, the Committee would lift the restrictions on an
additional ten percent (10%) of the Units awarded. The Units were subject to
forfeiture upon termination of employment (except terminations resulting
from death, disability, or retirement). Forfeited Units were available for
award under the Plan. Holders of restricted Units were entitled to receive
cash distributions during the restricted period, unless and until such Units
were forfeited. On December 31, 1996, Mr. Arras held 13,350 restricted Units
valued at $180,881 on the date of grant ($170,213 as of December 31, 1996),
Mr. Kelly held 12,040 restricted Units valued at $193,515 on the date of the
grant ($153,510 as of December 31, 1996), Mr. Willingham held 10,640 Units
valued at $169,090 on the date of grant ($135,660 as of December 31, 1996),
and Mr. Wiseman held 8,580 restricted Units valued at $135,668 on the date
of the grant ($109,395 as of December 31, 1996). The Plan was eliminated
upon consummation of the Going Private Transaction.
(5) Includes premiums paid for group term life insurance. Premiums paid during
1996 for the named executive officers were: Mr. Smith -- $550; Mr. Arras --
$1,740; Mr. Kelly -- $58; Mr. Willingham -- $2,880; and Mr. Wiseman --
$2,880. Premiums paid on behalf of the named executive officers for 1995
were as follows: Mr. Smith -- $550; Mr. Arras -- $1,138; Mr. Kelly --
$1,232; Mr. Willingham -- $2,880; and Mr. Wiseman -- $1,839. Premiums paid
during 1994 were: Mr. Smith -- $853; Mr. Arras -- $1,138; Mr. Kelly --
$1,839; Mr. Willingham -- $1,839; and Mr. Wiseman -- $1,839.
(6) Includes Perkins' discretionary matching contributions allocated to the
named executive officers for the period January 1, 1996 through December 31,
1996 under Perkins Retirement Savings Plan as follows: Mr. Arras -- $4,750;
Mr. Kelly -- $4,750; Mr. Willingham -- $4,750; and Mr. Wiseman -- $4,750.
For the period January 1, 1995 through December 31, 1995 the contributions
were as follows: Mr. Arras -- $2,310; Mr. Kelly -- $1,540; Mr. Willingham --
$2,310; and Mr. Wiseman -- $2,310. For the period January 1, 1994 through
December 31, 1994, matching contributions allocated to the named executives
were: Mr. Arras -- $4,620; Mr. Kelly -- $4,118; Mr. Willingham -- $4,591;
and Mr. Wiseman -- $4,620.
COMPENSATION OF DIRECTORS
Lee N. Abrams and D. Michael Meeks are paid for their services as members of
the Board of PMC. Messrs. Abrams and Meeks each receive an attendance fee per
meeting of $5,000 plus expenses. Mr. Abrams participated in and was paid for six
meetings of the Board in 1996. Mr. Meeks participated in and was paid for three
meetings of the Board since his election in August 1996. Messrs. Abrams and
Meeks are also paid $1,000 plus expenses for their attendance and participation
in each Audit Committee meeting. No compensation is paid for their participation
in Audit Committee meetings held by telephone or for their attendance when such
meetings are held on the same day as a Board meeting. In 1996, all Audit
Committee meetings were held by telephone or on the same day as a Board meeting.
Mr. Abrams received an award of 500 Units on February 16, 1996 under the
Plan valued at $6,250 on the date of the grant. Mr. Meeks received an award of
500 Units on August 22, 1996 under the Plan valued at $6,000 on the date of the
grant. Mr. Abrams, Mr. Meeks, Steven L. Ezzes, and Charles Ledsinger, Jr. each
received awards of 500 Units on February 4, 1997 under the Plan valued at $7,000
on the date of the grant. On December 31, 1996, Mr. Abrams held 2,630 restricted
Units under the Plan valued at $40,376 on the date of the grant, and Mr. Meeks
held 500 restricted Units under the Plan valued at $6,000 on the date of the
grant. The restricted period applicable to each award of Units under the Plan
was established by the Plan Committee (the "Committee") and may not exceed ten
(10) years. For awards granted prior to 1995, restrictions on ten percent (10%)
of the units were released each year. For awards granted after 1994,
restrictions on ten percent (10%) of the units were released in any year in
which Perkins exceeded ninety percent (90%) of its profit plan. For each fiscal
year in which Perkins met or exceeded its profit plan, the
48
<PAGE>
Committee would lift the restrictions on an additional ten percent (10%) of the
Units awarded. Holders of restricted Units were entitled to receive cash
distributions during the restricted period, unless and until such Units are
forfeited.
LONG-TERM INCENTIVE PLAN
Prior to the consummation of the Going Private Transaction, the Company
maintained a Restricted Limited Partnership Unit Plan (the "Unit Plan") pursuant
to which, prior to the execution of the Merger Agreement, awards of restricted
Units were made to officers and key employees of PMC, PRI and their affiliates
as well as certain members of PMC's board of directors. The Unit Plan was
administered by a committee of non-employee directors of PMC which determined
the applicable restrictions including, (i) a restricted period not to exceed ten
years during which the Units cannot be sold, transferred or pledged and (ii) the
dates on which all or a portion of the Units awarded lapse. Under the terms of
the Merger Agreement, all Units awarded to participants in the Unit Plan,
whether or not still subject to restrictions, were converted into the right to
receive $14.00 per Unit in cash upon consummation of the Going Private
Transaction. There were 155,605 Units subject to restriction that were converted
into the right to receive cash. The Company intends to adopt a phantom stock
appreciation rights plan for its officers, key employees and directors who are
not also employed by or affiliated with shareholders of TRC. Awards are expected
to be made annually with the size of the award dependent upon the base pay of
each participant. Awards are expected to be exercised ratably over a five year
period and will be payable in cash, until such time, if ever, the Company's
common equity securities are publicly traded, at which time all awards will be
convertible into the right to purchase units of such common equity securities.
The value of any award is determined by a formula based on a multiple of cash
flow.
BENEFICIAL OWNERSHIP OF UNITS
The following sets forth information as of December 31, 1997 with respect to
the beneficial ownership of the Units.
Following consummation of the Going Private Transaction, PRI and PMC own all
of the outstanding Units and the Company is a wholly-owned indirect subsidiary
of TRC. TRC's outstanding common stock is owned 33.2%, 33.2% and 28.1% by Mr.
Smith, Harrah's and Equitable, respectively and 5.5% by others. Pursuant to the
terms of a Stockholders Agreement dated November 21, 1985 (the "Stockholders
Agreement") among TRC's stockholders and the Bylaws of TRC, the voting and
disposition of the shares of TRC are subject to numerous restrictions.
Significant stockholder and director actions (including certain transactions in
TRC's assets and the disposition of TRC's indirect investment in the Company),
as defined in the Stockholders Agreement and in the By-Laws of TRC, PRI and PMC,
must be approved by a unanimous vote of the Board of Directors of the company
proposing to take any such action and by at least 95% of the shareholders.
49
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1995 and 1996, Friendly's purchased layer cakes and muffin and
pancake mixes from the Company for which the Company was paid approximately
$1,909,000 and $1,425,000, respectively. The Company believes that the prices
paid to the Company for these products were no less favorable than the prices
that would have been paid for the same products by a non-affiliated party in an
arm's length transaction.
The Company has subleased certain land, building and equipment to
Friendly's. During 1995 and 1996, the Company received approximately $318,000
and $328,000, respectively, related to those subleases. The Company believes
that the terms of these subleases are no less favorable to the Company than
could be obtained if the transaction was entered into with an unaffiliated third
party.
In 1996, PMC made payments to TRC Realty Co., a subsidiary of TRC, totaling
$467,000 related to the use of an aircraft leased by TRC Realty Co. PMC's use of
this aircraft is solely for Company related purposes, and the Company reimburses
PMC for all airplane expenses paid. Pursuant to an agreement expiring April 14,
2004, the Company is obligated to reimburse monthly an amount equal to 50% of
the fixed costs of the aircraft (consisting principally of lease payments, pilot
salaries, insurance and hangar rental) and its proportionate share of variable
expenses (such as fuel and maintenance) based on PMC's actual usage of the
aircraft.
The Company reimburses TRC for its out-of-pocket expenses related to
management services provided to the Company, including a portion of employee
compensation and office related expenses and related expenses. In addition, TRC
reimburses the Company for certain tax and accounting services. Excluding Mr.
Smith's compensation and expenses, during 1996, the payments due to the Company
exceeded the payments the Company owed TRC by $194,917.
CERTAIN BUSINESS RELATIONSHIPS
Lee N. Abrams, a director of PMC and Chairman of the Audit Committee of PMC,
is a senior partner in the Mayer, Brown & Platt law firm. Mayer, Brown & Platt
represented the Company and its affiliates in several matters during 1996 and
1997, and represented TRC and the Issuers in the Offering, is representing the
Issuers in this Exchange Offer and represented TRC, PMC, PRI and MergerCo. in
the Going Private Transaction.
INDEBTEDNESS OF MANAGEMENT
In December 1992, Jack W. Willingham, Executive Vice President, Restaurant
Development, obtained a loan from the Company in the original principal amount
of $70,000 with interest at the prime rate, which on March 3, 1997 was 8.25%.
This loan, as renegotiated effective July 1, 1995, is secured by his principal
residence and requires yearly interest payments through January 2000, on which
date the entire unpaid principal balance and all accrued interest are due and
payable. The highest outstanding principal balance during 1997 was $63,746 and
the remaining principal balance at September 30, 1997 was $46,946.
ISSUANCE OF UNITS TO TRC AND ITS AFFILIATES AND PAYMENT OF EXPENSES BY TRC
In order to prevent a termination of the Company's partnership status for
federal income tax purposes, TRC and its affiliates contributed cash in the
amount of $4.4 million to acquire newly issued Units of the Company prior to the
consummation of the Going Private Transaction.
The Merger Agreement also provided that TRC and its affiliates would be
entitled to contribute any amount necessary to pay any costs incurred by the
Company in connection with the repayment of the Company's existing indebtedness
or in connection with any other transaction connected with the Going
50
<PAGE>
Private Transaction and that payment of such expenses would be specially
allocated to the party paying such expense in order to satisfy the "substantial
economic effect" requirement of Section 704(b) of the Internal Revenue Code. The
Company's Amended and Restated Partnership Agreement provides that if any amount
is contributed or deemed to be contributed to the Company or its affiliates to
pay expenses incurred by the Company or its affiliates in connection with the
repayment of debt or any other transaction connected with the Going Private
Transaction, such expenses would be specially allocated to the partner making
such contribution or deemed contribution in accordance with Section 704(b) of
the Internal Revenue Code. Prior to such amendment, the tax benefit of some of
these expenses might have been allocated to all of the partners of the Company,
including the Company's public Unitholders. The Company's public Unitholders
therefore will not receive any tax benefit as a result of the contribution by
TRC and its affiliates to the Company of amounts for payment of expenses in
connection with the Going Private Transaction.
51
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
Set forth below is a summary of the terms of the New Credit Facility. The
summary does not purport to be complete and where reference is made to
particular provisions of the New Credit Facility, such provisions, including the
definition of certain terms, are incorporated by reference as part of such
summaries or terms. The summary is qualified in its entirety by reference to the
New Credit Facility. Copies of the credit agreement (the "New Credit Agreement")
relating to the New Credit Facility have been filed as Exhibits to the
Registration Statement of which this Prospectus is a part.
Pursuant to the New Credit Facility, a group of banks provided the Company
with a new $50 million revolving line of credit facility. Anticipated borrowings
under the New Credit Facility and the net proceeds of the Offering are being
used to finance the Going Private Transaction, refinance the Existing Credit
Facility and other existing indebtedness, pay related fees and expenses and
provide future capital for general corporate purposes.
Borrowings under the New Credit Facility mature January 1, 2003 and the New
Credit Facility contains a $5 million sublimit for letters of credit. Advances
under the New Credit Facility may be borrowed, repaid and reborrowed until
maturity.
The New Credit Facility is secured by a common collateral pool consisting of
a first perfected security interest in substantially all of the assets of the
Company, including but not limited to accounts and notes receivable, inventory,
equipment, real property, stock of subsidiaries and intangible assets (including
patents, trademarks, copyrights, etc.) and will be guaranteed by TRC and its
successors, PMC, PRI and by all future subsidiaries, if any, of the Company. The
guarantees of TRC, PMC and PRI are limited to their respective pledge of
partnership Units in the Company. At all times after an event of default (as
defined), and at other times in the agent bank's discretion, the Company will
provide the agent bank, or another bank approved by the agent, with dominion
over its domestic cash receipts through lock box accounts.
Outstanding principal balances under the New Credit Facility bear interest
at floating rates equal to the agent's base rate (as defined) or Eurodollar rate
(as defined) plus, in each case, the applicable margin (as defined). Financial
covenants and provisions contained in the New Credit Agreement restrict (with
certain exceptions), among other things, the Company's ability to incur
indebtedness and other liabilities, make guarantees, make non-cancellable rental
payments due under operating leases, incur liens, make acquisitions, make
investments, pay dividends and other distributions, merge, sell assets, allow
subsidiary distributions, make voluntary payments of other indebtedness
including the Notes, enter into derivative contracts, enter into transactions
with affiliates and enter into negative pledges. The Company is also subject to
covenants regarding payment of claims and taxes, the conduct of its business,
compliance with laws and contracts, the maintenance of insurance and compliance
with ERISA. The Company is permitted to pay tax distributions to its partners to
provide funds for the payment of such partners' tax liability arising from the
taxable income of the Company.
The Company is also required to comply with certain financial covenants. The
financial covenants are (i) maintenance of a maximum consolidated leverage ratio
(as defined), (ii) maintenance of a minimum net worth (as defined), (iii)
maintenance of a consolidated cash flow ratio (as defined) (iv), maintenance of
a consolidated EBITDA to interest expense ratio (as defined), and (v) limits on
maximum consolidated capital expenditures (as defined).
Events of default under the New Credit Facility include the failure to pay
any interest, principal or other amounts when due, the failure to comply with
any covenants, the breach of representations or warranties, defaults on other
indebtedness, the occurrence of a change of control (as defined) the occurrence
of any judgment defaults, the failure to comply with ERISA requirements and the
bankruptcy or insolvency of the Company.
52
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Issuers to satisfy their obligations
pursuant to the Registration Rights Agreement, which requires the Issuers to use
their best efforts to effect the Exchange Offer. See "-- Registration Rights."
The Issuers are making the Exchange Offer in reliance upon the position of
the staff of the Commission set forth in certain no-action letters addressed to
other parties in other transactions. However, the Issuers have not sought their
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer. Based on these interpretations by the Staff of the Commission, the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) any such holder
that is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act; (ii) an Initial Purchaser who acquired the Old Notes directly
from the Issuers solely in order to resell pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act; or
(iii) a broker-dealer who acquired the Old Notes as a result of market making or
other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating and has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Notes. By tendering, each Holder which is not a broker dealer
will represent to the Issuers that, among other things, the person receiving the
New Notes, whether or not such person is the Holder, (i) is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Issuers, (ii) will
acquire the New Notes in the ordinary course of such person's business, and
(iii) is not engaged in, does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of New Notes. If
any Holder or any such other person has an arrangement or understanding with any
person to participate in a distribution of such New Notes, is engaged in or
intends to engage in a distribution of such New Notes, is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Issuers, or acquired the
Old Notes as a result of market making or other trading activities, then such
Holder or any such other person (i) cannot rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless such sale is made pursuant to an
exemption from such requirements.
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected.
NEITHER THE COMPANY NOR FINANCE CORP. MAKES ANY RECOMMENDATION TO HOLDERS OF
OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR
OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING THEIR ADVISORS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Notes, the Issuers entered into
the Registration Rights Agreement with the Initial Purchasers of the Old Notes.
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Holders of the New Notes (other than as set forth below) are not entitled to
any registration rights with respect to the New Notes. Pursuant to the
Registration Rights Agreement, Holders of Old Notes are entitled to certain
registration rights. Under the Registration Rights Agreement, the Issuers have
agreed, for the benefit of the Holders of the Old Notes, that they will, at
their cost, (i) on or before February 5, 1998, file the Registration Statement
with the Commission and (ii) use their best efforts to cause such Registration
Statement to be declared effective under the Securities Act before April 21,
1998. The Registration Statement of which this Prospectus is a part constitutes
the Registration Statement. If (i) the Issuers are not permitted to consummate
the Exchange Offer because the Exchange Offer is not permitted by applicable law
or Commission policy or (ii) any Holder of Transfer Restricted Securities (as
defined) notifies the Issuers within the specified time period that (A) due to a
change in law or policy it is not entitled to participate in the Exchange Offer,
(B) due to a change in law or policy it may not resell the New Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Registration Statement is not appropriate or
available for such resales by such holder or (C) it is a broker-dealer and
acquired the Notes directly from the Issuers or an affiliate of the Issuers, the
Issuers will file with the Commission a Shelf Registration Statement (as
defined) to cover resales of the Transfer Restricted Securities by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Issuers will use their
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note, until (i) the date
of which such Transfer Restricted Security has been exchanged in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a
Transfer Restricted Security for a New Note, the date on which such New Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the Prospectus contained in the Registration Statement,
(iii) the date on which such security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such security is distributed pursuant to
Rule 144 under the Act.
The Registration Rights Agreement also provides that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Issuers will commence the Exchange Offer and use their best efforts to issue
on or prior to 30 business days after the date on which the Registration
Statement is declared effective by the Commission, New Securities in exchange
for all Transfer Restricted Securities tendered prior thereto in the Exchange
Offer and (ii) if obligated to file the Shelf Registration Statement, the
Company will file the Shelf Registration Statement with the Commission on or
prior to 30 days after such filing obligation arises and use their best efforts
to cause the Shelf Registration to be declared effective by the Commission on or
prior to 90 days after such obligation arises. The Issuers shall use their best
efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended until the third anniversary of the Closing Date (as
defined) or such shorter period that will terminate when all the Notes covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. If (a) the Issuers fail to file any of the registration
statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such registration statements are not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Issuers fail to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Registration Statement, or (d) the Shelf
Registration Statement or the Registration Statement is declared effective but
thereafter, subject to certain exceptions, ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Issuers will
pay Liquidated Damages to each Holder of Transfer Restricted Securities affected
thereby, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week for
each $1,000 principal amount of Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages will increase by an additional $.05
per week with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages
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<PAGE>
of $.50 per week for each $1,000 principal amount of Transfer Restricted
Securities, as applicable. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Transfer
Restricted Securities included in the Shelf Registration Statement and benefit
from the applicable provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuers will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1998; PROVIDED, HOWEVER, that if the Issuers, in
their sole discretion, have extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended; PROVIDED FURTHER that in no event will the
Exchange Offer be extended beyond , 1998. The Issuers may extend the
Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement. Without limiting
the manner in which the Issuers may choose to make any public announcement and
subject to applicable law, the Issuers shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency. During any extension of the
Exchange Offer, all Old Notes previously tendered pursuant to the Exchange Offer
will remain subject to the Exchange Offer. The Issuers intend to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations thereunder.
As of the date of this Prospectus, $130,000,000 in principal amount of the
Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all Holders of Old
Notes known to the Issuers. The Issuers' obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under "-- Certain Conditions to the Exchange Offer" below.
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and certain rights to receive Liquidated Damages. See
"-- Registration Rights; Liquidated Damages" above. The Old Notes were, and the
New Notes will be, issued under the Indenture and all such Notes are entitled to
the benefits of the Indenture.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuers expressly reserve the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Issuers
will give oral or written notice of any amendment, nonacceptance or termination
to the Holders of the Old Notes as promptly as practicable. Any amendment to the
Exchange Offer will not limit
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the right of Holders to withdraw tendered Old Notes prior to the Expiration
Date. See "-- Withdrawal Rights" below.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuers of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Issuers will constitute a binding
agreement between the tendering Holder and the Issuers upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to State Street Bank and Trust Company
(the "Exchange Agent") at one of the addresses set forth below under "--
Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal; or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date; or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY OR FINANCE CORP.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the signer of the Letter of Transmittal, the Old Notes surrendered for exchange
must be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Issuers in their
sole discretion, duly executed by the registered Holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuers in their sole discretion, which determination shall be final and
binding. The Issuers reserve the absolute right to reject any and all tenders of
any particular Old Notes not properly tendered or to not accept any particular
Old Notes which acceptance might, in the judgment of the Issuers or their
counsel, be unlawful. The Issuers also reserve the absolute right to waive any
defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any Holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuers shall be final and binding on all parties. Unless
waived, all defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Issuers
shall determine. Neither the Issuers, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability
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<PAGE>
for failure to give such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuers, proper evidence satisfactory to the Issuers of their authority to
so act must be submitted.
By tendering, each Holder which is not a broker dealer will represent to the
Issuers that, among other things, the person receiving the New Notes, whether or
not such person is the Holder, (i) is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuers, (ii) will acquire the New Notes in the
ordinary course of such person's business, and (iii) is not engaged in, does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of New Notes. If any Holder or any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Issuers, is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such New Notes
to be acquired pursuant to the Exchange Offer, or acquired the Old Notes as a
result of market making or other trading activities, such Holder or any such
other person (i) cannot rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Issuers shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Issuers have given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive payment of accrued but unpaid interest from the most
recent interest payment date or, if no interest payment date has yet occurred
from December 22, 1997. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility; (ii) a properly completed and duly executed
Letter of Transmittal; and (iii) all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer, or if Old Notes are submitted for a greater amount than
the Holder desires to exchange, such unaccepted or nonexchanged Old Notes will
be returned without
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expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book Entry
Transfer Facility pursuant to the book-entry procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility designated by the tendering Holder) as promptly as
practicable after withdrawal, rejection of tender or expiration or termination
of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent has received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form of the corresponding exhibit to the
Registration Statement of which this Prospectus constitutes a part (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the Holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of the withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under "--
Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the amount of such Old Notes), and (where certificates
for Old Notes have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing Holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the release of such certificates the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
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have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the Holder thereof without cost to such Holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account with such Book-Entry Transfer Facility specified by the Holder) as soon
as practicable after withdrawal, rejection of tender, expiration or termination
of the Exchange Offer. Properly withdrawn Old Notes may be retendered by
following one of the procedures described under "-- Procedures for Tendering Old
Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuers shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been issued
by, any court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, or assessing or seeking any damages as a
result thereof, or (ii) resulting in a material delay in the ability of the
Issuers to accept for exchange or exchange some or all of the Old Notes
pursuant to the Exchange Offer; or any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or
deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any government or governmental
authority, domestic or foreign, or any action shall have been taken,
proposed or threatened, by any government, governmental authority, agency or
court, domestic or foreign, that in the sole judgment of the Issuers might
directly or indirectly result in any of the consequences referred to in
clauses (i) or (ii) above or, in the sole judgment of the Issuers, might
result in the holders of New Notes having obligations with respect to
resales and transfers of New Notes which are greater than those described in
the interpretation of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market; (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Issuers to complete the transactions contemplated by the
Exchange Offer; (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit; or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Issuers, is or may be adverse to the Issuers, or the
Issuers shall have become aware of
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facts that, in the sole judgment of the Issuers, have or may have an adverse
effect on the value of the Old Notes or the New Notes.
Holders of Old Notes will have the registration rights and the right to
Liquidated Damages described under "-- Registration Rights; Liquidated Damages"
if the Issuers fail to consummate the Exchange Offer.
To the Issuers' knowledge as of the date of this Prospectus, none of the
above events has occurred.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. In the event the Issuers assert or
waive a condition to the Exchange Offer which constitutes a material change to
the terms of the Exchange Offer, the Issuers will disclose such change in a
manner reasonably calculated to inform prospective investors of such change, and
will extend the period of the Exchange Offer by five business days.
In addition, the Issuers will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
DELIVER TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT:
<TABLE>
<S> <C> <C> <C>
BY REGISTERED OR CERTIFIED BY OVERNIGHT COURIER OR HAND:
MAIL:
State Street Bank State Street Bank *State Street Bank
and Trust Company and Trust Company or and Trust Company
P.O. Box 778 Two International Place 61 Broadway,
Boston, MA 02102-0078 Boston, MA 02110 Concourse Level
Attn: Kelly Mullen Attn: Kelly Mullen Corporate Trust Window
New York, NY 10006
*ONLY DURING BUSINESS HOURS
</TABLE>
BY FACSIMILE FOR ELIGIBLE INSTITUTIONS:
(617) 664-5395
FOR CONFIRMATION CALL:
(617) 664-5587
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
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FEES AND EXPENSES
The Issuers will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Issuers will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Issuers will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling tenders for their
customers. The expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing, accounting,
registration, and legal fees, will be paid by the Issuers and are estimated to
be approximately $[100,000].
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Issuers to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering Holder will be responsible for the payment of any
applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers do not currently anticipate that
they will register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain outstanding
will not be entitled to any rights to have such Old Notes registered under the
Securities Act or to any rights under the Registration Rights Agreement. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, or tendered but unaccepted, Old Notes could
be adversely affected. Based upon no-action letters issued by the staff of the
Commission to other parties in other transactions, the Issuers believe the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for resale, resold or otherwise transferred by a Holder thereof (other
than any (i) Holder which is an "affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act; (ii) an Initial Purchaser who acquired the
Old Notes directly from the Issuers solely in order to resell pursuant to Rule
144A of the Securities Act or any other available exemption under the Securities
Act; or (iii) a broker-dealer who acquired the Old Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating and has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Notes. However, the Issuers have not sought their own no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and
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does not intend to engage in, a distribution of New Notes, and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Issuers, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, or acquired the Old
Notes as a result of market making or other trading activities, such Holder (i)
could not rely on the relevant determinations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. See "Plan of Distribution." In addition, to comply
with the securities laws of certain jurisdictions, if applicable, the New Notes
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Issuers have agreed to register or qualify
the sale of the New Notes in such jurisdiction only in limited circumstances and
subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Notes for the Old Notes will have no impact on the
Company's or Finance Corp.'s accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized.
Expenses of the Exchange Offer will be amortized, pro rata, over the term of the
New Notes.
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DESCRIPTION OF NOTES
GENERAL
The Old Notes were and the New Notes will be issued pursuant to an Indenture
dated as of December 22, 1997 (the "Indenture"), among the Issuers and State
Street Bank and Trust Company of Connecticut, N.A., as trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Notes are subject to all such terms, and holders of the
Notes (the "Holders") are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The following summary of the material provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. The Indenture and Registration Rights Agreement are filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions." For purposes of this summary, the term "Company"
refers only to Perkins Family Restaurants, L.P. and not to Finance Corp. and the
term "Holder" or "Holders" refers to Holders (as defined in the Indenture) of
Old Notes and/or New Notes.
The Notes are general unsecured obligations of the Issuers and rank PARI
PASSU in right of payment with all current and future unsecured senior
Indebtedness of the Issuers, including borrowings under the New Credit Facility.
However, all borrowings under the New Credit Facility are secured by a first
priority Lien on substantially all of the assets of the Company and its
Subsidiaries. As a result, the claims of Holders of the Notes will be
effectively subordinated to the extent of such security interests. As of
September 30, 1997, on a pro forma basis after giving effect to the Going
Private Transaction and the financing thereof, including the repayment of
existing indebtedness, approximately $6.8 million would have been outstanding
under the New Credit Facility, outstanding standby letters of credit would have
been approximately $3.0 million and approximately $40.2 million would be
available for future borrowings and letters of credit thereunder. The Indenture
permits the incurrence of substantial additional secured indebtedness by the
Company and its subsidiaries, under the New Credit Facility or otherwise, in the
future. See "Risk Factors -- Effective Subordination."
As of the date hereof, the Company has no Subsidiaries other than Finance
Corp., which is a Restricted Subsidiary (as defined herein). However, under
certain circumstances, the Company will be able to designate future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not subject to many
of the restrictive covenants set forth in the Indenture.
FINANCE CORP.
Finance Corp. is a Wholly-Owned Restricted Subsidiary of the Company that
was incorporated in Delaware for the purpose of serving as a co-issuer of the
Notes in order to facilitate the Offering. The Company believes that certain
purchasers of the Notes may be restricted in their ability to purchase debt
securities of partnerships, such as the Company, unless such debt securities are
jointly issued by a corporation. Finance Corp. will not have any substantial
operations or assets and will not have any revenues or expenses. As a result,
prospective Holders of Notes should not expect Finance Corp. to participate in
servicing the interest and principal obligations on the Notes.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed (the "Subsidiary Guarantees") by any future Restricted
Subsidiaries of the Company (collectively, the "Guarantors"). The obligations of
each Guarantor under its Subsidiary Guarantee will be limited so as not to
constitute a fraudulent conveyance under applicable law. See, "Risk Factors --
Fraudulent Conveyance Matters."
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The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the transaction;
and (iv) the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described below under
the caption "-- Incurrence of Indebtedness and Issuance of Preferred Equity
Interests."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Interests of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the Capital
Interests of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED, that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Redemption or
Repurchase at Option of Holders -- Asset Sales."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $150.0 million,
of which $130.0 million were issued in the Offering. The Notes will mature on
December 15, 2007. Interest on the Notes will accrue at the rate of 10 1/8% per
annum and will be payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 1998, to Holders of record on the immediately preceding
June 1 and December 1. For each Old Note accepted for exchange, the Holder of
such Old Note will receive a New Note having a principal amount equal to that of
the surrendered Old Note. Accordingly, registered Holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive payment of accrued but unpaid
interest from the most recent interest payment date or, if no interest payment
date has yet occurred, from December 22, 1997. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Additional Notes may be issued from time to time after the
Offering, subject to the provisions of the Indenture described below under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Equity Interests." Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages on the Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders of the Notes at their
respective addresses set forth in the register of Holders of Notes; PROVIDED
that all payments of principal, premium, interest and Liquidated Damages with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes are
issued in denominations of $1,000 and integral multiples thereof.
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OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Issuers, on or after December 15, 2002, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------- ----------
<S> <C>
2002................................................................ 105.063%
2003................................................................ 103.375%
2004................................................................ 101.688%
2005 and thereafter................................................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to December 15, 2000,
the Issuers may on any one or more occasions redeem Notes with the net cash
proceeds of one or more public offerings of the Company's equity securities or
the equity securities of any of the Company's direct or indirect parents (to the
extent such net proceeds have been contributed to the Company as common equity
capital), at 110.125% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date,
PROVIDED, that at least 65% of the principal amount of Notes originally issued
remains outstanding immediately following such redemption (excluding Notes held
by the Issuers or any of their respective Subsidiaries); and PROVIDED, FURTHER,
that such redemption shall occur within 60 days of the date of the closing of
any such public offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Issuers are not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuers to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Issuers will mail a notice to each Holder describing the transaction or
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transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Issuers will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Issuers
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility provides that certain events which are similar to a
Change of Control constitute a default under the New Credit Facility. In
addition, the exercise by the Holders of Notes of their right to require the
Company to repurchase the Notes could cause a default under the New Credit
Facility, even if the Change of Control itself does not, due to the financial
effect of such repurchases on the Company. Finally, the Company's ability to pay
cash to the Holders of Notes upon a repurchase may be limited by the Company's
then existing financial resources. See "Risk Factors -- Change of Control."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than TRC or a Related Party, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than TRC and its Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) directly or
indirectly, of Capital Interests of the Company entitling the owners thereof to
35% or more of the income or profits of the Company, (iv) the first day on which
a majority of the members of the Board of Directors of the Company are not
Continuing Directors or (v) prior to the reorganization of the Company as a
corporation, the first day on which the Company ceases to own 100% of the
outstanding Equity Interests of Finance Corp.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a
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whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"BOARD OF DIRECTORS" means (i) with respect to any Person that is a
corporation, the board of directors of such Person or any authorized committee
of such board of directors, and (ii) with respect to any Person that is a
partnership or a limited liability company, the board of directors of the
general partner (or similar Person) of such Person or any authorized committee
of such board of directors.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) was nominated for election to such Board
of Directors by TRC or one of its Related Parties.
"RELATED PARTY" with respect to TRC means (A) any 25% or greater stockholder
(including each of Donald N. Smith, Harrah's Entertainment, Inc. (and its
subsidiaries) and The Equitable Life Assurance Society of the United States) or
80% (or more) owned Subsidiary of TRC or (B) any trust, corporation, partnership
or other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of TRC
and/or such other Persons referred to in the immediately preceding clause (A).
"TRC" means The Restaurant Company.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) except in the case of a Permitted Non-Cash
Transaction, at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash; PROVIDED that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds (a) to permanently reduce Indebtedness
under the New Credit Facility (and to correspondingly reduce commitments with
respect thereto), or (b) to the acquisition of a majority of the assets of, or a
majority of the voting Capital Interests of, another Permitted Business, the
making of a capital expenditure or the acquisition of other tangible long-term
assets, in each case, that are used or useful in a Permitted Business. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the
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aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be
required to make an offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture and such other Indebtedness. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Notes tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other Indebtedness to be purchased on a
pro rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Interests) of the Company or to the
Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company (other
than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "-- Incurrence of Indebtedness and Issuance of
Preferred Equity Interests"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii) and (viii) of the second
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture (the "Measurement Date") to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by
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the Company since the Measurement Date as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Interests) or from the issue or sale of
Disqualified Interests or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Interests or convertible debt securities) sold to a Subsidiary
of the Company), plus (iii) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the aggregate amount of such Restricted Investment that was
treated as a Restricted Payment when made.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of subordinated Indebtedness or Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Interests); PROVIDED that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; and (v) the repurchase, redemption
or other acquisition or retirement for value of any Equity Interests of the
Company or any Subsidiary of the Company held by any member of the Company's (or
any of its Subsidiaries') management; PROVIDED that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $1,000,000 in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction; (vi)
the declaration of the Jack Astor Vehicle as an Unrestricted Subsidiary on the
date that it becomes a Subsidiary of the Company; PROVIDED that it otherwise
meets the qualifications of an Unrestricted Subsidiary; (vii) distributions to
partners or owners of the Company in an aggregate amount during or with respect
to any fiscal period commencing after December 31, 1996, not to exceed the Tax
Amount for such period or for such prior periods commencing after December 31,
1996 that are subject to adjustments as a result of audits by tax authorities;
(viii) transfers of cash proceeds from the sale of the Notes not to exceed, in
the aggregate, $85.0 million, to finance the purchase of Units from the public
holders of such Units in the Going Private Transaction, as set forth in the
Offering Memorandum under the caption "Use of Proceeds" and (ix) additional
Restricted Payments not to exceed $5.0 million after the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver
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to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED EQUITY INTERESTS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Interests
and will not permit any of its Subsidiaries to issue preferred Equity Interests
(including Disqualified Interests); PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) or issue Disqualified Interests and
any of the Company's Restricted Subsidiaries that is a Guarantor may incur
Indebtedness or issue preferred Equity Interests (including Disqualified
Interests) if, in each case, the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Equity Interests are issued would have been at
least 2 to 1, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Equity Interests had been issued, as the case may be, at the
beginning of such four-quarter period.
The Indenture also provides that the Company will not incur any Indebtedness
(nor will the Guarantors guarantee any such Indebtedness) that is contractually
subordinated in right of payment to any other Indebtedness of the Company unless
such Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; PROVIDED, HOWEVER, that no Indebtedness
of the Company shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of the Company solely by virtue of being
unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by the
Guarantors) of revolving credit Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
under Credit Facilities; PROVIDED that the aggregate principal amount of all
revolving credit Indebtedness and letters of credit outstanding under Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to $50.0 million;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Issuers (and the Guarantee thereof by the
Guarantors) of Indebtedness represented by the Notes;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary; PROVIDED that such Indebtedness was incurred by the
prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by the Company or one of its Restricted Subsidiaries and was not
incurred in connection with, or in contemplation of, such acquisition by the
Company or one of its Restricted Subsidiaries; and PROVIDED FURTHER that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (v) and any
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Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (v), does not exceed $10 million;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) or any Indebtedness that was permitted by the
Indenture to be incurred pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of this covenant;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly-Owned Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to
the prior payment in full in cash of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a
Wholly-Owned Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding; and
(ix) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x);
(xi) Indebtedness consisting of Permitted Investments of the kind
described in clause (f) of the definition of "Permitted Investments"; and
(xii) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xii), not to exceed $5.0
million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends or
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock for purposes of this covenant; provided, in each such case,
that the amount thereof is included in Fixed Charges of the Company as accrued.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
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SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Company may enter into a sale and leaseback transaction if (i)
the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Additional
Indebtedness and Issuance of Preferred Equity Interests" and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant described above under the
caption "-- Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the Company applies the proceeds of
such transaction in compliance with, the covenant described above under the
caption "-- Asset Sale."
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries on its
Capital Interests or with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) the Indenture and the Notes, (b) applicable law, (c) any
instrument governing Indebtedness or Capital Interests of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (d) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (e) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (f) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (g) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced; (h) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the caption "--
Liens" that limits the right of the debtor to dispose of the assets securing
such Indebtedness; and (i) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
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assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Equity
Interests."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has either been approved by a majority of the
disinterested members of the Board of Directors or has been approved in an
opinion issued by an accounting, appraisal or investment banking firm of
national standing as being fair to the Holders from a financial point of view
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing. Notwithstanding the foregoing, the following items
shall not be deemed to be Affiliate Transactions: (i) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (ii) transactions between or among the Company
and/or its Restricted Subsidiaries, (iii) payment of reasonable directors fees
to Persons who are not otherwise Affiliates of the Company, (iv) any agreement
in effect on the date of the Indenture or any amendment thereto or transaction
contemplated thereby (and any replacement or amendment of any such agreement so
long as any such amendment or replacement thereof is not materially less
favorable to the Holders than the original agreement in effect on the date of
the Indenture), and (v) Restricted Payments that are permitted by the provisions
of the Indenture described above under the caption "-- Restricted Payments."
RESTRICTIONS ON ACTIVITIES OF FINANCE CORP.
The Indenture provides that Finance Corp. may not hold any material assets,
become liable for any material obligations (other than certain indemnity
obligations under the Purchase Agrement (as defined) and the Registration Rights
Agreement) or engage in any significant business activities; PROVIDED that
Finance Corp. may be a co-obligor with respect to Indebtedness if the Company is
the primary obligor with
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respect to such Indebtedness and the net proceeds of such Indebtedness are
received by the Company or one of the Company's Restricted Subsidiaries other
than Finance Corp. The Company and Finance Corp. intend to take the position for
tax purposes that Finance Corp. is the Company's nominee. If such
recharacterization is denied, any payment of principal or interest by Finance
Corp. will be deemed to create an identical debt between Finance Corp. and the
Company.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL INTERESTS IN WHOLLY-OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Capital Interests in any Wholly-Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Interests in
such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "-- Asset Sales," and (ii)
will not permit any Wholly-Owned Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, Capital Interests
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly-Owned Restricted Subsidiary of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Subsidiary after the date of the Indenture, then such
newly acquired or created Subsidiary shall become a Guarantor and execute a
Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the
terms of the Indenture; PROVIDED that the foregoing shall not apply to any
Subsidiary that has properly been designated as an Unrestricted Subsidiary in
accordance with the Indenture for so long as it continues to constitute an
Unrestricted Subsidiary.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of
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Operations, the financial condition and results of operations of the Company and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company) and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company and the Guarantors have agreed that, for so long as any
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with the provisions described under
the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments"
or "-- Incurrence of Indebtedness and Issuance of Preferred Equity Interests";
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any
of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries; and (viii) except as permitted by the
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or shall cease for any reason to be in full force and effect or
any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligation under its Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
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In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 15, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to December 15, 2002, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, partner, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States
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reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions
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relating to the covenants described above under the caption "-- Repurchase at
the Option of Holders"), (iii) reduce the rate of or change the time for payment
of interest on any Note, (iv) waive a Default or Event of Default in the payment
of principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money other than
that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest on the
Notes, (vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders") or (viii) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default shall
occur (which shall not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were originally offered and sold to qualified institutional
buyers in reliance on Rule 144A. Except as set forth below, Notes are issued in
registered, global form in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof.
The Notes are represented by one or more Notes in registered, global form
without interest coupons (collectively, the "Global Notes"). The Global Notes
are deposited upon issuance with the Trustee as custodian for The Depository
Trust Company ("DTC"), in New York, New York, and registered in the name of DTC
or its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below. Through and including the 40th day after
the later of the commencement of the Offering and the Closing (such period
through and including such 40th day, the "Restricted Period"), beneficial
interests in the Regulation S Global Notes may be held only through the
Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") (as indirect
participants in DTC), unless transferred to a person
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that takes delivery through a Rule 144A Global Note in accordance with the
certification requirements described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below).
The Old Notes (including beneficial interests in the Global Notes) are
subject to certain restrictions on transfer and bear a restrictive legend. In
addition, transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Cedel), which may
change from time to time.
Initially, the Trustee is acting as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Issuers take no
responsibility for these operations and procedures and urge investors to contact
the system or their participants directly to discuss these matters.
DTC has advised the Issuers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Issuers that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and Cedel) which are Participants in such
system. All interests in a Global Note, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the procedures
and requirements of such systems. The laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
such persons will be limited to that extent. Because DTC can act only on behalf
of Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having beneficial interests in a Global
Note to pledge
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such interests to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Issuers, the Trustee nor any agent of the Issuers or the Trustee has or will
have any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Issuers that its current practice, upon receipt of any payment in
respect of securities such as the Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee or
the Issuers. Neither the Issuers nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
Notes, and the Issuers and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. See "-- Same Day Settlement
and Payment."
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
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DTC has advised the Issuers that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among Participants in DTC,
Euroclear and Cedel, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuers nor the Trustee nor any of their respective agents will have
any responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Notes
and the Company thereupon fails to appoint a successor depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Certificated Notes or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes. In addition,
beneficial interests in a Global Note may be exchanged for Certificated Notes
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary procedures)
and will bear the applicable restrictive legend referred to in "Notice to
Investors," unless the Company determines otherwise in compliance with
applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Notes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Notes in
certificated form, the Issuers will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Old Notes represented by the Global Notes are eligible to trade in
the PORTAL market and the Notes represented by the Global Notes are eligible to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required by
the Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any certificated Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
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(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; PROVIDED that beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory and leases (or subleases) of
restaurant facilities and related equipment to franchisees, in each case in
the ordinary course of business consistent with past practices (PROVIDED
that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "-- Change of Control" and/or the provisions described
above under the caption " -- Merger, Consolidation or Sale of Assets" and
not by the provisions of the Asset Sale covenant), and (ii) the issue or
sale by the Company or any of its Subsidiaries of Equity Interests of any of
the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds
in excess of $1.0 million. Notwithstanding the foregoing, the following
items shall not be deemed to be Asset Sales: (i) a transfer of assets by the
Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned
Restricted Subsidiary to the Company or to another Wholly-Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly-Owned
Restricted Subsidiary to the Company or to another Wholly-Owned Restricted
Subsidiary, and (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the
rate of interest implicit in such transaction, determined in accordance with
GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
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"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL INTERESTS" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or
limited liability company, partnership or membership interests (whether
general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case with any lender party to the New Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the
types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition and (vi) money
market funds at least 95% of the assets of which constitute Cash Equivalents
of the kinds described in clauses (i) - (v) of this definition.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based
on income or profits or the Tax Amount of such Person and its Subsidiaries
for such period, to the extent that such provision for taxes or Tax Amount
was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense, net of interest income, of such Person and
its Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to
the extent that any such expense was deducted in computing such Consolidated
Net Income, plus (iv) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person
and its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the
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extent (and in the same proportion) that the Net Income of such Subsidiary
was included in calculating the Consolidated Net Income of such Person and
only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and government regulations applicable to that Subsidiary or
its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP, less the Tax Amount of such Person for such Period;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the referent Person or a Wholly-Owned
Restricted Subsidiary thereof that is a Guarantor, (ii) the Net Income of
any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded and (v) the Net Income (but not loss) of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, (a) with respect to a partnership as of
any date, the capital accounts attributable to all common and preferred
partnership interests (other than Disqualified Interests) of such
partnership as of such date, determined on a consolidated basis in
accordance with GAAP, and (b) with respect to any other Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred equity (other than Disqualified
Interests) that by its terms is not entitled to the payment of dividends
unless such dividends may be declared and paid only out of net earnings in
respect of the year of such declaration and payment, but only to the extent
of any cash received by such Person upon issuance of such preferred equity,
less (x) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business) subsequent to
the date of the Indenture in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CREDIT FACILITIES" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
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"DISQUALIFIED INTERESTS" means any Capital Interests that, by its terms
(or by the terms of any security into which it is convertible, or for which
it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
Holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature; PROVIDED, HOWEVER, that any
Capital Interests that would constitute Disqualified Interests solely
because the holders thereof have the right to require the Company to
repurchase such Capital Interests upon the occurrence of a Change of Control
or an Asset Sale shall not constitute Disqualified Interests if the terms of
such Capital Interests provide that the Company may not repurchase or redeem
any such Capital Interests pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under
the caption " -- Certain Covenants -- Restricted Payments."
"EQUITY INTERESTS" means Capital Interests and all warrants, options or
other rights to acquire Capital Interests (but excluding any debt security
that is convertible into, or exchangeable for, Capital Interests).
"EXISTING INDEBTEDNESS" means up to $10.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other
than Indebtedness under the New Credit Facility) in existence on the date of
the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and
(ii) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person
or one of its Restricted Subsidiaries or secured by a Lien on assets of such
Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred equity of such Person or
any of its Restricted Subsidiaries, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person (or, in
the case of a Person that is a partnership or a limited liability company,
the combined federal, state and local income tax rate that was or would have
been utilized to calculate the Tax Amount of such Person), expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event
that the referrent Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred equity subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, Guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred equity, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to
above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such
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reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, as in effect from time to time.
"GENERAL PARTNER" means Perkins Management Company, Inc., as general
partner of the Company.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge
of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"GUARANTORS" means any Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provision of the Indenture, and
their respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"HOLDERS" means a Person in whose name a Note is registered.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or representing
any Hedging Obligations, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing (other
than letters of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP, as
well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
Indebtedness of any other Person. The amount of any Indebtedness outstanding
as of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (ii) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct
or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or
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other acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the
Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "-- Restricted Payments."
"JACK ASTOR VEHICLE" means J.A. Joint Venture, LLC, a Delaware limited
liability company engaged solely in the business of creating, owning,
developing and operating Jack Astor's Bar and Grill restaurants.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of dividends on preferred equity interests,
excluding, however, to the extent included in calculating such Net Income:
(a) any gain (but not loss), together with any related provision for taxes
or Tax Distributions on such gain (but not loss), realized in connection
with (x) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (y) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (b) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes or Tax Distributions on such
extraordinary or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
or Tax Distributions paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"NEW CREDIT FACILITY" means the Revolving Credit Agreement dated as of
December 22, 1997 among the Company, BankBoston N.A. as agent and the
lenders party thereto and any related notes, collateral documents, letters
of credit and guarantees, including any appendices, exhibits or schedules to
any of the foregoing (as the same may be in effect from time to time), in
each case, as such agreements may be amended, modified, supplemented or
restated from time to time (whether with the original agents and lenders or
other agents or lenders or otherwise, and whether provided under the
original credit agreement or other credit agreements or otherwise.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and (ii) no default
with respect to which (including any rights
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that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company of any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means the business of owning, operating and
franchising restaurants and other businesses that are ancillary or related
thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor (other
than an Investment in the Jack Astor Vehicle if it is subsequently to be
declared an Unrestricted Subsidiary); (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person, if as a result of such Investment (i) such
Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a
Guarantor that is engaged in a Permitted Business or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor and
that is engaged in a Permitted Business; (d) any Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Interests) of the Company; (f) additional
Investments in the Jack Astor Vehicle, either by way of capital contribution
or loan to, or Guarantee of Indebtedness of, the Jack Astor Vehicle;
PROVIDED that the aggregate amount of such capital contributions and loans,
together with the aggregate principal amount of any such Indebtedness that
is so Guaranteed, does not exceed $10.0 million at any time outstanding
(with each such Investment being measured as of the date it was made and
without giving effect to subsequent changes in value); (g) any Investments
in promissory notes acquired in a Permitted Non-Cash Transaction, provided
that not more than $5.0 million in aggregate principal amount of such
promissory notes remains outstanding after giving effect to such Investment
(excluding any such promissory notes outstanding on the date of the
Indenture); and (h) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (h) since the date of the
Indenture, not to exceed $2.0 million.
"PERMITTED LIENS" means (i) Liens securing Indebtedness under Credit
Facilities that were permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of the Company; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; PROVIDED that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company, PROVIDED that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the third
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance
of Preferred Equity Interests" covering only the assets acquired with the
proceeds of such Indebtedness; (vi) Liens to secure additional Capital Lease
Obligations that were permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and Issuance of
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Preferred Equity Interests" covering only the assets acquired with the
proceeds of such Indebtedness, up to an aggregate of $15.0 million in
principal amount at any one time outstanding; and (vii) Liens existing on
the date of the Indenture.
"PERMITTED NON-CASH TRANSACTION" means (i) any sale, lease or other
disposition of restaurants and related equipment for consideration
consisting of cash and/or promissory notes of the acquiror of such assets,
provided that not more than $5.0 million in aggregate principal amount of
such promissory notes remains outstanding after giving effect to such
transaction (excluding any such promissory notes outstanding on the date of
the Indenture) and (ii) any sale, lease or other disposition of assets that
are no longer used by the Company or any of its Restricted Subsidiaries in a
Permitted Business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); PROVIDED that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii)
if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the Notes, then the
Permitted Refinancing Indebtedness must have a final maturity date later
than the final maturity date of, and be subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Act, as such Regulation is in effect on the
date of the Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal
prior to the date originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
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Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"TAX AMOUNT" means, with respect to any Person for any period, the
aggregate combined federal, state, local and foreign income taxes (including
estimated taxes) actually payable by partners or owners of such Person in
respect of such partners' or owners' Taxable Income for such period, and
aggregate state and local franchise taxes. Notwithstanding anything to the
contrary, Tax Amount shall not include taxes payable as a result of
recognizing gain from such Person's reorganization as or change in the
status to a corporation or attributable to its Taxable Income for any
taxable year commencing prior to January 1, 1997.
"TAX DISTRIBUTION" means a distribution in respect of taxes to the
partners of the Company pursuant to clause (vii) of the second paragraph of
the covenant described above under the caption "Certain Covenants --
Restricted Payments."
"TAXABLE INCOME" means, with respect to any Person for any period, the
taxable income or loss of such Person for such period for federal, state,
foreign or local income tax purposes; provided, that (i) all items of gain,
loss or deduction required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in taxable income or loss, (ii) any
basis adjustment made in connection with an election under Section 754 of
the Code shall be disregarded and (iii) such taxable income shall be
increased or such taxable loss shall be decreased by the amount of any
interest expense incurred by such Person that is not treated as deductible
for federal income tax purposes by a partner or owner of such person.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than Finance
Corp.) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (c)
is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive
officer of the Company or any of its Restricted Subsidiaries and has at
least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries, except that clauses
(a)-(d) shall not be applicable to the Jack Astor Vehicle. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Certain Covenants -- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that
such designation shall be deemed to be an incurrence of Indebtedness by a
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Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the
caption "Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such
designation; and provided, further, that, to the extent applicable, the
Company shall cause such Subsidiary to comply with the covenant described
above under the caption "-- Subsidiary Guarantees."
"VOTING STOCK" of any Person as of any date means the Capital Interests
of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Interests or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly-Owned
Restricted Subsidiaries of such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Issuers have
agreed that for a period of 180 days after the Expiration Date, they will make
available a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any such resale. In addition, until
1998, all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Issuers will receive no proceeds in connection with the Exchange Offer.
New Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers and dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion is a summary of the material United States federal
income tax consequences of the Exchange Offer, to exchanging and nonexchanging
holders, but does not purport to be a complete analysis of all potential tax
effects. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service ("Service")
rulings and pronouncements and judicial decisions all in effect as of the date
hereof, all of which are subject to change at any time, and any such change may
be applied retroactively in a manner that could adversely affect a holder of the
New Notes. The discussion does not address all of the federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as certain
financial institutions, insurance companies, dealers in securities and persons
holding the New Notes as part of a "straddle," "hedge" or "conversion
transaction." Moreover, the effect of any applicable state, local or foreign tax
laws is not discussed. The discussion deals only with New Notes held as "capital
assets" within the meaning of section 1221 of the Code.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Note for a New Note pursuant to the Exchange Offer
will not be taxable to an exchanging Holder for U.S. federal income tax
purposes. As a result (i) an exchanging Holder will not recognize any gain or
loss on the exchange; (ii) the holding period for the New Note will include the
holding period for the Old Note; and (iii) the basis of the New Note will be the
same as the basis for the Old Note.
The Exchange Offer will result in no federal income tax consequences to a
nonexchanging Holder of Old Notes.
LEGAL MATTERS
Certain legal matters will be passed upon for the Issuers by Mayer, Brown &
Platt, Chicago, Illinois. Lee N. Abrams, a Director of PMC and Chairman of the
Audit Committee of PMC, is a senior partner at Mayer, Brown & Platt. Mayer,
Brown & Platt represents the Company and its affiliates with respect to various
matters from time to time and represented TRC, PMC, PRI and MergerCo. in
connection with the Going Private Transaction. The validity of the Notes will be
passed upon for the Initial Purchasers by Latham & Watkins, New York, New York.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements as of December 31, 1995 and 1996 and for
each of the three years in the period ended December 31, 1996, included in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report appearing herein.
AVAILABLE INFORMATION
Prior to the Going Private Transaction, the Company has been subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company has filed reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza,
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450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission.
Following the consummation of the Going Private Transaction, the Company was
no longer required by the rules and regulations of the Commission to remain
subject to the periodic reporting and other informational requirements of the
Securities Exchange Act. The Company has agreed that, whether or not it is
required to do so by the rules and regulations of the Commission, for so long as
any of the Notes remain outstanding, it will furnish to the holders of the Notes
and file with the Commission (unless the Commission will not accept such a
filing) (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such forms, including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, for so long as any of the Old Notes remain
outstanding, the Company has agreed to make available to any prospective
purchaser of the Old Notes or beneficial owner of the Old Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
The Issuers have filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement.
Finance Corp. has requested the Commission's Office of Chief Counsel,
Division of Corporation Finance, to indicate to Finance Corp. that, in
connection with the issuance of the New Notes, it will not raise any objection
if Finance Corp. does not file periodic reports pursuant to Sections 13(a) and
15(d) of the Exchange Act. If such relief is forthcoming, Finance Corp. will not
file such periodic reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-9214) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
3. The Company's Current Report on Form 8-K dated September 17, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the New Notes shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified
94
<PAGE>
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents which are
incorporated by reference herein, other than exhibits to such documents which
are not specifically incorporated by reference therein. Requests should be
directed to Perkins Family Restaurants, L.P., 6075 Poplar Avenue, Suite 800,
Memphis, TN 38119-4709, Attn: Investor Relations, telephone (888) 279-4542.
95
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PERKINS FAMILY RESTAURANTS, L.P.
Report of independent public accountants............................................. F-2
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997 (unaudited)... F-3
Statements of Income for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 (unaudited).......................... F-4
Statements of Changes in Partners' Capital for the years ended December 31, 1994,
1995 and 1996...................................................................... F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 (unaudited).......................... F-6
Notes to Financial Statements........................................................ F-7
Unaudited Pro Forma Financial Statements............................................. F-21
Unaudited Pro Forma Statement of Income for the year ended December 31, 1996......... F-22
Unaudited Pro Forma Statement of Income for the nine months ended
September 30, 1997................................................................. F-23
Unaudited Pro Forma Balance Sheet as of September 30, 1997........................... F-24
Notes to Unaudited Pro Forma Financial Statements.................................... F-25
PERKINS FINANCE CORP.
Report of independent public accountants............................................. F-27
Balance Sheet as of November 10, 1997................................................ F-28
Note to Financial Statement.......................................................... F-29
PERKINS MANAGEMENT COMPANY, INC.
Report of independent public accountants............................................. F-30
Balance Sheet as of December 31, 1996................................................ F-31
Notes to Financial Statement......................................................... F-32
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Perkins Family Restaurants, L.P.:
We have audited the accompanying balance sheets of PERKINS FAMILY
RESTAURANTS, L.P. ( a Delaware limited partnership) as of December 31, 1996 and
1995, and the related statements of income, changes in partners' capital and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Perkins Family Restaurants,
L.P., as of December 31, 1996 and 1995 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 13 to the financial statements, in 1995 the Partnership
adopted Statement of Financial Accounting Standards No. 121, and in connection
therewith, recorded an impairment loss of $1,900,000 for certain long-lived
assets.
Arthur Andersen LLP
Memphis, Tennessee
March 27, 1997 (except with respect
to the matter discussed in Note 14,
as to which the date is
November 10, 1997).
F-2
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ 1997
1995 1996 -------------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................. $ 1,825 $ 2,737 $ 2,054
Receivables, less allowance for doubtful
accounts of $481, $430 and $604.......... 8,683 6,285 7,446
Inventories, at the lower of first-in,
first-out cost or market................. 4,318 4,234 4,150
Prepaid expenses and other current
assets................................... 1,505 1,551 1,886
-------- -------- -------------
Total current assets....................... 16,331 14,807 15,536
Property and Equipment, at cost, net of
accumulated depreciation and
amortization............................... 117,435 115,086 114,312
Notes Receivable, less allowance for doubtful
accounts of $14, $10 and $6................ 1,883 805 558
Intangible and Other Assets, net of
accumulated amortization of $25,259,
$26,451 and $27,324........................ 26,180 24,958 25,798
-------- -------- -------------
$161,829 $155,656 $156,204
-------- -------- -------------
-------- -------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Current maturities of long-term debt....... $ 3,575 $ 4,356 $ 4,624
Current maturities of capital lease
obligations.............................. 1,984 1,683 1,430
Accounts payable........................... 7,525 8,878 12,546
Accrued expenses........................... 13,099 14,235 14,932
Distributions payable...................... 3,475 3,479 3,478
-------- -------- -------------
Total current liabilities.................. 29,658 32,631 37,010
Capital Lease Obligations, less current
maturities................................. 8,810 8,573 7,434
Long-Term Debt, less current maturities...... 57,850 48,244 43,026
Other Liabilities............................ 4,415 4,651 5,192
Commitments and Contingencies (Notes 4 and
10)........................................
Partners' Capital
General partner............................ 611 615 636
Limited partners (10,481,370, 10,492,930
and 10,487,495 Units issued and
outstanding)............................. 63,373 63,220 64,556
Deferred compensation related to restricted
units.................................... (2,888) (2,278) (1,650)
-------- -------- -------------
Total Partners' Capital...................... 61,096 61,557 63,542
-------- -------- -------------
$161,829 $155,656 $156,204
-------- -------- -------------
-------- -------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues
Food sales......................................... $ 205,675 $ 228,259 $ 234,164 $ 175,792 $ 185,069
Franchise revenues................................. 16,227 17,492 18,629 13,914 14,603
---------- ---------- ---------- ---------- ----------
Total Revenues..................................... 221,902 245,751 252,793 189,706 199,672
---------- ---------- ---------- ---------- ----------
Costs and Expenses
Cost of Sales
Food cost........................................ 57,975 66,204 68,456 51,247 53,099
Labor and benefits............................... 71,113 78,916 78,970 59,290 62,645
Operating expenses............................... 42,615 47,678 48,284 36,147 37,081
General and administrative......................... 21,779 22,251 23,741 17,655 19,593
Depreciation and amortization...................... 12,107 14,401 15,748 11,748 11,898
Interest, net...................................... 3,266 4,826 5,066 3,841 3,558
Provision for (Benefit from) litigation costs...... 1,079 (190) -- -- --
Provision for disposition of assets................ 800 609 -- -- --
Asset write-down (SFAS No. 121).................... -- 1,900 -- -- --
Tax related reorganization costs................... -- -- -- -- 650
Other, net......................................... (840) (640) (994) (721) (622)
---------- ---------- ---------- ---------- ----------
Total Costs and Expenses........................... 209,894 235,955 239,271 179,207 187,902
---------- ---------- ---------- ---------- ----------
Net Income........................................... $ 12,008 $ 9,796 $ 13,522 $ 10,499 $ 11,770
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted Average Equivalent Units.................... 10,275 10,269 10,289 10,289 10,338
Net Income Per Unit.................................. $ 1.16 $ 0.94 $ 1.30 $ 1.01 $ 1.13
Cash Distribution Declared Per Unit.................. $ 1.30 $ 1.30 $ 1.30 $ 0.975 $ 0.975
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- --------- ---------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993..................................................... $ 663 $ 65,592 $ 66,255
Net income....................................................................... 120 11,888 12,008
Capital contribution............................................................. 1 -- 1
Cash distributions declared ($1.30 per Unit)..................................... (136) (13,509) (13,645)
Issuance of 30,600 restricted Units.............................................. -- 545 545
Retirement of 20,830 restricted Units............................................ -- (341) (341)
Changes in deferred compensation related to restricted Units..................... -- 123 123
Repurchase of 16,800 Units....................................................... -- (168) (168)
--------- --------- ---------
BALANCE AT DECEMBER 31, 1994..................................................... 648 64,130 64,778
Net income....................................................................... 98 9,698 9,796
Capital contribution............................................................. 3 -- 3
Cash distributions declared ($1.30 per Unit)..................................... (138) (13,631) (13,769)
Issuance of 126,970 restricted Units............................................. -- 1,604 1,604
Retirement of 24,725 restricted Units............................................ -- (390) (390)
Changes in deferred compensation related to restricted Units..................... -- (926) (926)
--------- --------- ---------
BALANCE AT DECEMBER 31, 1995..................................................... 611 60,485 61,096
Net income....................................................................... 135 13,387 13,522
Capital contribution............................................................. 7 -- 7
Cash distributions declared ($1.30 per Unit)..................................... (138) (13,633) (13,771)
Issuance of 44,250 restricted Units.............................................. -- 544 544
Retirement of 32,690 restricted Units............................................ -- (451) (451)
Changes in deferred compensation related to restricted Units..................... -- 610 610
--------- --------- ---------
BALANCE AT DECEMBER 31, 1996..................................................... $ 615 $ 60,942 $ 61,557
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 12,008 $ 9,796 $ 13,522 $ 10,499 $ 11,770
Adjustments to reconcile net income to net cash
provided by operating activities:...................
Asset write-down (SFAS No. 121)..................... -- 1,900 -- -- --
Depreciation and amortization....................... 12,088 14,401 15,748 11,748 11,898
Provision for (Benefit from) litigation costs....... 1,079 (190) -- -- --
Provision for disposition of assets................. 800 609 -- -- --
Other non-cash income and expense items............. 1,533 1,498 1,795 1,444 1,254
Changes in other operating assets and liabilities... (2,747) (2,737) 4,180 1,866 977
---------- ---------- ---------- ---------- ----------
Total adjustments..................................... 12,753 15,481 21,723 15,058 14,129
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities............. 24,761 25,277 35,245 25,557 25,899
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment.................. (30,799) (28,931) (11,858) (9,282) (10,314)
Proceeds from sale of property and equipment.......... 389 889 573 573 --
Other investing activities, net....................... 687 723 1,755 1,671 489
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities................. (29,723) (27,319) (9,530) (7,038) (9,825)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.......................... 34,801 59,125 16,250 13,550 34,100
Payments on long-term debt............................ (15,301) (41,000) (25,075) (21,575) (39,050)
Principal payments under capital lease obligations.... (2,367) (1,981) (2,074) (1,553) (1,379)
Distributions to partners............................. (13,780) (13,870) (13,904) (10,428) (10,428)
Cash paid to repurchase Partnership Units............. (168) -- -- -- --
Other financing activities, net....................... (125) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities... 3,060 2,274 (24,803) (20,006) (16,757)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents......................................... (1,902) 232 912 (1,487) (683)
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS:
Balance, beginning of year............................ 3,495 1,593 1,825 1,825 2,737
---------- ---------- ---------- ---------- ----------
Balance, end of year.................................. $ 1,593 $ 1,825 $ 2,737 $ 338 $ 2,054
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The operations of Perkins Family Restaurants, L.P. ("PFR"), a Delaware
limited partnership, are conducted through Perkins Restaurants Operating
Company, L.P. ("PROC"), a Delaware limited partnership. PFR is the sole limited
partner and owns 99% of PROC. The combined activities of PFR and PROC are
referred to herein as activities of the "Partnership." The Partnership is
managed by Perkins Management Company, Inc. ("PMC"). PMC, a wholly-owned
subsidiary of Perkins Restaurants, Inc. ("PRI"), is the sole general partner and
owns 1% of both PROC and PFR. PRI owns approximately 48% of the Limited
Partnership Units ("Units") of PFR. PRI is a wholly-owned subsidiary of The
Restaurant Company ("TRC").
As general partner of the Partnership, PMC does not receive any compensation
other than distributions attributable to its 1% general partner's interest in
each of PROC and PFR. The Partnership reim-burses PMC for all of its direct and
indirect costs (principally general and administrative costs) allocable to the
Partnership.
The activities of the Partnership are governed by the terms of the
partnership agreements (the "Agreements"). The significant provisions of the
Agreements not described elsewhere are that the general partner has sole and
complete discretion in determining the consideration, terms and conditions with
respect to any future issuance of Units and no preemptive rights to acquire
additional Units exist.
The Partnership owns and franchises family-style restaurants which serve a
wide variety of high quality, moderately priced breakfast, lunch, and dinner
entrees, snacks and bakery products. Perkins restaurants provide table service
and many are open 24 hours a day (except Christmas day and certain late night
hours in selected markets), seven days a week. The restaurants are located in 32
states with the largest number in Minnesota, Ohio, New York, Pennsylvania, and
Florida. There are twelve franchised restaurants located in Canada. The
Partnership also offers cookie doughs, muffin batters, pancake mixes, pies and
other food products for sale to Partnership-operated and franchised restaurants
and bakery and food service distributors through Foxtail Foods, the
Partnership's manufacturing division.
BASIS OF PRESENTATION
The financial statements include the combined accounts of PFR and PROC after
elimination of all material intercompany amounts. Revenues and expenses are
allocated to the general and limited partners on the basis of their respective
ownership interests.
Certain prior year amounts have been reclassified to conform to current year
presentation.
ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Partnership considers highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
FRANCHISE REVENUE
Franchisees are required to pay an initial fee to the Partnership when each
franchise is granted. These fees are not recognized as income until the
restaurants open. The Partnership also receives franchise royalties ranging from
one to six percent of the gross sales of each franchised restaurant. These
royalties are recorded as income monthly.
PROPERTY AND EQUIPMENT
Major renewals and betterments are capitalized; replacements and maintenance
and repairs which do not extend the lives of the assets are charged to
operations as incurred.
PREOPENING COSTS
New store preopening costs are deferred and amortized over twelve months,
starting when the restaurant opens.
INCOME TAXES
For state and Federal income tax purposes, the Partnership is not a
taxpaying entity. As a result, the taxable income, which may vary substantially
from income reported for financial reporting purposes, is includable in the
state and Federal tax returns of the individual partners. Accordingly, no
current provision for income taxes is reflected in the accompanying financial
statements. The tax returns of the Partnership are subject to examination by
state and Federal taxing authorities. If such examinations result in changes to
taxable income, the tax liability of the partners would be changed accordingly.
The net income of publicly traded limited partnerships, such as the Partnership,
is considered portfolio income to their partners and is not available to offset
passive losses of the partners for tax years after 1986.
On December 22, 1987, tax legislation was enacted which will have the effect
of taxing the Partnership as a corporation for tax years beginning after 1997.
The Partnership could be subject to corporate income taxes earlier than 1998 if
it adds a substantial new line of business.
When the Partnership begins being taxed as a corporation on January 1, 1998,
the amount of cash available to the Partnership will be reduced by the amount of
cash necessary to pay taxes.
CASH DISTRIBUTIONS
The Partnership recognizes cash distributions payable to its partners as of
the declaration dates. Cash distributions of $1.30 per Unit were declared during
1996 and 1995 ($.325 per Unit during each quarter). As a limited partner, PRI
received approximately 48% of these total distributions.
F-8
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER UNIT
Net income per Unit is computed based on the weighted average number of
Units outstanding (adjusted for equivalent Units) after deducting the general
partner's 1% interest from Partnership earnings.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
The increase or decrease in cash and cash equivalents due to changes in
operating assets and liabilities and payments of interest consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- ----------------------
1994 1995 1996 1996 1997
--------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(Increase) Decrease in:
Receivables............................................. $ (2,395) $ (877) $ 1,726 $ 1,774 $ (2,158)
Inventories............................................. (688) (239) 84 199 84
Prepaid expenses and other current assets............... (1,159) (1,032) (739) (926) (473)
Other assets............................................ (82) 157 190 250 (1,380)
Increase (Decrease) in:
Accounts payable........................................ 1,228 (341) 1,353 274 3,668
Accrued expenses........................................ (153) (545) 1,294 (111) 697
Other liabilities....................................... 502 140 272 406 539
--------- --------- --------- ----------- ---------
$ (2,747) $ (2,737) $ 4,180 $ 1,866 $ 977
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Interest paid............................................. $ 3,637 $ 5,621 $ 5,443 $ 4,179 $ 3,646
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
</TABLE>
The Partnership entered into a master capital lease agreement during 1996
primarily to obtain restaurant equipment. The payment terms for each lease
schedule under the master lease provides for 72 monthly payments at interest
rates which vary from 7.1% to 8.9%. The capital lease obligations of two
properties targeted for disposition in 1993 were terminated during 1994 in
accordance with the related lease buyout agreements. The payments required by
the agreements are included in principal payments under capital lease
obligations in the Statements of Cash Flows. Losses on these terminations were
charged to the reserve established specifically for this purpose.
F-9
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
OWNED
Land and land improvements.................................. $ 27,065 $ 28,202
Buildings................................................... 61,543 65,873
Leasehold improvements...................................... 27,560 29,743
Equipment................................................... 51,812 54,387
Construction in progress.................................... 3,501 1,657
-------- --------
171,481 179,862
Less -- Accumulated depreciation and amortization........... (60,766) (70,932)
-------- --------
110,715 108,930
-------- --------
LEASED
Buildings................................................... 25,304 24,945
Equipment................................................... -- 1,564
Less -- Accumulated amortization............................ (18,584) (20,353)
-------- --------
6,720 6,156
-------- --------
$117,435 $115,086
-------- --------
-------- --------
</TABLE>
Depreciation and amortization for financial reporting purposes is computed
using the straight-line method based on the shorter of either the estimated
useful lives or the lease terms of the property, as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
OWNED:
Land improvements...................................................... 3-20
Buildings.............................................................. 20-30
Leasehold improvements................................................. 7-20
Equipment.............................................................. 3-7
LEASED:
Buildings.............................................................. 20-25
Equipment.............................................................. 6
</TABLE>
(4) LEASES
As of December 31, 1996, there were 134 restaurants operated by the
Partnership, as follows:
69 with both land and building leased
54 with both land and building owned
11 with the land leased and building owned
F-10
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) LEASES (CONTINUED)
As of December 31, 1996, there were 35 restaurants either leased or
subleased to others by the Partnership as follows:
19 with both land and building leased
11 with both land and building owned
5 with the land leased and building owned
Most of the restaurant leases have a primary term of 20 years and generally
provide for two to four renewals of five years each. Certain leases provide for
minimum payments plus a percentage of sales in excess of stipulated amounts.
Future minimum payments related to leases that have initial or remaining
lease terms in excess of one year as of December 31, 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
LEASE OBLIGATIONS
------------------
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997........................................................ $ 2,685 $ 5,809
1998........................................................ 2,241 5,602
1999........................................................ 1,989 5,296
2000........................................................ 1,599 4,695
2001........................................................ 1,518 4,308
Thereafter.................................................. 4,820 21,077
------- ---------
Total minimum lease payments................................ 14,852 $46,787
---------
---------
Less: Amounts representing interest......................... (4,596)
-------
Capital lease obligations............................... $10,256
-------
-------
</TABLE>
Capital lease obligations have effective interest rates ranging from 7.1% to
16.1% and are payable in monthly installments through 2011. Maturities of such
obligations at December 31, 1996 for the years 1997 through 2001 and thereafter
were $1,686,000, $1,408,000, $1,299,000, $1,036,000, $1,066,000 and $3,761,000,
respectively.
Future minimum gross rental receipts as of December 31, 1996, were as
follows (in thousands):
<TABLE>
<CAPTION>
AMOUNTS RECEIVABLE
AS
------------------
LESSOR SUBLESSOR
------- ---------
<S> <C> <C>
1997........................................................ $ 952 $ 1,761
1998........................................................ 959 1,575
1999........................................................ 969 1,347
2000........................................................ 980 1,081
2001........................................................ 941 1,053
Thereafter.................................................. 7,945 4,236
------- ---------
Total minimum lease rentals................................. $12,746 $11,053
------- ---------
------- ---------
</TABLE>
F-11
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) LEASES (CONTINUED)
The net rental expense included in the accompanying financial statements for
operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Minimum rentals........................................ $5,144 $5,064 $5,341
Contingent rentals..................................... 1,007 1,004 1,114
Less sublease rentals.................................. (918) (982) (1,041)
------ ------ ------
$5,233 $5,086 $5,414
------ ------ ------
------ ------ ------
</TABLE>
(5) INTANGIBLE AND OTHER ASSETS
Intangible and other assets, net of accumulated amortization, were as
follows as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Excess of cost over fair value of net assets acquired, being
amortized evenly over 30 to 40 years........................ $24,618 $23,627
Present value of estimated future royalty fee income of
acquired companies, being amortized evenly over the
remaining lives of the franchise agreements................. 574 423
Other......................................................... 988 908
------- -------
$26,180 $24,958
------- -------
------- -------
</TABLE>
The Partnership periodically reevaluates the realizability of its excess
cost over fair value of net assets acquired by comparing the unamortized balance
with projected undiscounted cash flows from operations. The realizability of
intangible assets related to future royalty fee income is also assessed
periodically based on the performance of the applicable franchise restaurants.
(6) ACCRUED EXPENSES
Accrued expenses consisted of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Payroll and benefits.......................................... $ 5,451 $ 7,543
Property, real estate and sales taxes......................... 2,093 2,006
Insurance..................................................... 1,475 1,232
Rent.......................................................... 1,025 1,165
Advertising................................................... 521 530
Other......................................................... 2,534 1,759
------- -------
$13,099 $14,235
------- -------
------- -------
</TABLE>
F-12
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
(7) LONG-TERM DEBT
Long-term debt consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Unsecured Senior Notes:
7.19%, due in quarterly installments beginning December 13, 1997 $ 20,000 $ 20,000
through December 13, 2005...........................................
8.6%, due in quarterly installments through July 1, 2002.............. 11,850 10,650
6.99%, due in quarterly installments through July 1, 2003............. 4,325 3,950
Revolving credit agreement, due June 30, 1997........................... 18,250 13,000
Term loan, due in quarterly installments through June 30, 1998.......... 7,000 5,000
--------- ---------
61,425 52,600
Less current maturities................................................. (3,575) (4,356)
--------- ---------
$ 57,850 $ 48,244
--------- ---------
--------- ---------
</TABLE>
On March 18, 1997, the Partnership entered into a commitment agreement with
its agent bank to provide a credit facility of up to $60,000,000. This is
composed of a $40,000,000 reducing revolving credit facility, a $15,000,000
revolving growth facility, and a $5,000,000 standby letter of credit facility.
The reducing revolving credit facility matures on March 31, 2002, and will
reduce $2,000,000 per year commencing on September 30, 1998. This facility will
initially be used to repay amounts outstanding under the Partnership's existing
revolving credit agreement and term loan. The revolving growth facility, which
may only be used for the acquisition of existing restaurants, converts to a term
loan on March 31, 2000, and amortizes in equal quarterly installments with final
maturity on March 31, 2004. The standby letter of credit facility matures on
March 31, 2002, and contains terms and conditions similar to the Partnership's
current agreement.
All amounts outstanding under this agreement bear interest at either the
Base Rate or LIBOR rates as defined in the agreement. Other terms and conditions
are similar to the Partnership's existing agreement. As a result of this
commitment, the Partnership has classified $13,000,000 as long-term debt.
During the fourth quarter of 1995, the Partnership issued $20,000,000 of
7.19% Unsecured Senior Notes due December 13, 2005 to an insurance company. The
proceeds were used to repay outstanding borrowings under the Partnership's
revolving line of credit. The note agreement also provides for a $15,000,000
Private Shelf Note Facility which expires December 13, 1997.
During the second quarter of 1994, the Partnership refinanced the
outstanding borrowings under its existing line of credit by entering into a
$40,000,000 revolving line of credit facility and a $10,000,000 term loan
agreement with three banks. The revolving line of credit contains a $6,000,000
sublimit for letters of credit and expires on June 30, 1997, at which time all
amounts become payable. At December 31, 1996, approximately $3,276,000 in
letters of credit were outstanding under the line of credit facility. The
borrowings under the term loan agreement are due in quarterly installments
through June 30, 1998. Pursuant to the revolving line of credit and term loan
facilities, all amounts outstanding under these agreements initially bear
interest at either the Base Rate or Euroloan Rates, as defined in the applicable
agreement.
In order to manage interest costs, the Partnership entered into an interest
rate swap agreement in 1994 with its lender that effectively fixes interest for
the term loan at 7.63%. The notional amount
F-13
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) LONG-TERM DEBT (CONTINUED)
protected by this transaction decreases as quarterly installments of principal
are made, and the LIBOR component is adjusted quarterly. The agreement expires
June 30, 1998.
The Partnership also entered into a participating interest rate swap and cap
agreement that protects the first $10,000,000 of borrowings outstanding under
the revolving line of credit facility. The first $5,300,000 is effectively fixed
at 8.25%, while the next $4,700,000 floats at either the Base Rate or the
Euroloan Rate pursuant to the terms of the line of credit facility, but is
capped at 8.25%. The swap and cap agreement is effective through June 30, 1997,
and the LIBOR component is adjusted quarterly.
These derivative financial instruments have an inherent element of risk that
the counterparties may be unable to meet the terms of the agreements. The
Partnership has minimized such risk exposure by limiting the counterparties to
major financial institutions.
Based on the borrowing rates currently available for debt with similar terms
and maturities, the approximate fair market value of the Partnership's long-term
debt as of December 31 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
7.19% Unsecured Senior Notes............................................ $ 20,000 $ 19,412
8.6% Unsecured Senior Notes............................................. 12,398 10,842
6.99% Unsecured Senior Notes............................................ 4,300 3,830
Interest Rate Swap Agreement............................................ 154 126
Participating Interest Rate Swap and Cap Agreement...................... 156 51
</TABLE>
The values associated with the interest rate swaps represent the estimated
contract values as reported to the Partnership by the commercial bank that is
the counterparty to these agreements.
Because the terms of the Partnership's revolving line of credit and term
loan facilities provide that borrowings outstanding under those agreements bear
interest at current market rates, management believes that the related
liabilities reflected in the accompanying balance sheets approximate fair market
value.
Pursuant to both the Unsecured Senior Notes and revolving line of credit
agreements, the Partnership must maintain a minimum tangible net worth and other
specified financial ratios, and is subject to certain restrictions which limit
additional indebtedness.
At December 31, 1996, the Partnership was in compliance with all such
requirements.
F-14
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of long-term debt subsequent to December 31,
1996 were as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 4,356
1998............................................................... 7,674
1999............................................................... 4,824
2000............................................................... 5,049
2001............................................................... 5,199
Thereafter......................................................... 25,498
---------
$ 52,600
---------
---------
</TABLE>
Interest expense capitalized in connection with the Partnership's
construction activities amounted to approximately $136,000, $153,000 and
$331,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
(8) LIMITED PARTNERSHIP UNITS
Limited Partnership Units issued and outstanding were as follows:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Units issued and outstanding, beginning of year................... 10,379,125 10,481,370
Issuance of restricted Units...................................... 126,970 44,250
Retirement of restricted Units.................................... (24,725) (32,690)
------------ ------------
Units issued and outstanding, end of year......................... 10,481,370 10,492,930
------------ ------------
------------ ------------
</TABLE>
(9) INCOME TAXES
As of January 1, 1993, the Partnership recorded the cumulative effect of
adopting SFAS No. 109. SFAS No. 109 requires the Partnership to recognize
deferred tax assets and liabilities for the expected future tax consequences of
existing temporary differences between the carrying amounts and the tax bases of
assets and liabilities that are projected to reverse after January 1, 1998, the
date after which the Partnership will become a taxable entity. As of December
31, 1996, the Partnership had deferred tax assets that equaled or exceeded
deferred tax liabilities. The deferred tax assets and liabilities are related to
existing temporary differences that are projected to reverse after January 1,
1998. Management believes that a conclusion as to the realizability of these
assets based upon current circumstances is highly subjective, and has therefore
established a valuation allowance. Accordingly, no deferred provision for income
taxes has been reflected in the accompanying financial statements.
F-15
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
(9) INCOME TAXES (CONTINUED)
The components of the Partnership's net deferred tax assets as of December
31 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Depreciation............................................................. $ (1,670) $ (1,505)
Capitalized leases....................................................... 1,240 1,303
Reserves................................................................. 795 372
Other, net............................................................... 210 230
--------- ---------
Total deferred tax assets................................................ 575 400
Valuation allowance...................................................... (575) (400)
--------- ---------
Net deferred tax assets.................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
(10) CONTINGENCIES
During 1996, a lawsuit filed in 1995 by two former employees in the U.S.
District Court for the District of North Dakota alleging sexual harassment and
related claims was resolved after a trial in favor of Perkins as to one
plaintiff and a judgement against Perkins as to the other plaintiff of $3,500.
In 1994, the Partnership recorded a provision of $1,079,000 for damages
associated with two separate lawsuits brought against the Partnership. During
the second quarter of 1995, the Partnership settled one of the suits for
$190,000 less than the original provision and the excess accrual was reversed.
The second suit was settled in October 1995 for the amount originally accrued.
The Partnership is a party to various legal proceedings in the ordinary
course of business. Management does not believe it is likely that these
proceedings, either individually or in the aggregate, will have a material
adverse effect on the Partnership's financial position or results of operations.
The Partnership has sponsored financing programs offered by certain lending
institutions to help its franchisees procure funds for the construction of new
franchised restaurants and to purchase and install the Perkins in-store bakery.
The Partnership provides a limited guaranty of the funds borrowed. At December
31, 1996, there were approximately $2,746,000 in borrowings outstanding under
these programs. The Partnership has guaranteed $965,000 of these borrowings
which represents its minimum commitments under these agreements. The Partnership
does not anticipate its guaranties will exceed these minimums in the future.
During 1995, the Partnership entered into a separate agreement with one of
the lending institutions to assist a franchisee in obtaining lease financing to
install in-store bakeries in 28 existing restaurants operated by the franchisee.
Pursuant to the agreement, the Partnership will provide a declining limited
guaranty to the lender for payment of the franchisee's obligations between the
lender and the franchisee, not to exceed $1,350,000. The Partnership's current
maximum liability if the maximum lease commitment is funded would be $945,000.
At December 31, 1996, there were approximately $547,000 in borrowings
outstanding under the program, of which the Partnership has guaranteed
approximately $383,000.
The majority of the Partnership's franchise revenues are generated from
franchisees owning less than 5% of total franchised restaurants and, therefore,
the loss of any one of these franchisees would not have a material impact on the
results of the Partnership's operations. As of December 31, 1996, three
franchisees
F-16
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(10) CONTINGENCIES (CONTINUED)
owned 94 of the 331 restaurants franchised by Perkins. During 1996, the
Partnership received net royalties and license fees of approximately $1,505,000,
$1,955,000 and $1,033,000 from these franchisees. While the exit of one of these
franchisees from the system would have a material impact on the future revenues
of the Partnership, such an occurrence would not disrupt the normal functioning
of the Partnership.
(11) UNIT PLAN
The Perkins Family Restaurants, L.P. Restricted Limited Partnership Unit
Plan ("Unit Plan") was initially adopted in October 1987. At December 31, 1996 a
total of 450,000 Units were authorized for issuance under the Unit Plan.
Awards of restricted Units under the Unit Plan may be made to officers and
key employees of PMC, PRI and their affiliates as well as certain members of
PMC's Board of Directors. A committee composed of those non-employee directors
of PMC (the "Committee") has been appointed to administer the Unit Plan. At the
time of each award, the Committee determines the applicable award restrictions,
including, without limitation, (i) a restricted period (not to exceed ten years)
during which the Units cannot be sold, transferred or pledged and (ii) the
date(s) on which restrictions on all or a portion of the Units awarded lapse. To
the extent declared, cash distributions are paid on all Units awarded under the
Unit Plan even during the restricted period.
At December 31, 1996, there were 423,730 Units issued and outstanding under
the Unit Plan. The expense related to the Unit Plan is recognized over the
periods in which the restrictions on the Units lapse. As of December 31, 1996,
restrictions had lapsed on 214,910 of the 423,730 Units issued under the Unit
Plan. On January 2, 1997 and February 4, 1997, the Board of Directors removed
restrictions on an additional 13,690 and 32,862 Units, respectively. The
unamortized amount of $2,278,000 related to the remaining 162,268 Units is
reflected as deferred compensation in the accompanying balance sheets.
(12) EMPLOYEE BENEFITS
The Perkins Retirement Savings Plan (the "Plan") as amended and restated
effective January 1, 1992, was established for the benefit of all eligible
employees, both hourly and salaried, of PROC and of any Participating Company,
as defined. At December 31, 1996, Participating Companies were PMC, PFR, TRC
Realty and TRC.
All participating employees at December 31, 1991 remained eligible to
participate in the Plan as amended and restated January 1, 1992. All other
employees of the Partnership and Participating Companies who have satisfied the
participation requirements are eligible for participation in the Plan provided
they (i) have attained the age of 21 and (ii) have completed one Year of
Service, as defined, during which they have been credited with 1,000 Hours of
Service.
Participants may elect to defer from 1% to 15% of their annual eligible
compensation subject to legal maximums. PROC and Participating Companies may
make a matching contribution equal to a percentage of the amount deferred by the
participant or a specified dollar amount as determined each year by their Boards
of Directors. During 1995, the Partnership, PMC, and TRC Realty matched
contributions at a rate of 25%, up to the first 6% deferred by each participant.
During 1996, the Partnership and PMC elected to match contributions at a rate of
50% up to the first 6% deferred by each participant. Neither PFR nor TRC had
employees participating in the Plan at any time during 1996, 1995 or 1994. TRC
Realty had no participating employees during 1994.
F-17
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(12) EMPLOYEE BENEFITS (CONTINUED)
Participants are always 100% vested in their salary deferral accounts and
qualified rollover accounts. Vesting in the employer matching account is based
on qualifying Years of Service. A participant vests 60% in the employer matching
account after three years, 80% after four years and 100% after five years.
A participant may apply for a loan from his or her salary deferral and
rollover accounts. Generally, loans are made for a period of five years (ten
years if for the purchase of the principal residence of the participant) subject
to certain restrictions. The interest rate is fixed at the Prime Rate at the
time of the loan plus two percent.
The trust established under the Plan is intended to qualify under the
appropriate section of the Internal Revenue Code (the "IRC") as exempt from
Federal income taxes. The Plan has received a favorable determination by the
Internal Revenue Service with regard to the qualification of the Plan. The
favorable determination applies to the original Plan as well as all amendments
adopted prior to 1995. The fourth amendment to the Plan, adopted in 1995, will
be submitted for determination at a later date. The Partnership's management and
legal counsel believe that the adoption of the aforementioned amendment to the
Plan does not hinder the Plan's ability to operate in compliance with all
applicable provisions of the IRC and that a favorable determination will be
received.
(13) ASSET WRITE-DOWN (SFAS NO. 121)
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." SFAS No. 121 requires companies to evaluate the recoverability
of assets (including intangibles) based upon their related undiscounted
estimated future cash flows. The Partnership adopted SFAS No. 121 in 1995.
In adopting SFAS No. 121, the Partnership evaluated all material asset
groups, including intangibles associated with specific Partnership-operated
properties and specific franchise agreements. As a result of this review, the
Partnership identified three restaurant properties which were not expected to
generate undiscounted future cash flows sufficient to cover the carrying value
of the underlying assets related to these properties.
As required under SFAS No. 121, the carrying amounts of the assets
associated with these restaurant properties were written down to their estimated
fair market values, based on the Partnership's experience in disposing of
similar under-performing properties, negotiations with lessors of the subject
properties and historical industry lease rates for similarly performing real
estate. The resulting non-cash charge reduced 1995 net income by $1,900,000, of
which $1,290,000 was related to assets to be disposed of. The remaining amounts
were due to write-downs of long-term assets deemed by the Partnership to be
impaired. The major components of the SFAS No. 121 charge were as follows (in
thousands):
<TABLE>
<S> <C>
Reduction of the carrying values of operating assets to fair market
values............................................................ $ 1,428
Net present value of noncancelable lease commitments, less estimated
sublease income................................................... 367
Other disposal costs, including commissions......................... 105
---------
$ 1,900
---------
---------
</TABLE>
Management is aggressively pursuing subleasing one of the properties. Based
on the expected sublease rental income on this property, the carrying amounts of
all owned and leased assets related to this
F-18
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(13) ASSET WRITE-DOWN (SFAS NO. 121) (CONTINUED)
property were concluded to have no fair market value. A provision for future
losses was recorded to reflect the net present value of the future lease
payments less estimated sublease income on this property. The Partnership's
results of operations include losses related to this property of $197,000,
$277,000 and $229,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.
During 1994, a provision of $800,000 was recorded to further reduce the
carrying value of assets related to certain underperforming stores which had
been targeted for disposition in 1993. As of December 31, 1995, the Partnership
had substantially completed the disposition of these properties.
There were no additional write-downs during 1996. Management believes that
estimates used in evaluating the adoption of SFAS No. 121 were reasonable.
However, actual expenses and cash flows could differ from these estimates.
(14) SUBSEQUENT EVENT AND RELATED RISK FACTORS
On September 11, 1997, PFR, TRC and Perkins Acquisition Corp. entered into a
merger agreement that provides for a series of transactions (collectively, the
"Going Private Transaction") whereby PROC will be merged into PFR, PFR will
become an indirect wholly owned subsidiary of TRC and the approximately 5.44
million Units held by persons other than TRC and its subsidiaries will be
converted into the right to receive $14.00 in cash per Unit. A special meeting
of the holders of Units is expected to take place in December 1997 to approve
the Going Private Transaction. The consummation of the Going Private Transaction
is conditioned upon the favorable vote of a majority of the public Units voting
at such meeting; accordingly, there can be no assurance that the Going Private
Transaction will be consummated.
If the Going Private Transaction is approved by the public Unitholders,
approximately $89.1 million will be required to consummate the transaction and
to pay related fees and expenses, and approximately $47.6 million will be
required to refinance PFR's existing indebtedness (based on indebtedness
outstanding on September 30, 1997). Such funds are expected to be obtained from
the net proceeds of (a) the sale of $130.0 million of senior notes (the "Notes")
by PFR and Perkins Finance Corp. ("PFC"), a wholly-owned subsidiary of PFR
incorporated on November 6, 1997 (PFR and PFC being collectively referred to as
"the Issuers"), and (b) a new credit facility (the "New Credit Facility") to be
entered into by PFR concurrently with the closing of the sale of the Notes.
If the Going Private Transaction is consummated, and the related Note and
New Credit Facility financings occur, PFR will be highly leveraged.
Additionally, upon a Change of Control (as defined), each Holder of the Notes
would have the right to require the Issuers to purchase all or any part of such
Holder's Notes at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages (as defined),
if any, to the date of purchase. There can be no assurance that the Issuers will
have adequate funds available to repurchase the Notes. Finally, the New Credit
Facility will be secured by liens on substantially all of PFR's and its
subsidiaries' assets. The Notes will be effectively subordinated to all such
secured indebtedness.
F-19
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(IN THOUSANDS, EXCEPT NET INCOME PER UNIT)
<TABLE>
<CAPTION>
GROSS NET NET INCOME
1997 REVENUES PROFIT (A) INCOME PER UNIT
- --------------------------------------------------------------------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1st Quarter.......................................................... $ 61,481 $ 13,875 $ 2,725 $ 0.26
2nd Quarter.......................................................... 66,588 15,767 3,464 0.33
3rd Quarter.......................................................... 71,603 17,205 5,581 0.53
1996
- ---------------------------------------------------------------------
1st Quarter.......................................................... $ 59,973 $ 12,761 $ 2,275 $ 0.22
2nd Quarter.......................................................... 63,516 14,469 3,352 0.32
3rd Quarter.......................................................... 66,217 15,792 4,872 0.47
4th Quarter.......................................................... 63,087 14,061 3,023 0.29
1995
- ---------------------------------------------------------------------
1st Quarter.......................................................... $ 56,913 $ 12,093 $ 2,200 $ 0.21
2nd Quarter.......................................................... 60,843 12,999 2,912 0.28
3rd Quarter.......................................................... 66,334 15,064 4,200 0.40
4th Quarter.......................................................... 61,661 12,797 484 0.05
(a) Represents total revenues less cost of sales.
</TABLE>
F-20
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The accompanying unaudited pro forma financial statements have been prepared
to reflect: (a) the issuance of the Notes, (b) estimated initial borrowings
under the New Credit Facility, (c) application of the proceeds of the foregoing,
as set forth in "Use of Proceeds" and (d) the Going Private Transaction (such
transactions being collectively referred to herein as "the Transactions"). The
accompanying unaudited pro forma statements of income for the year ended
December 31, 1996 and the nine months ended September 30, 1997, have been
prepared as if the Transactions had occurred as of the beginning of 1996. The
accompanying unaudited pro forma balance sheet has been prepared as if the
Transactions had occurred as of September 30, 1997.
As a result of the Going Private Transaction, the Company became an indirect
wholly-owned subsidiary of TRC. Accordingly, TRC will treat the Going Private
Transaction as an acquisition of a minority interest of a subsidiary and account
for it in accordance with the purchase method of accounting as a step
acquisition. The accompanying unaudited pro forma financial statements include
adjustments to "push-down" to the Company's financial statements TRC's new basis
in the Company's assets and liabilities.
The unaudited pro forma financial statements should be read in conjunction
with the financial statements of the Company and the related notes thereto and
management's discussion thereof included elsewhere in this Prospectus.
Additionally, the unaudited pro forma financial statements do not purport to
represent what the Company's results of operations or financial position would
have been had the Transactions occurred as of the assumed dates indicated above
or to project the Company's results of operations or financial position in any
future period.
F-21
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT EARNINGS PER UNIT)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Food sales............................................................. $ 234,164 $ -- $ 234,164
Franchise revenues..................................................... 18,629 -- 18,629
---------- ----------- -----------
252,793 -- 252,793
---------- ----------- -----------
COST AND EXPENSES
Cost of sales
Food cost............................................................ 68,456 -- 68,456
Labor and benefits................................................... 78,970 -- 78,970
Operating expenses................................................... 48,284 -- 48,284
General and administrative............................................. 23,741 (704)(a) 23,037
Depreciation and amortization.......................................... 15,748 2,788(b) 18,536
Interest, net.......................................................... 5,066 10,822(c) 15,888
Other, net............................................................. (994) -- (994)
---------- ----------- -----------
239,271 12,906 252,177
---------- ----------- -----------
NET INCOME............................................................... $ 13,522 $ (12,906) $ 616
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Equivalent Units........................................ 10,289 (5,246)(e) 5,043
---------- ----------- -----------
---------- ----------- -----------
Net Income Per Equivalent Unit........................................... $ 1.30 $ 0.12
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Statements.
F-22
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT EARNINGS PER UNIT)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ -----------
<S> <C> <C> <C>
REVENUES
Food sales............................................................... $ 185,069 $ -- $ 185,069
Franchise revenues....................................................... 14,603 -- 14,603
---------- ------------ -----------
199,672 -- 199,672
---------- ------------ -----------
COST AND EXPENSES
Cost of sales
Food cost.............................................................. 53,099 -- 53,099
Labor and benefits..................................................... 62,645 -- 62,645
Operating expenses..................................................... 37,081 -- 37,081
General and administrative............................................... 19,593 (550) (a) 19,043
Depreciation and amortization............................................ 11,898 2,091(b) 13,989
Interest, net............................................................ 3,558 8,103(d) 11,661
Other, net............................................................... 28 -- 28
---------- ------------ -----------
187,902 9,644 197,546
---------- ------------ -----------
NET INCOME................................................................. $ 11,770 $ (9,644) $ 2,126
---------- ------------ -----------
---------- ------------ -----------
Weighted Average Equivalent Units.......................................... 10,338 (5,295) (e) 5,043
---------- ------------ -----------
---------- ------------ -----------
Net Income Per Equivalent Unit............................................. $ 1.13 $ 0.42
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Statements.
F-23
<PAGE>
PERKINS FAMILY RESTAURANTS, L.P.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 2,054 $ -- $ 2,054
Receivables, net....................................................... 7,446 -- 7,446
Inventories............................................................ 4,150 -- 4,150
Prepaid expenses and other current assets.............................. 1,886 -- 1,886
---------- -------------- -----------
Total current assets............................................... 15,536 -- 15,536
Property and Equipment, net.............................................. 114,312 14,699(i) 129,011
Notes Receivable, net.................................................... 558 -- 558
Intangibles and Other Assets............................................. 25,798 10,753(i) 62,247
19,309(i)
6,387(h)
---------- -------------- -----------
$ 156,204 $ 51,148 $ 207,352
---------- -------------- -----------
---------- -------------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt................................... $ 4,624 $ (4,624) (f) $ --
Current maturities of capital lease obligations........................ 1,430 -- 1,430
Accounts payable....................................................... 12,546 -- 12,546
Accrued expenses....................................................... 14,932 -- 14,932
Distributions payable.................................................. 3,478 -- 3,478
---------- -------------- -----------
Total current liabilities.......................................... 37,010 (4,624) 32,386
Capital Lease Obligations, less current maturities....................... 7,434 -- 7,434
Long-Term Debt, less current maturities.................................. 43,026 136,779(h) 136,779
(47,650) (h)
4,624(f)
Other Liabilities........................................................ 5,192 -- 5,192
Partners' Capital:
Partners' capital...................................................... 65,192 (78,063) (h) 25,561
(4,679) (h)
44,761(i)
(1,650) (g)
Deferred compensation.................................................. (1,650) 1,650(g) --
---------- -------------- -----------
Total partners' capital............................................ 63,542 (37,981) 25,561
---------- -------------- -----------
$ 156,204 $ 51,148 $ 207,352
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Statements.
F-24
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(a) To eliminate amortization of deferred compensation related to restricted
Units which are being repurchased in connection with the Transactions.
(b) To record additional amortization and depreciation related to "push-down"
purchase accounting adjustments resulting in a write-up of property and
equipment and intangibles. The calculation of such amounts is as follows:
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENT
WEIGHTED --------------------------
AMOUNT OF AVERAGE LIFE YEAR ENDED NINE MONTHS
WRITE-UP (YEARS) 12/31/96 ENDED 9/30/97
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Property and equipment......................... $ 14,699 9 $ 1,633 $ 1,225
Franchise agreements........................... 10,753 16 672 504
Goodwill....................................... 19,309 40 483 362
----------- ------
$ 2,788 $ 2,091
----------- ------
----------- ------
</TABLE>
(c) To record interest on the Notes of $13,163 ($130,000 at a rate of 10.125%
per annum), interest on the estimated initial borrowings under New Credit
Facility of $593 ($6,779 at an assumed rate of 8.75% per annum),
amortization of debt financing costs of $809, and eliminate $3,743 of
interest and amortization of debt financing costs on pre-existing debt which
is being refinanced in connection with the Transactions.
(d) To record interest on the Notes of $9,872 ($130,000 at a rate of 10.125% per
annum), interest on the estimated initial borrowings under New Credit
Facility of $445 ($6,779 at an assumed rate of 8.75% per annum),
amortization of debt financing costs of $607, and eliminate $2,821 of
interest and amortization of debt financing costs on pre-existing debt which
is being refinanced in connection with the Transactions.
(e) To eliminate Units which are being repurchased in connection with the
Transactions.
(f) To reclassify long-term debt to appropriately classify current maturities of
long-term debt as a result of the Transactions.
(g) To record the acceleration of amortization of deferred compensation related
to the restricted Units which are being repurchased in connection with the
Transactions.
(h) To record the issuance of the Notes ($130,000) and estimated initial
borrowings under the New Credit Facility ($6,779) and the application of the
estimated proceeds therefrom as follows:
<TABLE>
<S> <C>
Effect the Going Private Transaction (including direct costs of
$1,840)......................................................... $ 78,063
Refinance existing debt........................................... 47,650
Non-capitalizable costs of the Transactions....................... 4,679
Deferred financing costs.......................................... 6,387
---------
Total............................................................. $ 136,779
---------
---------
</TABLE>
F-25
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
(i) To record "push-down" accounting adjustments to reflect TRC's treatment of
the Going Private Transaction as an acquisition of a minority interest of a
subsidiary and accounting for such in accordance with the purchase method of
accounting as a step acquisition.
<TABLE>
<S> <C>
Total purchase price of Units (including direct costs of
$1,840)......................................................... $ 78,063
Less: Minority interest in PFR.................................... (33,302)
---------
$ 44,761
---------
---------
Allocation of step-up of assets:
Property and equipment.......................................... $ 14,699
Franchise agreements............................................ 10,753
Intangibles..................................................... 19,309
---------
$ 44,761
---------
---------
</TABLE>
The allocation of the step-up of assets is preliminary pending receipt of a
final appraisal.
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Perkins Finance Corp.:
We have audited the accompanying balance sheet of PERKINS FINANCE CORP. (a
Delaware corporation) as of November 10, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Perkins Finance Corp. as of
November 10, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Memphis, Tennessee,
November 10, 1997.
F-27
<PAGE>
PERKINS FINANCE CORP.
BALANCE SHEET
AS OF NOVEMBER 10, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................. $ 100
---------
---------
STOCKHOLDER'S EQUITY
Common stock, $.01 par value, 1,000 shares authorized,
100 shares issued and outstanding.................................................. $ 1
Additional paid-in capital........................................................... 99
---------
$ 100
---------
---------
</TABLE>
The accompanying note to financial statement is an integral part of this balance
sheet.
F-28
<PAGE>
PERKINS FINANCE CORP.
NOTE TO FINANCIAL STATEMENT
NOVEMBER 10, 1997
(1) ORGANIZATION AND PURPOSE
Perkins Finance Corp. ("PFC") was incorporated in the state of Delaware on
November 6, 1997, and capitalized on November 10, 1997. PFC is a wholly-owned
subsidiary of Perkins Family Restaurants, L.P. ("PFR") and was formed for the
purpose of serving as co-issuer, together with PFR, of $130 million of senior
notes (the "Notes").
PFR is a publicly-traded limited partnership. The Restaurant Company ("TRC")
indirectly owns 48.1% of the outstanding Units of limited partnership interests
and indirectly owns PFR's general partner, which has a 1% interest in PFR. The
remainder of PFR's limited partnership interests are traded on the New York
Stock Exchange. PFR currently conducts its business through an operating
partnership, Perkins Restaurants Operating Company, L.P. (the "Operating
Partnership"). On September 11, 1997, PFR, TRC and Perkins Acquisition Corp.
entered into a Merger Agreement that provides for a series of transactions
(collectively, the "Going Private Transaction") whereby the Operating
Partnership will be merged into PFR, PFR will become an indirect wholly-owned
subsidiary of TRC and the approximately 5.44 million Units of limited
partnership interests in PFR held by persons other than TRC and its subsidiaries
will be converted into the right to receive $14.00 in cash per Unit.
Approximately $89 million will be required to consummate the Going Private
Transaction and to pay related fees and expenses, and approximately $50 million
will be required to refinance PFR's existing credit facility. Such funds are
expected to be obtained from the net proceeds of the sale of the Notes and from
the proceeds of a new credit facility to be entered into by PFR concurrently
with the closing of the sale of the Notes.
PFC does not, and is not expected to, have substantial operations or assets
of any kind.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Perkins Management Company, Inc.:
We have audited the accompanying balance sheet of PERKINS MANAGEMENT
COMPANY, INC. (a Delaware corporation) as of December 31, 1996. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Perkins Management Company, Inc. as
of December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Memphis, Tennessee,
November 7, 1997.
F-30
<PAGE>
PERKINS MANAGEMENT COMPANY, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................................................. $ 474
Receivables from affiliates............................................................................ 196
Prepaid expenses and other current assets.............................................................. 617
Deferred income taxes.................................................................................. 21
---------
Total current assets............................................................................... 1,308
INVESTMENT IN AFFILIATES................................................................................. 1,205
RECEIVABLES FROM AFFILIATES.............................................................................. 1,696
---------
$ 4,209
---------
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABLITIES:
Accounts payable....................................................................................... $ 314
Accrued expenses....................................................................................... 621
---------
Total current liabilities.......................................................................... 935
DEFERRED INCOME TAXES.................................................................................... 377
STOCKHOLDER'S EQUITY:
Common stock, no par value, 1,000 shares authorized,
100 shares issued and outstanding.................................................................. --
Additional paid-in capital........................................................................... 6,407
Capital contribution receivable...................................................................... (4,900)
Retained earnings.................................................................................... 1,390
---------
Total stockholder's equity......................................................................... 2,897
---------
$ 4,209
---------
---------
</TABLE>
The accompanying notes to financial statement are an integral part of this
balance sheet.
F-31
<PAGE>
PERKINS MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 1996
(1) ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION --
Perkins Management Company, Inc. ("PMC") is the general partner and manager
of Perkins Family Restaurants, L.P. ("PFR"), a Delaware limited partnership, and
Perkins Restaurants Operating Company, L.P. ("PROC"), the entity through which
PFR's operations are conducted. PFR is the sole limited partner and owns 99% of
PROC. The combined activities of PFR and PROC are referred to herein as
activities of the "Partnership." PMC, a wholly-owned subsidiary of Perkins
Restaurants, Inc. ("PRI"), owns 1% of both PROC and PFR, and the remainder of
PFR's limited partnership units are traded on the New York Stock Exchange. PRI
owns approximately 48% of the limited partnership units of PFR. PRI is a
wholly-owned subsidiary of The Restaurant Company ("TRC").
As general partner of the Partnership, PMC does not receive any compensation
other than distributions attributable to its 1% general partner's interest. PROC
reimburses PMC for all of its direct and indirect costs (principally general and
administrative costs) allocable to the Partnership.
BASIS OF PRESENTATION --
The balance sheet has been prepared by PMC's management in accordance with
U.S. generally accepted accounting principles. The preparation of a balance
sheet in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the balance sheet. Actual results could differ from those estimates.
PMC uses the equity method to account for its investments in PROC and PFR.
(2) ACCRUED EXPENSES:
Accrued expenses consisted of the following as of December 31, 1996 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Payroll and benefits.................................................................. $ 454
Property, real estate and state taxes................................................. 27
Other................................................................................. 140
---------
$ 621
---------
---------
</TABLE>
F-32
<PAGE>
PERKINS MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1996
(3) INCOME TAXES:
TRC and its subsidiaries file a consolidated Federal income tax return. For
state purposes, each subsidiary generally files a separate return. The
components of PMC's net deferred tax liability as of December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
CURRENT NONCURRENT
----------- -------------
<S> <C> <C>
Capital leases.......................................................... $ -- $ 34
Other................................................................... 21 3
----- -----
Deferred tax assets................................................... 21 37
----- -----
Investment in partnerships.............................................. -- (369)
Depreciation and amortization........................................... -- (45)
----- -----
Deferred tax liabilities.............................................. -- (414)
----- -----
$ 21 $ (377)
----- -----
----- -----
</TABLE>
(4) RECEIVABLES FROM AFFILIATES:
PMC has a note receivable from PRI for $4.9 million related to PRI's
original capital contribution to PMC. Additionally, PMC makes cash advances to
PRI for general corporate purposes. PRI pays interest on the note receivable and
cash advances based on the prime rate.
(5) SUBSEQUENT EVENT:
On September 11, 1997, PFR, TRC and Perkins Acquisition Corp. entered into a
Merger Agreement that provides for a series of transactions (collectively, the
"Going Private Transaction") whereby PROC will be merged into PFR, PFR will
become an indirect wholly-owned subsidiary of TRC and the approximately 5.44
million units of limited partnership interests in PFR held by persons other than
TRC and its subsidiaries will be converted into the right to receive $14.00 in
cash per Unit.
Approximately $89 million will be required to consummate the Going Private
Transaction and to pay related fees and expenses, and approximately $50 million
will be required to refinance PFR's existing credit facility. Such funds are
expected to be obtained from the net proceeds of the sale of $130 million of
senior notes (the "Notes") and from the proceeds of a new credit facility to be
entered into by PFR concurrently with the closing of the sale of the Notes.
F-33
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 14
The Going Private Transaction............................................. 20
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Selected Historical and Pro Forma Financial and Other Data................ 23
Management's Discussion and Analysis
of Results of Operations and Financial Condition........................ 25
Business.................................................................. 34
Management................................................................ 44
Executive Compensation.................................................... 47
Beneficial Ownership of Units............................................. 49
Certain Transactions...................................................... 50
Description of Other Indebtedness......................................... 52
The Exchange Offer........................................................ 53
Description of Notes...................................................... 63
Plan of Distribution...................................................... 92
Certain Federal Income Tax Considerations................................. 93
Legal Matters............................................................. 93
Independent Public Accountants............................................ 93
Available Information..................................................... 93
Index to Financial Statements............................................. F-1
</TABLE>
[LOGO]
PERKINS FAMILY
RESTAURANTS, L.P.
PERKINS FINANCE CORP.
10 1/8% SERIES B
SENIOR NOTES
DUE 2007
------
PROSPECTUS
JANUARY , 1998
---------
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides that, subject to any applicable restrictions set forth in the
partnership agreement, a Delaware limited partnership may indemnify and hold
harmless any partner or other person from and against any and all claims and
demands whatsoever.
Section 6.9 of the Partnership's Amended and Restated Agreement of Limited
Partnership provides for indemnification of its directors and officers as
follows:
1. To the fullest extent permitted by law, the General Partner, its
Affiliates and its directors, officers, partners, employees and agents
(individually, an "Indemnitee") shall each be indemnified and held harmless by
the Partnership from and against any and all losses, claims, damages,
liabilities, joint and several, expenses (including legal fees and expenses),
judgments, fines, settlements and other amounts arising from any and all claims,
demands, actions, suits or proceedings, civil, criminal, administrative or
investigative, in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of its status as (x) a General
Partner or an Affiliate thereof or (y) a director, officer, partner, employee or
agent of the General Partner or an Affiliate or (z) a Person serving at the
request of the Partnership in another entity in a similar capacity, which relate
to or arise out of the Partnership, its property, business or affairs,
including, without limitation, the Initial Offering, regardless of whether the
Indemnitee continues to be the General Partner or an Affiliate or a director,
officer, partner, employee or agent of the General Partner or an Affiliate
thereof at the time any such liability or expense is paid or incurred, if (i)
the Indemnitee acted in good faith and in a manner it in good faith believed to
be in, or not opposed to, the best interests of the Partnership, and with
respect to any criminal proceeding, had no reasonable cause to believe that its
conduct was unlawful, and (ii) the Indemnitee's conduct did not constitute gross
negligence or willful or wanton misconduct. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
the Indemnitee acted in a manner contrary to that specified in (i) or (ii)
above. Any indemnification pursuant to this Section 6.9 shall be made only out
of the assets of the Partnership.
2. To the fullest extent permitted by law, expenses (including legal fees)
incurred by an Indemnitee in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of an undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 6.9.
3. The indemnification provided by this Section 6.9 shall be in addition to
any other rights to which an Indemnitee may be entitled under any agreement,
vote of the Partners, as a matter of law or otherwise, both as to action in the
Indemnitee's capacity as the General Partner or an Affiliate or as a director,
officer or employee of the General Partner or an Affiliate and to action in any
other capacity (including, without limitation, any capacity under the
Underwriting Agreement and the Conveyance Agreement), and shall continue as to
an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
4. The Partnership may purchase and maintain insurance on behalf of the
General Partner and such other Persons as the General Partner shall determine
against any liability that may be asserted against or expense that may be
incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
II-1
<PAGE>
5. For purposes of this Section 6.9, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan, excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall be deemed "fines"
within the meaning of Section 6.9(a); and action taken or omitted by it with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interest of the Partnership.
6. In no event may an Indemnitee subject the Limited Partners or Assignees
to personal liability by reason of these indemnification provisions.
7. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 6.9 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
8. The provisions of this Section 6.9 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of any
other Persons.
The Company's general partner, Perkins Management Company, Inc. ("PMC")
amended its Certificate of Incorporation on October 7, 1986 to provide that:
1. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
2. (i) Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), against all expense,
liability and loss (including attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (ii) hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred in
this Section (b) shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding
II-2
<PAGE>
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section (b) or otherwise. The corporation may, by action
of its Board of Directors, provide indemnification to employees and agents of
the corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
(ii) If a claim under paragraph (i) of this Section (b) is not paid in full
by the corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section (b) shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section 8.1 of PMC's By-Laws provides that it shall indemnify its officers,
directors, employees and agents to the fullest extent permitted by the General
Corporation Law of Delaware.
Section 145 of the Delaware General Corporation Law, as amended, provides as
follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
II-3
<PAGE>
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
4. Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
5. Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
6. The indemnification and advancement of expenses provided by, or granted
pursuant to the other subsections of this section shall be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
7. A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
8. For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership,
II-4
<PAGE>
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
9. For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employer benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
10. The indemnification and advancement of expenses provided by or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Finance Corp.'s Certificate of Incorporation provides that:
(a) A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except (i) for any breach of a director's duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the GCL as it may from time to time be amended or
supplemented or any successor provision thereto; or (iv) for any transaction
from which a director derived an improper personal benefit.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of any person thereunder with respect
to any act or omission occurring prior to or at the time of such repeal or
modification.
Finance Corp.'s By-Laws provide that:
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative,
including all appeals (other than an action, suit or proceeding by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director or officer of the Corporation (and the Corporation, in the discretion
of the Board of Directors, may so indemnify a person by reason of the fact that
he or she is or was an employee or agent of the Corporation or is or was serving
at the request of the Corporation in any other capacity for another corporation,
partnership, joint venture, trust or other enterprise), against expenses
(including attorneys' fees), judgments, decrees, fines, penalties, and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith or in a manner which he or she reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful. Notwithstanding the foregoing, the Corporation shall be required to
indemnify a director or officer in connection with an action, suit or proceeding
initiated by such person only if such action, suit or proceeding was authorized
by the Board of Directors.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit, including all appeals, by or in the right of the
II-5
<PAGE>
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director or officer of the Corporation (and the Corporation, in
the discretion of the Board of Directors, may so indemnify a person by reason of
the fact that he or she is or was an employee or agent of the Corporation or is
or was serving at the request of the Corporation in any other capacity for
another corporation, partnership, joint venture, trust or other enterprise),
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been finally adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action or
suit was brought, or any other court of competent jurisdiction, shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper. Notwithstanding the
foregoing, the Corporation shall be required to indemnify a director or officer
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board of Directors.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or 2 of this Article, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
(d) Except in a situation governed by Section 3 of this Article, any
indemnification under Section 1 or 2 of this Article (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he or she has met the applicable standard
of conduct set forth in Section 1 or 2, as applicable, of this Article. Such
determination shall be made (i) by a majority vote of directors acting at a
meeting at which a quorum consisting of directors who were not parties to such
action, suit or proceeding is present, or (ii) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. The determination required by clauses (i) and (ii) of this Section
4 may in either event be made by written consent of the majority required by
each clause.
(e) Expenses (including attorneys' fees) of each director and officer
hereunder indemnified actually and reasonably incurred in defending any civil,
criminal, administrative or investigative action, suit or proceeding or threat
thereof shall be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses (including attorneys' fees) incurred by employees
and agents may be so paid upon the receipt of the aforesaid undertaking and such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, other Sections of this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may now or hereafter be entitled under any law, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of the Delaware Law.
II-6
<PAGE>
(h) For purposes of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had the power
and authority to indemnify any or all of its directors, officers, employees and
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation in any other capacity for another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have had with respect to such
constituent corporation if its separate existence had continued.
For purposes of this Article, references to "other capacities" shall include
serving as a trustee or agent for any employee benefit plan; references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a manner
he or she reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
(i) The indemnification and advancement of expenses provided by, or granted
pursuant to, the Delaware Law, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
(j) If any provision hereof is invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction, and the remaining provisions hereof shall be liberally construed
to effectuate the provisions hereof, and the invalidity of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
(k) The right to indemnification conferred by this Article shall be deemed
to be a contract between the Corporation and each person referred therein until
amended or repealed, but no amendment to or repeal of these provisions shall
apply to or have any effect on the right to indemnification of any person with
respect to any liability or alleged liability of such person for or with respect
to any act or omission of such person occurring prior to such amendment or
repeal.
Section 145 of the Delaware General Corporate Law, as amended, also applies
to Finance Corp., as set forth above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this registration statement is
contained on the Exhibit Index and is incorporated herein by reference.
(b) Financial Statement Schedules:
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, are inapplicable or the required information has already
been provided elsewhere in the registration statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
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<PAGE>
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 193, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
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<PAGE>
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant, will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(g) The registrant had not entered into any arrangement or understanding
with any person to distribute the securities to be received in the Exchange
Offer and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the securities to be received in the Exchange
Offer. In this regard, the registrant will make each person participating in the
Exchange Offer aware (through the Exchange Offer Prospectus or otherwise) that
if the Exchange Offer is being registered for the purpose of secondary resales,
any security holder using the exchange offer to participate in a distribution of
the securities to be acquired in the registered exchange offer (1) could not
rely on the staff position enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989) or similar letters and (2) must comply with
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The registration acknowledges
that such a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT, OR ANY AMENDMENT
THERETO, TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE NEW YORK, ON JANUARY 29, 1998.
<TABLE>
<S> <C> <C>
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management Company, Inc.
its General Partner
By: /s/ STEVEN R. MCCLELLAN
-----------------------------------------
Name: Steven R. McClellan
Title:Executive Vice President,
Chief Financial Officer
PERKINS FINANCE CORP.
By: /s/ STEVEN R. MCCLELLAN
-----------------------------------------
Name: Steven R. McClellan
Title: President
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT, OR ANY AMENDMENT THERETO, HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON JANUARY 29, 1998.
PERKINS FAMILY RESTAURANTS, L.P.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------------------------------
<C> <S>
/s/ DONALD N. SMITH
- ------------------------------ Chief Executive Officer (Principal Executive
Donald N. Smith Officer) and Chairman of the Board
/s/ STEVEN R. MCCLELLAN
- ------------------------------ Executive Vice President, Chief Financial Officer
Steven R. McClellan (Principal Financial Officer)
/s/ MICHAEL P. DONAHOE
- ------------------------------ Vice President, Controller
Michael P. Donahoe (Principal Accounting Officer)
*
- ------------------------------ Director
Lee N. Abrams
*
- ------------------------------ Director
Charles L. Atwood
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------------------------------
<C> <S>
*
- ------------------------------ Director
Steven L. Ezzes
- ------------------------------ Director
Charles A. Ledsinger, Jr.
*
- ------------------------------ Director
D. Michael Meeks
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ STEVEN R. MCCLELLAN
-------------------------
Attorney-in-fact
</TABLE>
PERKINS FINANCE CORP.
<TABLE>
<C> <S>
/s/ STEVEN R. MCCLELLAN
- ------------------------------ President (Principal Executive Officer) and
Steven R. McClellan Director
/s/ MICHAEL P. DONAHOE
- ------------------------------ Vice President and Director (Principal Financial
Michael P. Donahoe and Accounting Officer)
/s/ DONALD F. WISEMAN
- ------------------------------ Director
Donald F. Wiseman
</TABLE>
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<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Steven R.
McClellan and Donald F. Wiseman, Esq. his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
with full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ ---------------------------
<C> <S> <C>
Chief Executive Officer
/s/ DONALD N. SMITH (Principal Executive
- ------------------------------ Officer and Chairman of January 29, 1998
Donald N. Smith the Board
Executive Vice President,
/s/ STEVEN R. MCCLELLAN Chief Financial Officer
- ------------------------------ (Principal Financial January 29, 1998
Steven R. McClellan Officer)
/s/ MICHAEL P. DONAHOE Vice President, Controller
- ------------------------------ (Principal Accounting January 29, 1998
Michael P. Donahoe Officer)
/s/ LEE N. ABRAMS
- ------------------------------ Director January 29, 1998
Lee N. Abrams
/s/ CHARLES L. ATWOOD
- ------------------------------ Director January 29, 1998
Charles L. Atwood
/s/ STEVEN L. EZZES
- ------------------------------ Director January 29, 1998
Steven L. Ezzes
- ------------------------------ Director January , 1998
Charles A. Ledsinger, Jr.
/s/ D. MICHAEL MEEKS
- ------------------------------ Director January 29, 1998
D. Michael Meeks
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
1 Purchase Agreement dated as of December 17, 1997 among the Issuers and the Initial
Purchasers named therein...........................................................
3.1(a) Certificate of Incorporation of Perkins Management Company, Inc.(8)..................
3.1(b) Certificate of Amendment of Certificate of Incorporation of Perkins Management
Company, Inc.(8)...................................................................
3.2 Certificate of Incorporation of Perkins Finance Corp.*...............................
3.3 By-Laws, as amended, of Perkins Management Company, Inc.(7)..........................
3.4 By-Laws of Perkins Finance Corp.*....................................................
3.5 Certificate of Limited Partnership of Perkins Family Restaurants, L.P.(9)............
4.1(a) Agreement of Limited Partnership of Perkins Family Restaurants, L.P.(5)..............
4.1(b) Amended and Restated Agreement of Limited Partnership of Perkins Family Restaurants,
L.P.(5)............................................................................
4.2 Indenture dated as of December 22, 1997 among the Issuers and the Trustee named
therein............................................................................
4.3 Form of 10 1/8% Series B Senior Notes due 2007 (included in Exhibit 4.2).............
5 Opinion of Mayer, Brown & Platt......................................................
10.1 Lease Agreement dated January 18, 1988 between The Crescent Center, Ltd. and Perkins
Restaurants Operating Company, L.P.(6).............................................
10.2 Modification and Ratification of Lease dated December 21, 1992 between The Travelers
Insurance Company, successor of interest to the Crescent Center, Ltd., and Perkins
Restaurants Operating Company, L.P.(2).............................................
10.3 Finance Program Agreement dated September 14, 1993 among Bell Atlantic TriCon Leasing
Corporation, d/b/a Bell Atlantic Capital Corporation, Perkins Restaurants Operating
Company, L.P. and Perkins Family Restaurants L.P.(1)...............................
10.4 Guaranty by Perkins Family Restaurants, L.P. and Perkins Family Restaurants Operating
Company, L.P. in favor of BancBoston Leasing, Inc. dated as of May 1, 1994.(10)....
10.5 Guaranty dated July 5, 1995 among Perkins Restaurants Operating Company, L.P. and
BancBoston Leasing, Inc.(5)........................................................
10.6 Third Amended and Restated Agreement and Plan of Merger dated as of September 11,
1997...............................................................................
10.7 Revolving Credit Agreement, by and among Perkins Family Restaurants, L.P., The
Restaurant Company, Perkins Restaurants, Inc., Perkins Finance Corp., BankBoston,
N.A. and other financial institutions and BankBoston N.A., as Agent and
Administrative Agent with NationsBank, N.A. as Syndication Agent and BancBoston
Securities, Inc. as Arranger dated as of December 22, 1997.........................
10.8 Registration Rights Agreement dated as of December 22, 1997 among the Issuers and the
Initial Purchasers named therein...................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
21 Subsidiaries of the Registrant.......................................................
23 Consent of Arthur Andersen...........................................................
24 Power of Attorney (Included on Page II-12)...........................................
25 Statement of Eligibility of Trustee..................................................
99.1 Certificate of Incorporation of The Restaurant Company.(8)...........................
99.2 Certificate of Amendment of Certificate of Incorporation of The Restaurant
Company.(8)........................................................................
99.3 By-Laws of The Restaurant Company.(4)................................................
99.4 Articles of Incorporation, as amended, of Perkins Restaurants, Inc.(7)...............
99.5 By-Laws of Perkins Restaurants, Inc.(9)..............................................
99.6 Stockholders Agreement, dated as of November 21, 1985, among The Restaurant Company,
Holiday Inns, Inc., Bass Investment Limited Partnership Donald N. Smith, et
al.(9).............................................................................
99.7 Pledge Agreement dated September 2, 1988 between Perkins Restaurants, Inc. and The
First National Bank of Boston.(6)..................................................
99.8 Form of Letter of Transmittal........................................................
</TABLE>
- ------------------------
(1) Incorporated herein by reference to Registrant's Current Report on form
8-K/A dated November 1, 1993.
(2) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.
(3) Incorporated herein by reference to Registrant's Company Report on Form 8-K
dated May 25, 1992.
(4) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
(5) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the quarterly period ending September 30, 1995.
(6) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988.
(7) Incorporated hereby by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987.
(8) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1986.
(9) Incorporated herein by reference to Registrant's Form S-1, Registration No.
33-7333 dated July 17, 1986.
(10) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1994.
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 1
$130,000,000
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
10 1/8% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
December 17, 1997
SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
SOCIETE GENERALE SECURITIES CORPORATION
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Perkins Family Restaurants, L.P., a Delaware limited partnership
(the "Company"), and Perkins Finance Corp., a Delaware corporation, and a
wholly-owned subsidiary of the Company ("Finance Corp." and, together with
the Company, the "Issuers"), jointly and severally propose, upon the terms
and conditions set forth herein, to issue and sell to the Initial Purchasers
named in Schedule I hereto (the "Initial Purchasers") $130,000,000 in
aggregate principal amount of the Issuers' 10 1/8% Senior Notes due 2007 (the
"Series A Notes"). The Series A Notes are to be issued pursuant to the
provisions of an Indenture (the "Indenture"), to be dated as of the Closing
Date (as defined below), among the Issuers and State Street Bank and Trust
Company of Connecticut, N.A., as Trustee (the "Trustee"). The Series A Notes
and the Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Notes."
It is understood by the parties hereto that on or prior to the
Closing Date the Company will consummate (i) a recapitalization (the
"Recapitalization") pursuant to which (A) Perkins Acquisition Corp. ("Merger
Co."), a Delaware corporation, will merge with and into the Company and (B)
depositary units representing limited partners' interests in the Company
(other than depositary units held by the Restaurant Company, Inc. ("TRC") and
its affiliates) will be converted into the right to receive $14.00 per unit
in cash payable to the holder of such unit and (ii) a merger (the "Merger")
pursuant to which Perkins Restaurants Operating Company, L.P., a Delaware
limited partnership ("PROC"), which is 99% owned by the Company and 1% owned
by Perkins Management Company, Inc. ("PMC"), a Delaware corporation, will be
merged with and into the Company.
It is further understood by the parties hereto that the Company
shall enter into a credit facility (the "New Credit Facility"), dated as of
the Closing Date, among the Company and BankBoston, N.A., as agent for itself
and other lenders (the "Agent"), providing for revolving credit borrowings in
an aggregate amount not to exceed $50 million.
<PAGE>
The Issuers wish to confirm as follows their agreement with the
Initial Purchasers in connection with the purchase and resale of the Series A
Notes.
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM. The
Notes shall be offered and sold to the Initial Purchasers pursuant to one or
more exemptions from the registration requirements of the Securities Act of
1933 (the "Act"). The Issuers have prepared a preliminary offering
memorandum, dated December 3, 1997 (the "Preliminary Offering Memorandum")
and a final offering memorandum, dated December 17, 1997 (the "Offering
Memorandum"), setting forth information regarding the Issuers and the Series
A Notes. Any references herein to the Preliminary Offering Memorandum and
the Offering Memorandum shall be deemed to include all amendments and
supplements thereto. The Issuers hereby confirm that they have authorized
the use of the Preliminary Offering Memorandum and the Offering Memorandum,
on the terms and in the manner set forth therein, in connection with the
offering and resale of the Series A Notes by the Initial Purchasers.
The Issuers understand that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Series A Notes purchased by
the Initial Purchasers hereunder only on the terms and in the manner set
forth in the Offering Memorandum and Section 2 hereof, as soon as the Initial
Purchasers deem advisable after this Agreement has been executed and
delivered, (i) to persons in the United States whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("QIBs") as defined
in Rule 144A under the Act, as such rule may be amended from time to time
("Rule 144A"), in transactions under Rule 144A and (ii) outside the United
States to persons other than U.S. persons in reliance upon Regulation S
("Regulation S") under the Act (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). As used herein
the terms "United States" and "U.S. persons" have the meaning given them in
Regulation S.
It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Act, the Series A Notes shall bear the
following legend:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER SECTION 5
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), (2) TO ONE OF THE ISSUERS OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
<PAGE>
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Series A Notes will have the registration
rights set forth in the registration rights agreement (the "Registration
Rights Agreement"), to be dated the Closing Date, in the form of EXHIBIT A
hereto, for so long as such Series A Notes constitute "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement). Pursuant to
the Registration Rights Agreement, the Issuers will agree to file with the
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein, (i) a registration statement on the appropriate form under
the Act (the "Exchange Offer Registration Statement") relating to the
Issuers' 10 1/8% Senior Notes due 2007 (the "Series B Notes") to be offered in
exchange for the Series A Notes (the "Exchange Offer") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act relating to the
resale by certain holders of the Series A Notes (the "Shelf Registration
Statement"), and to use all commercially reasonable efforts to cause such
Shelf Registration Statement to be declared effective. This Agreement, the
Notes, the Indenture, the New Credit Facility and the Registration Rights
Agreement are hereinafter referred to collectively as the "Operative
Documents."
Capitalized terms used herein without definition have the
respective meanings specified therefor in the Indenture.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL. On the basis of the
representations, warranties and agreements contained in this Agreement and
subject to all the terms and conditions set forth herein, the Issuers agree
to issue and sell to the Initial Purchasers, and the Initial Purchasers agree
to purchase from the Issuers, at a purchase price equal to 97.25% of the
principal amount thereof, the principal amount of Series A Notes set forth
opposite the name of each Initial Purchaser in Schedule I hereto (the
"Purchase Price"). The Initial Purchasers have advised the Issuers that they
shall offer the Series A Notes to Eligible Purchasers at a price initially
equal to 100% of the principal amount thereof. Such price may be changed by
the Initial Purchasers at any time thereafter without notice.
3. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represent and warrant to
the Issuers, and agrees that:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) has been or shall be used by such
Initial Purchaser or any of its representatives in connection with the offer
and sale of any of the Series A Notes, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(c) In connection with the Exempt Resales, such Initial Purchaser
shall solicit offers to buy the Series A Notes only from, and shall offer to
sell the Series A Notes only to, (1) persons that it reasonably believes to be
QIBs who in purchasing such Series A Notes shall be deemed to have
<PAGE>
represented and agreed that they are purchasing the Series A Notes for their
own accounts or accounts with respect to which they exercise sole investment
discretion and that they or such accounts, as applicable, are QIBs and (2)
Regulation S Purchasers, in each case, that acknowledge and agree that (A)
such Series A Notes shall not have been registered under the Act and may be
resold, pledged or otherwise transferred only (x)(I) to a person who the
seller reasonably believes is a QIB in a transaction meeting the requirements
of Rule 144A, (II) in a transaction meeting the requirements of Rule 144,
(III) outside the United States in a transaction meeting the requirements of
Rule 903 or 904 of Regulation S under the Securities Act or (IV) in
accordance with another exemption from the registration requirements of the
Act (and based upon an opinion of counsel if the Company so requests), (y) to
one of the Issuers or (z) pursuant to an effective registration statement
under the Act and, in each case, in accordance with any applicable securities
laws of any state of the United States or any other applicable jurisdiction
and (B) that the holder shall, and each subsequent holder is required to,
notify any purchaser of the security evidenced thereby of the resale
restrictions set forth in (A) above.
(d) Not to offer, sell or deliver any of the Series A Notes in any
jurisdiction outside the United States except under circumstances that shall
result in compliance with the applicable laws thereof, and to take at its own
expense whatever action is required to permit its purchase and resale of the
Series A Notes in such jurisdictions.
(e) Not to cause any advertisement of the Series A Notes to be
published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Series A Notes, except such
advertisements as include the statements required by Regulation S.
(f) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of
a plan or scheme to evade the registration provisions of the Act.
(g) Such Initial Purchaser has offered the Series A Notes and
shall offer and sell the Series A Notes as part of its distribution at any
time and otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes and the Closing Date, only in accordance with
Rule 903 of Regulation S or another exemption from the registration
requirements of the Act. Accordingly, neither such Initial Purchaser, its
affiliates nor any persons acting on its or their behalf has engaged or shall
engage in any directed selling efforts within the meaning of Rule 901(b) of
Regulation S with respect to the Series A Notes, and such Initial Purchaser,
its affiliates and all persons acting on its or their behalf have complied
and shall comply with the offering restrictions requirements of Regulation S.
(h) Such Initial Purchaser agrees that the Series A Notes offered
and sold in reliance on Regulation S have been and shall be offered and sold
only in offshore transactions and that such securities have been and shall be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the restricted
period (as defined in Regulation S) and only upon certification of beneficial
ownership of the securities by a non-U.S. person or a U.S. person who
purchased such securities in a transaction that was exempt from the
registration requirements of the Act, which U.S. person will acquire an
interest in a "Registrable Security" (as defined in the Registration Rights
Agreement).
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes, it shall have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Series A Notes from it during the restricted
period (as defined in Regulation S) a confirmation or notice to substantially
the following effect:
<PAGE>
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the
Offering and the Closing Date, except in either case in accordance with
Regulation S (or Rule 144A or in transactions that are exempt from the
registration requirements of the Securities Act) under the Securities Act.
Terms used above have the meanings assigned to them in Regulation S."
Such Initial Purchaser further agrees that it has not entered and shall
not enter into any contractual arrangement with respect to the distribution
or delivery of the Series A Notes, except with its affiliates or with the
prior consent of the Company.
The Initial Purchasers understand that the Issuers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 8, 8(d) and 8(e) hereof, counsel to the Issuers and counsel to
the Initial Purchasers, shall rely upon the accuracy and truth of the
foregoing representations and agreements and the Initial Purchasers hereby
consent to such reliance.
4. DELIVERY OF THE NOTES AND PAYMENT THEREFOR. Delivery to the
Initial Purchasers of and payment for the Series A Notes shall be made at the
office of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois
60603 or such other location as may be mutually acceptable, at 9:00 A.M.,
Chicago time, on December 22, 1997 (the "Closing Date").
The Series A Notes shall be delivered to the Initial Purchasers
against payment of the Purchase Price in immediately available funds with any
transfer taxes thereon duly paid by the Company. The Series A Notes shall be
evidenced by one or more global securities (including a temporary global
security that may not be exchanged for definitive securities until the
expiration of the restricted period (as defined in Regulation S)) in
definitive form (the "Global Notes") and/or by additional definitive
securities, and shall be registered, in the case of the Global Notes, in the
name of Cede & Co. as nominee of The Depository Trust Company ("DTC"), and in
the other cases, in such names and in such denominations as the Initial
Purchasers shall request prior to 9:30 A. M., New York City time, on the
second business day preceding the Closing Date. The Series A Notes to be
delivered to the Initial Purchasers shall be made available to the Initial
Purchasers in New York City for inspection and packaging not later than 9:30
A.M., New York City time, on the business day immediately preceding the
Closing Date.
5. AGREEMENTS OF THE ISSUERS. The Issuers hereby agree with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
them, to confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(f)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii)
within the period of time referred to in paragraph (e) below, of any material
change in the Issuers' condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of any event
which makes any statement made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum in
order to make the statements therein not misleading, or of the necessity to
amend or supplement the Offering Memorandum to comply with any law. The Issuers
shall use their best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series
<PAGE>
A Notes under any state securities or Blue Sky laws and, if at any time any
state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any Series
A Notes under any state securities or Blue Sky laws, the Issuers shall use
their best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to the Initial Purchasers and those persons
identified by the Initial Purchasers to the Issuers, without charge, as of
the date of the Offering Memorandum, such number of copies of the Offering
Memorandum as they may reasonably request.
(c) Not to make any amendment or supplement to the Preliminary
Offering Memorandum or to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which they shall
reasonably object after being so advised.
(d) Prior to the execution and delivery of this Agreement, the
Issuers have delivered or shall deliver to the Initial Purchasers, without
charge, in such quantities as the Initial Purchasers shall have requested or
may hereafter reasonably request, copies of the Preliminary Offering
Memorandum. The Issuers consent to the use, on the terms and in the manner
set forth therein and in accordance with the securities or Blue Sky laws of
the jurisdictions in which the Series A Notes are offered by the Initial
Purchasers and by dealers prior to the date of the Offering Memorandum, of
each Preliminary Offering Memorandum so furnished by the Issuers. The
Issuers consent to the use of the Offering Memorandum on the terms and in the
manner set forth therein and in accordance with the securities or Blue Sky
laws of the jurisdictions in which the Series A Notes are offered by the
Initial Purchasers and by all dealers to whom Series A Notes may be sold, in
connection with the offering and sale of the Series A Notes.
(e) If, at any time prior to completion of the distribution of the
Series A Notes by the Initial Purchasers to Eligible Purchasers, any event
shall occur that, in the judgment of the Issuers or in the opinion of counsel
for the Initial Purchasers, should be set forth in the Offering Memorandum in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Offering Memorandum in order to comply with any law, to forthwith
prepare an appropriate supplement or amendment thereto, and to expeditiously
furnish to the Initial Purchasers and dealers a reasonable number of copies
thereof. In the event that the Issuers and the Initial Purchasers agree that
the Offering Memorandum should be amended or supplemented, the Issuers, if
reasonably requested by the Initial Purchasers, shall promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement or such document.
(f) To cooperate with the Initial Purchasers and their counsel in
connection with the qualification of the Series A Notes for offering and sale
by the Initial Purchasers and by dealers under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchasers may designate and to
file such consents to service of process or other documents necessary or
appropriate in order to effect such qualification; provided that in no event
shall the Issuers be obligated to qualify to do business in any jurisdiction
where they are not now so qualified or to take any action which would subject
them to service of process in suits, other than those arising out of the
offering or sale of the Series A Notes, in any jurisdiction where they are
not now so subject.
(g) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers terminating this Agreement pursuant to
Section 11 hereof) or if this Agreement shall be terminated by the Initial
Purchasers because of any failure or refusal on the part of the Issuers to
comply with the terms or fulfill any of the conditions of this Agreement, to
reimburse the Initial Purchasers for all out-of-pocket
<PAGE>
expenses (including fees and expenses of its counsel) reasonably incurred by
it in connection herewith, but without any further obligation on the part of
the Issuers for loss of profits or otherwise.
(h) So long as any of the Series A Notes remain outstanding and
during any period in which the Issuers are not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such
holder, the information ("Rule 144A Information") required by Rule 144A(d)(4)
under the Act.
(i) To apply the net proceeds from the sale of the Series A Notes
to be sold by them hereunder substantially in accordance with the description
set forth in the Offering Memorandum.
(j) Without the prior consent of the Initial Purchasers and except
as contemplated pursuant to the New Credit Facility, prior to and including
the Closing Date, not to offer, sell, contract to sell or otherwise dispose
of any fixed income obligation having a maturity of more than one year.
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, not to take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Series A
Notes to facilitate the sale or resale of the Series A Notes. Except as
permitted by the Act, not to distribute any offering material in connection
with the Exempt Resales.
(l) To use their best efforts to cause the Series A Notes to be
eligible for trading on the PORTAL Market and to maintain the listing of the
Series A Notes on PORTAL for so long as the Series A Notes are outstanding.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes in a manner that
would require the registration under the Act of the sale to the Initial
Purchasers or the Eligible Purchasers of the Series A Notes.
(n) To comply with all the terms and conditions of the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Issuers to DTC relating to the approval of the
Series A Notes by DTC for "book entry" transfer.
(o) Prior to any registration of the Series B Notes pursuant to
the Registration Rights Agreement, or at such earlier time as may be
required, to cause the Indenture to be qualified under the Trust Indenture
Act of 1939 (the "TIA") and to enter into any necessary supplemental
indentures in connection therewith.
(p) To use all commercially reasonable efforts to do and perform
all things required or necessary to be done and performed under this
Agreement by them prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Series A Notes.
6. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS. The Issuers
represent and warrant to the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering Memorandum
with respect to the Series A Notes have been prepared by the Issuers for use,
on the terms and in the manner set forth therein, by the Initial Purchasers
in connection with the Exempt Resales. No order or decree preventing
<PAGE>
the use of the Preliminary Offering Memorandum or the Offering Memorandum or
any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued and no proceeding for that purpose
has commenced or is pending or, to the knowledge of the Issuers, is
contemplated.
(b) The Preliminary Offering Memorandum, the Offering Memorandum
and the Proxy Statement of the Company dated November 28, 1997 (the "Proxy
Statement"), as of their respective dates, and the Offering Memorandum as of
the Closing Date, did not or will not, as of the Closing Date, contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum or
Offering Memorandum made in reliance upon and in conformity with information
furnished to the Issuers in writing by or on behalf of the Initial Purchasers
expressly for use therein.
(c) The Indenture has been duly and validly authorized by each
Issuer and, upon its execution, delivery and performance by each of the
Issuers and assuming due authorization, execution, delivery and performance
by the Trustee, shall be a valid and binding agreement of each Issuer,
enforceable against each of them in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) and conforms in all
material respects to the description thereof in the Offering Memorandum. No
qualification of the Indenture under the TIA is required in connection with
the offer and sale of the Series A Notes contemplated hereby or in connection
with the Exempt Resales.
(d) The Series A Notes have been duly authorized by each Issuer
and, when executed by each Issuer and authenticated by the Trustee in
accordance with the Indenture and delivered to the Initial Purchasers against
payment therefor in accordance with the terms hereof, shall have been validly
issued and delivered, and shall constitute valid and binding obligations of
each Issuer entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally and
by general equitable principles (whether considered in a proceeding in equity
or at law). The Series A Notes shall conform in all material respects to the
description thereof in the Offering Memorandum.
(e) The Series B Notes have been duly authorized by each Issuer,
and, when duly executed, authenticated, issued and delivered, shall
constitute valid and binding obligations of each Issuer entitled to the
benefits of the Indenture and enforceable in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
(f) All the outstanding equity interests of each Issuer have been
duly authorized and validly issued and are fully paid and nonassessable, and
are not subject to any preemptive or similar rights.
(g) Each Issuer is duly organized, validly existing and in good
standing under the laws of Delaware with full power and authority to own,
lease and operate its properties and to conduct its business as described in
the Offering Memorandum, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the
nature of its properties or the
<PAGE>
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify does not have a material adverse
effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Issuers, taken as a
whole (a "Material Adverse Effect").
(h) The Company owns 100% of the capital stock of Finance Corp.
and does not have any subsidiaries or any ownership interests in any entities
other than Finance Corp, PROC and Jack Astors Joint Venture, L.L.C.
(i) There are no legal or governmental proceedings pending or, to
the knowledge of the Issuers, threatened, against either Issuer or to which
either Issuer or its respective properties is subject, that are not disclosed
in the Offering Memorandum and which might reasonably be expected to result,
singly or in the aggregate, in a Material Adverse Effect or might materially
affect the issuance of the Series A Notes or the consummation of the
transactions contemplated by this Agreement. There are no agreements,
contracts, indentures, leases or other instruments that are material to the
Issuers that are not described in the Offering Memorandum. Neither Issuer is
involved in any strike, job action or labor dispute with any group of
employees, and, to each Issuer's knowledge, no such action or dispute is
threatened.
(j) Neither Issuer is (i) in violation of its certificate or
articles of incorporation, certificate of limited partnership, partnership
agreement, by-laws or other organizational documents, as applicable, or of
any law, ordinance, administrative or governmental rule or regulation
applicable to either Issuer or of any decree of any court or governmental
agency or body having jurisdiction over either Issuer except where any such
violation or violations in the aggregate would not reasonably be expected to
have a Material Adverse Effect or (ii) in default in any material respect in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which either
Issuer is a party or by which either of them or any of their respective
properties may be bound, except as may be disclosed in the Offering
Memorandum.
(k) None of the issuance, offer, sale or delivery of the Series A
Notes, the execution, delivery or performance of this Agreement, the
Indenture, the Registration Rights Agreement or the New Credit Facility by
the Issuers or the consummation by the Issuers of the transactions
contemplated hereby or thereby (including the Recapitalization and the
Merger) (i) requires any consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except as may be
required in connection with the registration under the Act of the Series B
Notes in accordance with the Registration Rights Agreement, qualification of
the Indenture under the TIA and compliance with the securities or Blue Sky
laws of various jurisdictions), or conflicts or shall conflict with or
constitutes or shall constitute a breach of, or a default under, the
certificate or articles of incorporation, certificate of limited partnership,
bylaws, partnership agreement or other organizational documents, as
applicable, of either Issuer or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, in any
material respect, any material agreement, indenture, lease or other
instrument to which either Issuer is a party or by which either of them or
any of their respective properties may be bound, or (assuming compliance with
all applicable state securities and Blue Sky laws and, in the case of the
Registration Rights Agreement and the transactions contemplated thereby, the
Act, the Exchange Act and the TIA) violates or will violate in any material
respect any statute, law, regulation or filing or judgment, injunction, order
or decree applicable to either Issuer or any of their respective properties,
or will, except as contemplated under the New Credit Facility, result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of either Issuer pursuant to the terms of any agreement or
instrument to
<PAGE>
which either of them is a party or by which either of them may be bound or to
which any of the property or assets of either of them is subject.
(l) This Agreement has been duly authorized, executed and
delivered by each Issuer.
(m) The financial statements (historical and pro forma), together
with related schedules and notes forming part of the Offering Memorandum (and
any amendment or supplement thereto), present fairly in all material respects
the consolidated financial position, results of operations and changes in
owners' equity and cash flows of such entities purported to be shown thereby
on the basis stated in the Offering Memorandum at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the assumptions used in preparing the pro forma
financial information and related notes and schedules included in the
Offering Memorandum are reasonable; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment
or supplement thereto) is accurately presented and, to the extent such
information and data is derived from the financial books and records of the
entities covered thereby, is prepared on a basis consistent with such
financial statements and the books and records of the entities covered
thereby.
(n) The accountants, Arthur Andersen, LLP, who have certified or
shall certify the financial statements included as part of the Offering
Memorandum (or any amendment or supplement thereto), are independent public
accountants under Rule 101 of the AICPA's Code of Professional Conduct, and
its interpretation and rulings. The historical financial statements,
together with related schedules and notes, set forth in the Preliminary
Offering Memorandum and the Offering Memorandum comply as to form in all
material respects with the requirements applicable to registration statements
on Form S-1 under the Act.
(o) The Registration Rights Agreement has been duly authorized by
each Issuer and, on the Closing Date, will have been duly executed and
delivered by each Issuer. When the Registration Rights Agreement has been
duly executed and delivered, the Registration Rights Agreement will be a
valid and binding agreement of each Issuer, enforceable against each Issuer
in accordance with its terms subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity or
at law) and except as rights to indemnity and contribution may be limited by
Federal or state securities laws or principles of public policy. On the
Closing Date, the Registration Rights Agreement will conform as to legal
matters in all material respects to the description thereof in the Offering
Memorandum.
(p) The New Credit Facility has been duly authorized by the
Company and, when duly executed and delivered by the Company (assuming the
due execution and delivery by the parties thereto other than the Company)
will be a legally valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
to general equitable principles (whether considered in a proceeding in equity
or at law). As of the Closing Date, (A) the New Credit Facility will have
been duly executed and delivered by the Company, the Agent and each of the
lenders party thereto, (B) at least $50 million will be immediately available
thereunder and (C) the New Credit Facility will conform as to legal matters
in all material respects to the description thereof in the Offering
Memorandum.
(q) The Recapitalization and the Merger have been duly authorized
by the Company
<PAGE>
and such other entities as may be required by applicable law.
(r) Neither of the Issuers nor any of their respective affiliates
have taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of the Series A Notes.
(s) Except as disclosed in the Offering Memorandum (or any
amendment or supplement thereto) (including, without limitation, in
connection with the Recapitalization, the Merger, the New Credit Facility and
the Registration Rights Agreement), subsequent to the date as of which such
information is given in the Offering Memorandum (or any amendment or
supplement thereto), neither Issuer has incurred any liability or obligation,
direct or contingent, or entered into any transaction, not in the ordinary
course of business, that is material to such Issuer, and there has not been
any material change in the general or limited partners' interests or capital
stock, or material increase in the short-term or long-term debt, of either
Issuer or any material adverse change, or any development involving or which
could reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), business, properties, net
worth or results of operations of either Issuer.
(t) Each Issuer has good and marketable title to all property
(real and personal) described in the Offering Memorandum as being owned by
it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Offering Memorandum and all
the property described in the Offering Memorandum as being held under lease
by either Issuer is held by it under valid, subsisting and enforceable
leases, with only such exceptions as in the aggregate are not materially
burdensome and do not interfere in any material respect with the conduct of
the business of the Issuers taken as a whole. Each of the Issuers enjoys
peaceful and undisturbed possession under all leases to which it is a party
as lessee, except for such leases that, in the aggregate, are not material to
the business of the Issuers taken as a whole. No consent need be obtained
from any person with respect to any such lease or agreement in connection
with the transactions contemplated hereby and in the Offering Memorandum,
including the Recapitalization and the Merger, which consent has not already
been obtained. Except for such assets, plants and facilities as are not
material in the aggregate to the business of the Issuers taken as a whole,
all tangible assets, plants and facilities of each of the Issuers are in good
condition and repair (ordinary wear and tear excepted) and are adequate, in
the reasonable opinion of the Issuers, for the uses to which they are being
put or would be put in the ordinary course of business.
(u) Except as permitted by the Act, the Issuers have not
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Series A Notes, shall not distribute
any offering material in connection with the offering and sale of the Series
A Notes other than the Preliminary Offering Memorandum and Offering
Memorandum.
(v) Each of the Issuers has such permits, licenses, franchises,
certificates of need and other approvals or authorizations of governmental or
regulatory authorities ("Permits") as are necessary under applicable law to
own its properties and to conduct its businesses in the manner described in
the Offering Memorandum, except to the extent that the failure to have such
Permits would not reasonably be expected to have a Material Adverse Effect.
Each of the Issuers has fulfilled and performed in all material respects all
its material obligations with respect to the Permits, and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment
of the rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Memorandum and except to
the extent that any such revocation or termination would not have a Material
Adverse Effect; and, except as described in the Offering Memorandum, none of
the Permits contains any restriction that is materially burdensome to
<PAGE>
either Issuer.
(w) Neither Issuer has violated any foreign, federal, state or
local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws") or any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules and regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(x) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Permit, any related constraints on operating
activities and any potential liabilities to third parties) which would,
singly or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(y) Each Issuer maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets
is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(z) Neither Issuer has, nor, to the Issuers' knowledge, has any
employee or agent of the Issuers made any payment of funds of the Issuers or
received or retained any funds in violation of any law, rule or regulation.
(aa) Except as disclosed in the Offering Memorandum, each Issuer
has filed all tax returns required to be filed, which returns are true and
correct in all material respects, and neither Issuer is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, except where the failure to file such
returns and make such payments would not reasonably be expected to have a
Material Adverse Effect.
(bb) Except as contemplated pursuant to the Registration Rights
Agreement, there are no contracts, agreements or understandings between
either Issuer and any person granting such person the right to require either
Issuer to file a registration statement under the Act with respect to any
securities of either Issuer or to require either Issuer to include such
securities with the Series A Notes registered pursuant to any Shelf
Registration Statement. Except as described in or contemplated by the
Offering Memorandum, there are no outstanding options, warrants or other
rights calling for the issuance of, and there are no commitments, plans or
arrangements to issue, any equity interests of the Issuer or any security
convertible into or exchangeable or exercisable for equity interests of the
Issuer.
(cc) Each Issuer owns or possesses all patents, trademarks,
trademark registration, service marks, service mark registrations, trade
names, copyrights, licenses, inventions, trade secrets and rights described
in the Offering Memorandum as being owned by it or necessary for the conduct
of its businesses, and neither Issuer is aware of any claim to the contrary
or any challenge by any other person to the rights of either Issuer with
respect to the foregoing.
(dd) Each Issuer is insured by insurers of recognized financial
responsibility against such losses and risks and in such amount as are
prudent and customary in the businesses in which they are engaged. Neither
Issuer (i) has received notice from any insurer or agent of such insurer that
<PAGE>
substantial capital improvements or other material expenditures shall have to
be made in order to continue such insurance or (ii) has any reason to believe
that it shall not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers at a cost that would not have a Material Adverse Effect.
(ee) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Issuers, on the
one hand, and the directors, officers, stockholders, customers or suppliers
of the Issuers (including, in the case of the Company, the directors or
officers of its general partner), on the other hand, which would be required
by the Act to be described in the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on Form S-1
filed with the Commission.
(ff) Neither Issuer is and, upon sale of the Series A Notes to be
issued and sold thereby in accordance herewith and the application of the net
proceeds to the Issuers of such sale as described in the Offering Memorandum
under the caption "Use of Proceeds," shall not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(gg) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Issuers that it is considering imposing) any
condition (financial or otherwise) on either Issuer's retaining any rating
assigned to either Issuer or any securities of either Issuer or (ii) has
indicated to either Issuer that it is considering (a) the downgrading,
suspension or withdrawal of, or any review for a possible change that does
not indicate the direction of the possible change in, any rating so assigned
or (b) any change in the outlook for any rating of either Issuer or any
securities of either Issuer.
(hh) When the Series A Notes are issued and delivered pursuant to
this Agreement, such Series A Notes shall not be of the same class (within
the meaning of Rule 144A(d)(3) under the Act) as any security of the Issuers
that is listed on a national securities exchange registered under Section 6
of the Exchange Act or that is quoted in a United States automated
interdealer quotation system.
(ii) Neither Issuer nor any affiliate (as defined in Rule 501(b) of
Regulation D ("Regulation D") under the Act) of the Issuers has directly, or
through any agent (provided that no representation is made as to the Initial
Purchasers or any person acting on their behalf), sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Act) which is or shall be integrated with the offering and
sale of the Series A Notes in a manner that would require the registration of
the Series A Notes under the Act.
(jj) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all of the information specified in, and
meeting the requirements of, Rule 144(d)(4) under the Act.
(kk) Assuming (i) that the representations and warranties in
Section 3 hereof are true, (ii) the Initial Purchasers comply with the
covenants set forth in Section 3 hereof and (iii) that each person to whom
the Initial Purchasers offer, sell or deliver the Series A Notes is a QIB or
a person other than a U.S. person outside the United States in reliance on
Regulation S under the Act, the purchase and sale of the Series A Notes
pursuant hereto (including the Initial Purchasers' proposed offering of the
Series A Notes on the terms and in the manner set forth in the Offering
Memorandum and Section 3 hereof) is exempt from the registration requirements
of the Act.
<PAGE>
(ll) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to the Initial
Purchasers or by the Initial Purchasers to Eligible Purchasers shall not
involve any prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code. The representation made by the Issuers in the
preceding sentence is made in reliance upon and subject to the accuracy of,
and compliance with, the representations and covenants made or deemed made by
the Eligible Purchasers as set forth in the Offering Memorandum under the
section entitled "Notice to Investors."
(mm) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Issuers or any of
their respective representatives (other than the Initial Purchasers, as to
whom the Issuers make no representation) in connection with the offer and
sale of the Series A Notes contemplated hereby, including, but not limited
to, articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(nn) Neither of the Issuers nor any of their respective
affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Issuers make no representation) has
engaged or shall engage in any directed selling efforts within the meaning of
Regulation S under the Act which respect to the Series A Notes.
(oo) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of the
Act.
(pp) The Issuers and their respective affiliates and all
persons acting on their behalf (other than the Initial Purchasers, as to whom
the Issuers make no representation) have complied with and shall comply with
the offering restrictions requirements of Regulation S in connection with the
offering of the Series A Notes outside the United States and, in connection
therewith, the Offering Memorandum shall contain the disclosure required by
Rule 902(h).
(qq) The Series A Notes offered and sold in reliance on
Regulation S have been and shall be offered and sold only in offshore
transactions and such securities have been and shall be represented upon
issuance by a temporary global security that may not be exchanged for
definitive securities until the expiration of the 40-day restricted period
referred to in Rule 903(c)(3) of the Act and only upon certification of
beneficial ownership of such Series A Notes by non-U.S. persons or U.S
persons who purchased such Series A Notes in transactions that were exempt
from the registration requirements of the Act.
(rr) Each certificate signed by any officer of either Issuer
delivered to the Initial Purchasers or counsel to the Initial Purchasers
shall be deemed to be a representation and warranty by such Issuer to the
Initial Purchasers as to the matters covered thereby.
The Issuers acknowledge that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
8(c), 8(d) and 8(e) hereof, counsel to the Issuers and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Issuers agree to
indemnify and hold harmless each Initial Purchaser and each person, if any,
who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
<PAGE>
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum, the Offering Memorandum or the Proxy Statement or in any
amendment or supplement thereto, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses (i) arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information furnished in writing to
the Issuers by or on behalf of the Initial Purchasers expressly for use in
connection therewith or (ii) with respect to the Preliminary Offering
Memorandum, result from the fact that the Initial Purchaser sold Series A
Notes to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Offering Memorandum, as
amended or supplemented, if the Issuers shall have previously furnished
copies thereof to the Initial Purchaser in accordance with this Agreement,
and the Issuers prove that the Offering Memorandum, as amended or
supplemented, would have corrected such untrue statement or omission. The
foregoing indemnity agreement shall be in addition to any liability which the
Issuers may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling such Initial Purchaser in respect
of which indemnity may be sought against the Issuers, such Initial Purchaser
or such controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Each Initial
Purchaser or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Initial Purchaser or such controlling person unless (i)
the indemnifying parties have agreed in writing to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include such Initial Purchaser
or such controlling person and the indemnifying parties and such Initial
Purchaser or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between
them (in which case the indemnifying party shall not have the right to assume
the defense of such action, suit or proceeding on behalf of such Initial
Purchaser or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of only one separate firm of attorneys (in addition to any local counsel) at
any time for the Initial Purchasers and controlling persons, which firm shall
be designated in writing by Salomon Brothers Inc, and that all such fees and
expenses shall be reimbursed on a monthly basis. Each indemnified party, as
a condition to the indemnity agreement contained in paragraph (a) above,
shall use all commercially reasonable efforts to cooperate with the
indemnifying party in the investigation and defense of any such action, suit,
proceeding or claim. The indemnifying parties shall not be liable for any
settlement of any such action, suit or proceeding effected without their
written consent (which consent shall not unreasonably be withheld), but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties
agree to indemnify and hold harmless the Initial Purchasers and any such
controlling person, to the extent provided in paragraph (a), from and against
any loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) Each of the Initial Purchasers, severally and not jointly, agree
to indemnify and
<PAGE>
hold harmless the Issuers, their directors and officers (or, in the case of
the Company, the directors and officers of the its general partner) and any
person who controls either Issuer within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the indemnity from
the Issuers to the Initial Purchasers set forth in paragraph (a) hereof, but
only with respect to information furnished in writing by or on behalf of such
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Issuers, their
directors or officers or any such controlling person based on the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against
such Initial Purchaser pursuant to this paragraph (c), such Initial Purchaser
shall have the rights and duties given to the Issuers by paragraph (b) above
(except that if the Issuers shall have assumed the defense thereof such
Initial Purchaser shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Initial Purchaser's expense), and
the Issuers, their directors and officers, and any such controlling person
shall have the rights and duties given to such Initial Purchaser by paragraph
(b) above. The foregoing indemnity agreement shall be in addition to any
liability which such Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Issuers on the one hand and the Initial Purchasers on the
other hand from the offering of the Series A Notes, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers on
the one hand and the Initial Purchasers on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one
hand and the Initial Purchasers on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Issuers to the total underwriting discounts and
commissions received by the Initial Purchasers, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault
of the Issuers on the one hand and the Initial Purchasers on the other hand
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Issuers on the one hand or by the Initial Purchasers on the other hand and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Issuers and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to
in paragraph (d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this
Section 7, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price of the Series A Notes
underwritten by it and distributed to the public exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of
<PAGE>
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to
contribute pursuant to this Section 7(e) are several in proportion to the
respective amount of Series A Notes purchased by each of the Initial
Purchasers hereunder and not joint.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuers set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling such Initial Purchaser, the Issuers, their directors or officers,
(or, in this case of the Company, the directors or officers of its general
partner) or any person controlling the Company, (ii) acceptance of any Series
A Notes and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Initial Purchaser or any person controlling
any Initial Purchaser, or to either Issuer, their directors or officers (or,
in the case of the Company, the directors and officers of its general
partner) or any person controlling any Issuer, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
(g) No indemnifying party shall, without the prior written consent
of the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened action, suit or proceeding
in respect of which any indemnified party is a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.
8. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Series A Notes
hereunder are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements
of the Act shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending or, to the knowledge of the Issuers,
be contemplated. No stop order suspending the sale of the Series A Notes in
any jurisdiction designated by the Initial Purchasers shall have been issued
and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Issuers, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any material change, or any development involving
a prospective material change, in or affecting the condition (financial or
other), business, properties, net worth, or results of operations of the
Issuers not contemplated by the Offering Memorandum, which in the opinion of
the Initial Purchasers, would materially adversely affect the market for the
Series A Notes, or (ii) any event or development relating to or involving any
officer or director of either Issuer (or, in the case of the Company, any
officer or director of its general partner) which makes any statement made in
the Offering Memorandum untrue or which, in the opinion of the Issuers and
their counsel or the Initial Purchasers and their counsel, requires the
making of any addition to or change in the Offering Memorandum in order to
state a material fact required by any law to be stated therein or necessary
in order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, materially adversely affect
the market for
<PAGE>
the Series A Notes.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Mayer, Brown & Platt, counsel for the Company, dated the
Closing Date and addressed to the Initial Purchasers, to the effect that:
(i) Each Issuer is validly existing and in good standing
under the laws of Delaware with full power and authority to own, lease and
operate its properties and to conduct its business as described in the
Offering Memorandum (and any amendment or supplement thereto);
(ii) Each Issuer has the requisite power and authority to
enter into this Agreement, the Registration Rights Agreement and the New
Credit Facility and to issue, sell and deliver the Series A Notes to be
sold by it to the Initial Purchasers as provided herein. This Agreement,
the Registration Rights Agreement, and the New Credit Facility have been
duly authorized, executed and delivered by each Issuer and are the valid,
legal and binding agreements of each Issuer, enforceable against each
Issuer in accordance with their terms, except (A) as enforcement of rights
to indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy and (B)
subject to the qualification that the enforceability of each Issuer's
obligations hereunder and thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights generally and by general
equitable principles;
(iii) The Indenture has been duly and validly authorized,
executed and delivered by each Issuer and, assuming due authorization,
execution and delivery by the Trustee, is a valid and binding agreement of
each Issuer, enforceable in accordance with its terms, subject to the
qualification that the enforceability of each Issuer's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles. No
qualification of the Indenture under the TIA is required in connection with
the offer and sale of the Series A Notes contemplated hereby or in
connection with the Exempt Resales;
(iv) The Series A Notes have been duly and validly authorized
by each Issuer and when executed by each Issuer in accordance with
the Indenture and, assuming due authentication of the Series A Notes
by the Trustee, upon delivery to the Initial Purchasers against payment
therefor in accordance with the terms hereof, will have been validly issued
and delivered, and will constitute valid and binding obligations of each
Issuer entitled to the benefits of the Indenture, subject to the
qualification that the enforceability of each Issuer's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(v) Neither the offer, sale or delivery of the Series A Notes,
the execution, delivery or performance by either Issuer of this Agreement,
the Registration Rights Agreement, the New Credit Facility or the
Indenture, compliance by the Issuers with the provisions hereof or thereof
or consummation by the Issuers of the transactions contemplated hereby or
thereby (including the Recapitalization and the Merger) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, in any material respect, the certificate or articles of
incorporation, the certificate of limited partnership, the bylaws, the
partnership agreement or other organizational documents of the Issuers, as
applicable, or any material agreement, indenture, lease or other instrument
listed on Exhibit B hereto (collectively, the "Material
<PAGE>
Agreements"), or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of either Issuer pursuant
to the terms of any Material Agreement nor will any such action (assuming
compliance with all applicable state securities and Blue Sky laws and, in
the case of the Registration Rights Agreement and the transactions
contemplated thereby, the Act, the Exchange Act and the TIA) result in any
violation in any material respect of any existing New York, Illinois,
Delaware corporate or federal law, regulation, ruling, judgment,
injunction, order or decree known to such counsel, applicable to the
Issuers or any of their respective properties;
(vi) Other than any state securities and Blue Sky laws, no
consent, approval, authorization or other order of, or registration or
filing with, any court, regulatory body, administrative agency or other
governmental body, agency, or official is required on the part of the
Issuers for the valid issuance and sale of the Series A Notes to the
Initial Purchasers as contemplated by this Agreement;
(vii) The Issuers have full corporate power and authority to
own their respective properties and to conduct their respective businesses
as now being conducted as described in the Offering Memorandum;
(viii) The statements in the Offering Memorandum, insofar as
they are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all
material respects and present fairly the information required to be shown;
(ix) When the Series A Notes are issued and delivered
pursuant to this Agreement, such Series A Notes will not be of the same
class (within the meaning of Rule 144A(d)(3) under the Act) as any equity
interests of the Issuers that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a
United States automated interdealer quotation system;
(x) No registration of the Series A Notes under the Act is
required for the sale of the Series A Notes to the Initial Purchasers as
contemplated in this Agreement or for the Exempt Resales (assuming (A) that
any Eligible Purchaser who buys the Series A Notes in the Exempt Resales is
a QIB or a person other than a U.S. person outside the United States in
reliance on Regulation S and (B) the accuracy of the Initial Purchasers'
representations and those of the Issuers in this Agreement regarding the
absence of general solicitation in connection with the Exempt Resales;
(xi) The Recapitalization and the Merger have been duly
authorized by the Company and such other entities as may be required by
applicable law; and
(xii) Although such counsel have not undertaken, except as
otherwise indicated in their opinion, to determine independently, and do
not assume any responsibility for, the accuracy, completeness or fairness
of the statements in the Offering Memorandum, such counsel have
participated in the preparation of the Offering Memorandum, including
review and discussion of the contents thereof, and nothing has come to the
attention of such counsel that has caused them to believe that the Offering
Memorandum, as of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading or that any
amendment or supplement to the Offering
<PAGE>
Memorandum, as of its respective date, and as of the Closing Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data included
or incorporated by reference in the Offering Memorandum and information
furnished in writing by or on behalf of the Initial Purchasers).
(d) The Initial Purchasers shall have received on the Closing
Date an opinion of Donald F. Wiseman, Esq., General Counsel of the Company,
dated the Closing Date and addressed to the Initial Purchasers to the effect
that:
(i) Each Issuer is duly organized under the laws of Delaware.
(ii) Each Issuer is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where
the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing does not have a Material Adverse Effect;
(iii) Upon consummation of the Recapitalization and the
Merger, all outstanding equity interests of each Issuer will have been duly
authorized and validly issued, are fully paid and nonassessable, and not
subject to any preemptive or similar rights;
(iv) Neither Issuer is in violation in any material respect
of its certificate or articles of incorporation, certificate of limited
partnership, bylaws, partnership or other organizational documents, as
applicable, or to the knowledge of such counsel after reasonable inquiry, is in
default in any material respect in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any material agreement, indenture, lease or other
instrument to which such Issuer is a party or by which either Issuer or any of
their respective properties may be bound, except as disclosed in the Offering
Memorandum and except to the extent that any such violation or default would not
reasonably be expected to have a Material Adverse Effect; and
(v) To the knowledge of such counsel, the Issuers have all
Permits that are required under applicable law to own their respective
properties and to conduct their respective businesses as now being
conducted as described in the Offering Memorandum except where the failure
to have any such Permits would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect
(vi) To the knowledge of such counsel, (A) other than as
described or contemplated in the Offering Memorandum (or any amendment or
supplement thereto), there are no legal or governmental proceedings pending
or threatened against either Issuer, or to which either Issuer or any of
their properties are subject, which are not disclosed in the Offering
Memorandum and which, if adversely decided, are reasonably likely to cause
a Material Adverse Effect or materially affect the issuance of the Series A
Notes or the consummation of the transactions contemplated by this
Agreement and (B) there are no agreements, contracts, indentures, leases or
other instruments material to the Issuers, that are not described in the
Offering Memorandum (or any amendment or supplement thereto);
(vi) To the knowledge of such counsel, neither Issuer is in
violation of any
<PAGE>
law, ordinance, administrative or governmental rule or regulation
applicable to either Issuer or of any decree of any court or governmental
agency or body having jurisdiction over such Issuer, except to the extent
that any such violation would not reasonably be expected to have a
Material Adverse Effect.
(vii) Except as described in the Offering Memorandum, such
counsel does not know of any person who has the right, contractual or
otherwise, to cause the Issuers to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Series A Notes or the
right, as a result of the consummation of the transactions contemplated by
this Agreement, to require registration under the Act of any equity
interests of the Issuers;
(viii) To the knowledge of such counsel and except as has
previously been obtained, the Issuers are not required to obtain
stockholder consent for the issuance or offering of the Series A Notes;
(ix) Nothing has come to the attention of such counsel that
has caused him to believe that, as of the date of the Offering Memorandum
or as of the Closing Date, the Offering Memorandum (except for the
financial statements and the notes thereto and other financial and
statistical data included therein and information furnished in writing by
or on behalf of the Initial Purchasers, as to which such counsel need not
express any belief) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Latham & Watkins, counsel for the Initial Purchasers, dated the
Closing Date, and addressed to the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers.
(f) The Initial Purchasers shall have received letters addressed
to the Initial Purchasers, and dated the date hereof and the Closing Date
from Arthur Andersen, LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchasers.
(g) (i) There shall not have been any change in the capital stock
of the Issuers nor any material increase in the short-term or long-term debt
of the Issuers (other than in the ordinary course of business) from that set
forth or contemplated in the Offering Memorandum (or any amendment or
supplement thereto); (ii) there shall not have been, since the respective
dates as of which information is given in the Offering Memorandum (or any
amendment or supplement thereto), except as may otherwise be stated in the
Offering Memorandum (or any amendment or supplement thereto), any material
adverse change in the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Issuers taken as a
whole; (iii) the Issuers shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business),
that are material to the Issuers, taken as a whole, other than those
reflected in the Offering Memorandum (or any amendment or supplement thereto)
(including, without limitation, in connection with the Recapitalization, the
Merger, the New Credit Facility and the Registration Rights Agreement); and
(iv) all the representations and warranties of the Issuers contained in this
Agreement shall be true and correct in all material respects on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and the Initial Purchasers shall have received a certificate,
dated the Closing Date and signed by the chief executive officer and the
chief accounting officer of the Issuers (or such other officers as are
acceptable to the Initial Purchasers), to the effect set forth in this
Section 8(g) and in Section 8(h) hereof.
<PAGE>
(h) The Issuers shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(i) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Issuers, or (ii) it is reviewing its ratings
assigned to any class of securities of the Issuers with a view to possible
downgrading, or with negative implications, or direction not determined.
(j) The Series A Notes shall have been approved for trading on
PORTAL.
(k) The Recapitalization and the Merger shall be consummated
concurrently with the Closing.
(l) The New Credit Facility shall be executed by all parties
thereto concurrently with the Closing and at least $50 million shall be
available for borrowing thereunder.
(m) The Issuers shall have furnished or caused to be furnished to
the Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have reasonably requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for
the Initial Purchasers.
9. EXPENSES. The Issuers jointly and severally agree to pay the
following costs and expenses and all other costs and expenses incident to the
performance by it of its obligations hereunder: (i) the preparation, printing
or reproduction of the Offering Memorandum (including financial statements
thereto), and each amendment or supplement to any of them, this Agreement and
the Indenture; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the Offering Memorandum, the Preliminary Offering Memorandum, and
all amendments or supplements to any of them as may be reasonably requested
for use in connection with the offering and sale of the Series A Notes; (iii)
the preparation, printing, authentication, issuance and delivery of
certificates for the Series A Notes, including any stamp taxes in connection
with the original issuance and sale of the Series A Notes; (iv) the printing
(or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Series A
Notes; (v) the application for quotation of the Notes on the PORTAL market;
(vi) the qualification of the Series A Notes for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 4(f)
hereof (including the reasonable fees, expenses and disbursements of counsel
for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the preliminary and supplemental Blue Sky
Memoranda and such qualification); (vii) the performance by the Issuers of
their obligations under the Registration Rights Agreement; and (viii) the
fees and expenses of the Issuers's accountants and the fees and expenses of
counsel (including local and special counsel) for the Issuers. The Issuers
hereby jointly and severally agree to pay in full on the Closing Date the
fees and expenses referred to in clause (vi) of this Section 9 by delivering
to counsel for the Initial Purchasers on such date a check payable to such
counsel in the requisite amount.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the
<PAGE>
execution and delivery hereof by all the parties hereto.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Issuers, by notice to
the Issuers, if prior to the Closing Date, (i) trading in securities
generally on the New York Stock Exchange shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking
activities in New York shall have been declared, or (iii) there shall have
occurred any outbreak or escalation of hostilities, or other U.S. or
international calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States
is such as to make it, in the judgment of the initial purchaser,
impracticable or inadvisable to commence or continue the offering of the
Series A Notes on the terms set forth on the cover page of the Offering
Memorandum or to enforce contracts for the resale of the Series A Notes by
the Initial Purchasers. Notice of such termination may be given to the
Issuers by telecopy or telephone and shall be subsequently confirmed by
letter.
12. INFORMATION FURNISHED BY THE INITIAL PURCHASERS. The
statements set forth in the stabilization legend on the inside front cover,
the last paragraph on the cover page and the statements in the first, second
and third paragraphs and the fifth sentence of the fourth paragraph under the
caption "Plan of Distribution" in the Preliminary Offering Memorandum and
Offering Memorandum, constitute the only information furnished by or on
behalf of the Initial Purchasers as such information is referred to in
Sections 6(b), 7(a), 7(c), 8(c)(xii) and 8(d)(x) hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 4, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Issuers, at the office of
the Issuers at 6075 Poplar Avenue, Suite 800, Memphis, TN 38119-4709,
Attention: General Counsel, or (ii) if to the Initial Purchasers, to Salomon
Brothers Inc, Seven World Trade Center, New York, New York 10048, Attention:
Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Issuers, its directors, its officers (and, in the
case of the Company, the directors and officers of its general partner) and
the controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person
shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from the Initial Purchasers of any
of the Series A Notes in its status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed within the State of New
York and without regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers and the Initial Purchasers.
Very truly yours,
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management Company, Inc.
its general partner
By: /s/ Donald F. Wiseman
-----------------------------------------
Name: Donald F. Wiseman
Title: Vice President
PERKINS FINANCE CORP.
By: /s/ Donald F. Wiseman
-----------------------------------------
Name: Donald F. Wiseman
Title: Secretary
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
By: /s/ James M. Oakes Jr.
----------------------------
Name: James M. Oakes Jr.
Title: Director
BANCBOSTON SECURITIES INC.
By: /s/ Neal T. Reiner
----------------------------
Name: Neal T. Reiner
Title: Managing Director
NATIONSBANC MONTGOMERY SECURITIES, INC.
By: /s/ Lisa Yeager
----------------------------
Name: Lisa Yeager
Title: MD
SOCIETE GENERALE SECURITIES CORPORATION
By: /s/ Adam Goodfriend
----------------------------
Name: Adam Goodfriend
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT B
MATERIAL AGREEMENTS
1. Promissory Note from Anthony Seta
2. Promissory Note from Jack Willingham
3. Jack Astor's Joint Venture LLC Agreements:
Operating Agreement of J.A. Joint Venture, LLC, dated May 29, 1997
Management Agreement, dated May 29, 1997
Licence Agreement, dated May 29, 1997
Agreement Regarding the Purchase of Existing Restaurants, dated May 29,
1997
Loan Agreement, dated May 29, 1997
Assignment and Security Agreement, dated May 29, 1997
4. Form purchase and sales orders
5. Form Franchise Agreements
6. Revolving Credit Agreement and Term Loan Agreement, dated June 25, 1997,
by and among Perkins Restaurants Operating Company, Perkins Family
Restaurants, L.P. and BankBoston N.A., and various other financial
institutions which may become parties to the Credit Agreement with
Prudential
7. Note Facility Agreement with Prudential, dated May 29, 1992
8. Aircraft Reimbursement Agreement, dated January 16, 1995, effective as of
April 14, 1994, between Perkins Restaurants Operating Company and TRC
Realty Co.
9. Second Amended and Restated Agreement and Plan of Merger among
The Restaurant Company, Perkins Acquisition Corp. and Perkins Family
Restaurants, L.P., dated September 11, 1997.
10. Form of Agreement and Plan of Merger between Perkins Restaurants Operating
Company, L.P. and Perkins Family Restaurants, L.P.
11. Form of Revolving Credit and Term Loan Agreement, by and among Perkins
Family Restaurants, L.P., The Restaurant Company, Perkins Restaurants,
Inc., Perkins Management Company, Inc., Perkins Finance Corp. BankBoston,
N.A. and other financial institutions and BankBoston, N.A., as Agent with
BancBoston Securities, Inc. as Syndication Agent.
<PAGE>
SCHEDULE I
NAME OF ISSUERS
Principal Amount
Initial Purchasers of Series A Notes
------------------ -----------------
Salomon Brothers Inc $63,212,500
BancBoston Securities Inc. $37,927,500
NationsBanc Montgomery Securities, Inc. $12,642,500
Societe Generale Securities Corporation $12,642,500
------------
Total $126,425,000
<PAGE>
- -------------------------------------------------------------------------------
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
Issuers
-----------------------
SERIES A AND SERIES B
10 1/8% SENIOR NOTES DUE 2007
-----------------------
INDENTURE
Dated as of December 22, 1997
-----------------------
STATE STREET BANK AND TRUST COMPANY
Trustee
-----------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- -----------------
310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(i)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(ii)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(iii(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(iv)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
313(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(v)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;
10.02
(vi)(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03;
10.02
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(vii)(e). . . . . . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . NA
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05,
10.02
(A)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence). . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(B)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
<PAGE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . .15
Section 1.03.. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . .17
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . .17
Section 2.02. Execution and Authentication . . . . . . . . . . . . .18
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . .19
Section 2.04. Paying Agent to Hold Money in Trust. . . . . . . . . .19
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . .19
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . .19
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . .31
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . .31
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . .32
Section 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . .32
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . .32
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . .32
ARTICLE 3. REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . .33
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . .33
Section 3.02. Selection of Notes to Be Redeemed. . . . . . . . . . .33
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . .33
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . .34
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Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . .34
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . .34
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . .34
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . .35
Section 3.09. Offer to Purchase by Application of Excess Proceeds. .35
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . .37
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . .37
Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . .38
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . .38
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . .39
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . .39
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . .39
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . .44
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . .45
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . .45
Section 4.13. Corporate Existence. . . . . . . . . . . . . . . . . .45
Section 4.14. Offer to Repurchase Upon Change of Control . . . . . .46
Section 4.15. Restrictions on Activities of Finance Corp . . . . . .46
Section 4.16. Limitation on Sale and Leaseback Transactions. . . . .47
Section 4.17. Limitation on Issuances and Sales of Capital Stock of
Wholly-Owned restricted Subsidiaries . . . . . . . . . . . . . . . .47
Section 4.18. Line Of Business . . . . . . . . . . . . . . . . . . .47
Section 4.19. Payments for Consent . . . . . . . . . . . . . . . . .47
Section 4.20. Additional Subsidiary Guarantees . . . . . . . . . . .48
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ARTICLE 5. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . .48
Section 5.02. Successor Corporation Substituted. . . . . . . . . . .48
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . .49
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . .49
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . .50
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . .51
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . .51
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . .51
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . .51
Section 6.07. Rights of Holders of Notes to Receive Payment. . . . .52
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . .52
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . .52
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . .53
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . .53
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . .53
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . .54
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . .55
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . .55
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . .55
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . .55
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . .56
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . .56
Section 7.09. Successor Trustee by Merger, etc.. . . . . . . . . . .57
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . .57
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Section 7.11. Preferential Collection of Claims Against Issuers. . .58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . .58
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.02. Legal Defeasance and Discharge.. . . . . . . . . . . .58
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . .58
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . .59
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. . . . . . . . . . . .60
Section 8.06. Repayment to Issuers . . . . . . . . . . . . . . . . .60
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . .61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . . . . . . . .61
Section 9.01. Without Consent of Holders of Notes. . . . . . . . . .61
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . .62
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . .63
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . .63
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . .63
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . . .64
ARTICLE 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.01. Trust Indenture Act Controls. . . . . . . . . . . . .64
Section 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.03. Communication by Holders of Notes with Other
Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . .65
Section 10.04. Certificate and Opinion as to Conditions Precedent. .65
Section 10.05. Statements Required in Certificate or Opinion . . . .65
Section 10.06. Rules by Trustee and Agents . . . . . . . . . . . . .66
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders . . . . . . . . . . . . . . . . . . . . .66
Section 10.08. Governing Law . . . . . . . . . . . . . . . . . . . .66
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Section 10.09. No Adverse Interpretation of Other Agreements . . . .66
Section 10.10. Successors. . . . . . . . . . . . . . . . . . . . . .66
Section 10.11. Severability. . . . . . . . . . . . . . . . . . . . .67
Section 10.12. Counterpart Originals . . . . . . . . . . . . . . . .67
Section 10.13. Table of Contents, Headings, etc. . . . . . . . . . .67
EXHIBITS
Exhibit A-1 FORM OF GLOBAL NOTE
Exhibit A-2 FORM OF REGULATIONS S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT
GUARANTOR
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<PAGE>
INDENTURE dated as of December 22, 1997 between Perkins Family
Restaurants, L.P., a Delaware limited partnership (the "Company") and Perkins
Finance Corp. ("Finance Corp." and, together with the Company, the "Issuers")
and State Street Bank and Trust Company, as trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 10 1/8%
Series A Senior Notes due 2007 (the "Series A Notes") and the 101/8% Series B
Senior Notes due 2007 (the "Series B Notes" and, together with the Series A
Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A GLOBAL NOTE" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"ACQUIRED DEBT" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"ADDITIONAL NOTES" means up to $20 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; PROVIDED, that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback
transaction means, at the time of determination, the present value
(discounted at the rate of interest implicit in such transaction, determined
in accordance with GAAP) of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such sale and
leaseback transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
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"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"BOARD OF DIRECTORS" means (i) with respect to any Person that
is a corporation, the board of directors of such Person or any authorized
committee of such board of director, and (ii) with respect to any Person that
is a partnership or a limited liability company, the board of directors of
the general partner (or similar Person) of such Person or any authorized
committee of such board of directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL INTERESTS" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any
and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a partnership
or limited liability company, partnership or membership interests (whether
general or limited) and (iv) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"CASH EQUIVALENTS" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof)
having maturities of not more than six months from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500,000,000 and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from either Moody's
Investors Service, Inc. or Standard & Poor's Corporation and, in each case,
maturing within six months after the date of acquisition and (vi) money
market funds at least 95% of the assets of which constitute Cash Equivalents
of the kinds described in clauses (i)-(v) of this definition.
"CEDEL" means Cedel Bank, SA.
"CHANGE OF CONTROL" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries, taken as a whole, to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other than TRC or a Related
Party, (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than TRC and its Related Parties, becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act) directly or indirectly, of Capital Interests of the
Company entitling the owners thereof to 35% or more of the income or profits
of the Company, (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) prior
to the
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reorganization of the Company as a corporation, the first day on which the
Company ceases to own 100% of the outstanding Equity Interests of Finance
Corp.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Perkins Family Restaurants, L.P., and any and
all successors thereto.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus
(i) an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based
on income or profits or the Tax Amount of such Person and its Subsidiaries
for such period, to the extent that such provision for taxes or Tax Amount
was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense, net of interest income, of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to
the extent that any such expense was deducted in computing such Consolidated
Net Income, plus (iv) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Subsidiary without prior approval (that
has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
government regulations applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP, less the Tax Amount of such Person for such Period;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned
Restricted Subsidiary thereof that is a Guarantor, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect
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<PAGE>
of a change in accounting principles shall be excluded and (v) the Net Income
(but not loss) of any Unrestricted Subsidiary shall be excluded, whether or
not distributed to the Company or one of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, (a) with respect to a
partnership as of any date, the capital accounts attributable to all common
and preferred partnership interests (other than Disqualified Interests) of
such partnership as of such date, determined on a consolidated basis in
accordance with GAAP, and (b) with respect to any other Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred equity (other than Disqualified
Interests) that by its terms is not entitled to the payment of dividends
unless such dividends may be declared and paid only out of net earnings in
respect of the year of such declaration and payment, but only to the extent
of any cash received by such Person upon issuance of such preferred equity,
less (x) all write-ups (other than write-ups resulting from foreign currency
transactions and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business) subsequent to
the date of this Indenture in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all investments as of
such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determination in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the date of this Indenture, (ii) was nominated for
election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election, or (iii) was nominated for election to
such Board of Directors by TRC or one of its Related Parties.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address
of the Trustee specified in Section 10.02 hereof or such other address as to
which the Trustee may give notice to the Issuers.
"CREDIT FACILITIES" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New Credit Facility)
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"CUSTODIAN" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"DEFAULT" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"DEFINITIVE NOTE" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
in the form of Exhibit A-1 hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests
in the Global Note" attached thereto.
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"DEPOSITARY" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"DISQUALIFIED INTEREST" means any Capital Interest that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature; PROVIDED, HOWEVER, that any Capital
Interests that would constitute Disqualified Interests solely because the
holders thereof have the right to require the Company to repurchase such
Capital Interests upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Interests if the terms of such Capital
Interests provide that the Company may not repurchase or redeem any such
Capital Interests pursuant to such provisions unless such repurchase or
redemption complies with the provisions of Section 4.07 of this Indenture.
"EQUITY INTERESTS" means Capital Interests and all warrants,
options or other rights to acquire Capital Interests (but excluding any debt
security that is convertible into, or exchangeable for, Capital Interests).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"EXCHANGE OFFER" has the meaning set forth in the Registration
Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set
forth in the Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means up to $10.0 million in aggregate
principal amount of Indebtedness of the Company (other than Indebtedness
under the New Credit Facility) in existence on the date of this Indenture.
"FIXED CHARGES" means, with respect to any person for any
period, the sum, without duplication, of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not
such Guarantee or Lien is called upon) and (iv) the product of (a) all
dividend payments, whether or not in cash, on any series of preferred equity
of such
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Person or any of its Restricted Subsidiaries, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person
(or, in the case of a Person that is a partnership or a limited liability
company, the combined federal, state and local income tax rate that was or
would have been utilized to calculate the Tax Amount of such Person),
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for
such period to the Fixed Charges of such Person for such period. In the
event that the referent Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred equity subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred equity, as if the same had occurred at
the beginning of the applicable four-quarter reference period. In addition,
for purposes of making the computation referred to above, (i) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall
be calculated without giving effect to clause (iii) of the proviso set forth
in the definition of Consolidated Net Income, and (ii) the Consolidated Cash
Flow attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, as in effect from time to time.
"GLOBAL NOTES" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii), 2.06(d)(iii) or 2.06(f) hereof.
"GLOBAL NOTE LEGEND" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of
pledge of assets or through letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
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"GUARANTORS" means any Subsidiary of the Company that executes
a Guarantee in accordance with the provisions of this Indenture, and its
respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a Lien
on any asset of such Person (whether or not such Indebtedness is assumed by
such Person) and, to the extent not otherwise included, the Guarantee by such
Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"INITIAL NOTES" means $130,000,000 in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act, who are not also QIBs.
"INVESTMENTS" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the
forms of direct or indirect loans (including guarantees of Indebtedness or
other obligations), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the Company sells
or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Subsidiary not sold or disposed of in an amount determined as provided
in the final paragraph of Section 4.07 of this Indenture.
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"JACK ASTOR VEHICLE" means J.A. Joint Venture, LLC, a Delaware
limited liability company engaged solely in the business of creating, owning,
developing and operating Jack Astor's Bar and Grill restaurants.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, Hartford, Connecticut or at a
place of payment are authorized by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue on such payment for the
intervening period.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be
prepared by the Issuers and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"NET INCOME" means, with respect to any Person, for any period,
the net income (loss) of such Person, determined in accordance with GAAP and
before any reduction in respect of dividends on preferred equity interests,
excluding, however, to the extent included in calculating such Net Income:
(i) any gain (but not loss), together with any related provision for taxes or
Tax Distributions on such gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions), or (b) the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries, and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes or Tax Distributions on such extraordinary or
nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes or Tax Distributions
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), and any reserve
for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"NEW CREDIT FACILITY" means the Credit Agreement expected to be
dated as of December 22, 1997 among the Company, BankBoston, N.A., as agent,
and the lenders party thereto and any related notes, collateral documents,
letters of credit and guarantees, including any appendices, exhibits or
schedules to any of the foregoing (as the same may be in effect from time to
time), in each case, as such agreements may be amended, modified,
supplemented or restated from time to time (whether with the original agents
and lenders or other agents or lenders or otherwise, and whether provided
under the original credit agreement or other credit agreements or otherwise).
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"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and (ii) no default
with respect to which (including any rights that the holders thereof may have
to take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness of
the Company of any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity; and (iii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" has the meaning assigned to it in the preamble to this
Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the Notes by the Issuers.
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, any Assistant Secretary or any Vice-President
of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of
the Issuers by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Issuers,
any Subsidiary of the Company or the Trustee.
"PARTICIPANT" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or
Cedel, respectively (and, with respect to The Depository Trust Company, shall
include Euroclear and Cedel).
"PERMITTED BUSINESS" means the business of owning, operating
and franchising restaurants and other businesses that are ancillary or
related thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company
or in a Wholly-Owned Restricted Subsidiary of the Company that is a
Guarantor (other than an Investment in the Jack Astor Vehicle if it is
subsequently to be declared an Unrestricted Subsidiary); (b) any Investment
in Cash Equivalents; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a
Guarantor that is engaged in a Permitted Business or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly-Owned Restricted Subsidiary of the Company that is a
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<PAGE>
Guarantor and that is engaged in a Permitted Business; (d) any Investment
made as a result of the receipt of non-cash consideration from an Asset Sale
that was made pursuant to and in compliance with Section 4.10 of this
Indenture; (e) any acquisition of assets solely in exchange for the issuance
of Equity Interests (other than Disqualified Interests) of the Company; (f)
additional Investments in the Jack Astor Vehicle, either by way of capital
contribution or loan to, or Guarantee of Indebtedness of, the Jack Astor
Vehicle; PROVIDED that the aggregate amount of such capital contributions and
loans, together with the aggregate principal amount of any such Indebtedness
that is so Guaranteed, does not exceed $10.0 million at any time outstanding
(with each such Investment being measured as of the date it was made and
without giving effect to subsequent changes in value); (g) any Investments in
promissory notes acquired in a Permitted Non-Cash Transaction, provided that
not more than $5.0 million in aggregate principal amount of such promissory
notes remains outstanding after giving effect to such Investment (excluding
any such promissory notes outstanding on the date of the Indenture); and (h)
other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect
to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (h) since the date of the Indenture,
not to exceed $2.0 million.
"PERMITTED LIENS" means (i) Liens securing Indebtedness under
Credit Facilities that were permitted by the terms of the Indenture to be
incurred; (ii) Liens in favor of the Company; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Company or any Restricted Subsidiary of the Company; provided that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing
at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company, PROVIDED that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of Section
4.09 of this Indenture covering only the assets acquired with the proceeds of
such Indebtedness; (vi) Liens to secure additional Capital Lease Obligations
that were permitted to be incurred pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09 of this Indenture
covering only assets acquired with the proceeds of such Indebtedness, up to
an aggregate of $15.0 million in principal amount at any one time
outstanding; and (vii) Liens existing on the date of the Indenture.
"PERMITTED NON-CASH TRANSACTION" means (i) any sale, lease or
other disposition of restaurants and related equipment for consideration
consisting of cash and/or promissory notes of the acquiror of such assets,
provided that not more than $5.0 million in aggregate principal amount of
such promissory notes remains outstanding after giving effect to such
transaction (excluding any such promissory notes outstanding on the date of
the Indenture) and (ii) any sale, lease or other disposition of assets that
are no longer used by the Company or any of its Restricted Subsidiaries in a
Permitted Business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); PROVIDED that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is
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subordinated in right of payment to the Notes, then the Permitted Refinancing
Indebtedness must have a final maturity date later than the final maturity
date of, and be subordinated in right of payment to, the Notes on terms at
least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of December 22, 1997, by and among the Issuers and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time and, with respect to any
Additional Notes, one or more registration rights agreements between the
Issuers and the other parties thereto, as such agreement(s) may be amended,
modified or supplemented from time to time, relating to rights given by the
Issuers to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"REGULATION S" means Regulation S promulgated under the
Securities Act.
"REGULATION S GLOBAL NOTE" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"REGULATION S PERMANENT GLOBAL NOTE" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Regulation S Temporary Global Note
upon expiration of the Restricted Period.
"REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Notes initially sold in reliance on
Rule 903 of Regulation S.
"RELATED PARTY" with respect to TRC means (A) any 25% or
greater stockholder (including each of Donald N. Smith, Harrah's
Entertainment, Inc. (and its subsidiaries) and The Equitable Life Assurance
Society of the United States) or 80% (or more) owned Subsidiary of TRC or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of TRC and/or such other Persons
referred to in the immediately preceding clause (A).
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"RESPONSIBLE OFFICER," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee
(or any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"RESTRICTED BROKER-DEALER" has the meaning set forth in the
Registration Rights Agreement.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing
the Private Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the
Private Placement Legend.
"RESTRICTED INVESTMENT" means any Investment other than a
Permitted Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"RULE 903" means Rule 903 promulgated under the Securities Act.
"RULE 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date of this Indenture.
"STATED MATURITY" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of
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the other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means the Guarantee by each Guarantor of
the Issuers' payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"TAX AMOUNT" means, with respect to any Person for any period,
the aggregate combined federal, state, local and foreign income taxes
(including estimated taxes) actually payable by partners or owners of such
Person in respect of such partners' or owners' Taxable Income for such
period, and aggregate state and local franchise taxes. Notwithstanding
anything to the contrary, Tax Amount shall not include taxes payable as a
result of recognizing gain from such Person's reorganization as or change in
the status to a corporation or attributable to its Taxable Income for any
taxable year commencing prior to January 1, 1997.
"TAX DISTRIBUTION" means a distribution in respect of taxes to
the partners of the Company pursuant to clause (vii) of the third paragraph
of Section 4.07 of this Indenture.
"TAXABLE INCOME" means, with respect to any Person for any
period, the taxable income or loss of such Person for such period for
federal, state, foreign or local income tax purposes; PROVIDED, that (i) all
items of gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss,
(ii) any basis adjustment made in connection with an election under Section
754 of the Code shall be disregarded and (iii) such taxable income shall be
increased or such taxable loss shall be decreased by the amount of any
interest expense incurred by such Person that is not treated as deductible
for federal income tax purposes by a partner or owner of such person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"TRC" means The Restaurant Company.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture
and thereafter means the successor serving hereunder.
"UNRESTRICTED GLOBAL NOTE" means a permanent global Note in the
form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the
name of the Depositary, representing a series of Notes that do not bear the
Private Placement Legend.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than
Finance Corp.) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be
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obtained at the time from Persons who are not Affiliates of the Company; (c)
is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any
of its Restricted Subsidiaries; and (e) has at least one director on its
board of directors that is not a director or executive officer of the Company
or any of its Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries, except that clauses (a)-(d) shall not be applicable
to the Jack Astor Vehicle. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the provisions of Section 4.07 hereof. If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be
an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness
of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary
of the Company as of such date (and, if such Indebtedness is not permitted to
be incurred as of such date under the provisions of section 4.09 hereof, the
Company shall be in default of Section 4.09 hereof). The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under the provisions of Section 4.09 of this Indenture, calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would
be in existence following such designation; and provided, further, that, to
the extent applicable, the Company shall cause such Subsidiary to comply with
the provisions of Section 4.20 of this Indenture.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"VOTING STOCK" of any Person as of any date means the Capital
Interests of such Person that is at the time entitled to vote in the election
of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (b) the
then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Interests
or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person or by such Person and one
or more Wholly-Owned Restricted Subsidiaries of such Person.
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SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- -------
"Affiliate Transaction". . . . . . . . . . . . . .4.11
"Asset Sale" . . . . . . . . . . . . . . . . . . .4.10
"Asset Sale Offer" . . . . . . . . . . . . . . . .3.09
"Authentication Order" . . . . . . . . . . . . . .2.02
"Change of Control Offer" . . . . . . . . . . . .4.14
"Change of Control Payment". . . . . . . . . . . .4.14
"Change of Control Payment Date" . . . . . . . . .4.14
"Covenant Defeasance". . . . . . . . . . . . . . .8.03
"Event of Default" . . . . . . . . . . . . . . . .6.01
"Excess Proceeds". . . . . . . . . . . . . . . . .4.10
"Incur". . . . . . . . . . . . . . . . . . . . . .4.09
"Legal Defeasance" . . . . . . . . . . . . . . . .8.02
"Offer Amount" . . . . . . . . . . . . . . . . . .3.09
"Offer Period" . . . . . . . . . . . . . . . . . .3.09
"Paying Agent" . . . . . . . . . . . . . . . . . .2.03
"Permitted Debt" . . . . . . . . . . . . . . . . .4.09
"Purchase Date". . . . . . . . . . . . . . . . . .3.09
"Registrar". . . . . . . . . . . . . . . . . . . .2.03
"Restricted Payments". . . . . . . . . . . . . . .4.07
SECTION 1.03.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the
Issuers and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise
defined has the meaning assigned to it in accordance
with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the
plural, and in the plural include the singular;
(5) provisions apply to successive events
and transactions; and
(6) references to sections of or rules
under the Securities Act shall be deemed to include
substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) GENERAL. The Notes shall be substantially in the form of
Exhibit A-1 or A-2 hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note shall
be dated the date of its authentication. The Notes shall be in denominations
of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern
and be controlling.
(b) GLOBAL NOTES. Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including
the Global Note Legend thereon and the "Schedule of Exchanges of Interests in
the Global Note" attached thereto). Notes issued in definitive form shall be
substantially in the form of Exhibit A-1 attached hereto (but without the
Global Note Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
(c) TEMPORARY GLOBAL NOTES. Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the
Regulation S Temporary Global Note, which shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Trustee, at its New York
office, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel Bank, duly executed by the
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Issuers and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i)
a written certificate from the Depositary, together with copies of
certificates from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except
to the extent of any beneficial owners thereof who acquired an interest
therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a
beneficial ownership interest in a 144A Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and
(ii) an Officers' Certificate from the Issuers. Following the termination of
the Restricted Period, beneficial interests in the Regulation S Temporary
Global Note shall be exchanged for beneficial interests in Regulation S
Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The
provisions of the "Operating Procedures of the Euroclear System" and "Terms
and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for each of the Issuers by
manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that
the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed
by an Officer of each Issuer (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4
of the Notes. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Issuers to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or
an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Issuers may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar" includes any
co-registrar and the term "Paying Agent" includes any
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additional paying agent. The Issuers may change any Paying Agent or
Registrar without notice to any Holder. The Issuers shall notify the Trustee
in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on
the Notes, and will notify the Trustee of any default by the Issuers in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The
Issuers at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the
money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to either Issuer, the Trustee shall serve as Paying
Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Issuers shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Issuers shall otherwise comply with
TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note
may not be transferred as a whole except by the Depositary to a nominee of
the Depositary, by a nominee of the Depositary to the Depositary or to
another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary. All
Global Notes will be exchanged by the Issuers for Definitive Notes if (i) the
Issuers deliver to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer
a clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Issuers within 120 days after
the date of such notice from the Depositary or (ii) the Issuers in their sole
discretion determine that the Global Notes (in whole but not in part) should
be exchanged for Definitive Notes and deliver a written notice to such effect
to the Trustee; PROVIDED that in no event shall the Regulation S Temporary
Global Note be exchanged by the Issuers for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global
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Notes also may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant
to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may
not be exchanged for another Note other than as provided in this Section
2.06(a), however, beneficial interests in a Global Note may be transferred
and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE
GLOBAL NOTES. The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME
GLOBAL NOTE. Beneficial interests in any Restricted Global Note
may be transferred to Persons who take delivery thereof in the form
of a beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the Private
Placement Legend; PROVIDED, HOWEVER, that prior to the expiration
of the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Note may not be made to a U.S. Person
or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted
Global Note may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in
this Section 2.06(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF
BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all
transfers and exchanges of beneficial interests that are not
subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures
directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary
to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to
in (1) above; PROVIDED that in no event shall Definitive Notes be
issued upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities
Act. Upon consummation of an Exchange Offer by the Issuers in
accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all
of the requirements for transfer or exchange of beneficial
interests in Global Notes contained in this Indenture and the Notes
or otherwise applicable under the
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Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER
RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another Restricted
Global Note if the transfer complies with the requirements of
Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery
in the form of a beneficial interest in the 144A Global
Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery
in the form of a beneficial interest in the Regulation S
Temporary Global Note or the Regulation S Permanent
Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including
the certifications in item (2) thereof.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS
IN A RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE
UNRESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted
Global Note may be exchanged by any holder thereof for a beneficial
interest in an Unrestricted Global Note or transferred to a Person
who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note if the exchange or transfer complies
with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the holder of
the beneficial interest to be transferred, in the case of
an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with
the Registration Rights Agreement;
(C) such transfer is effected by a
Restricted Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes
to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the
form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
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(2) if the holder of such beneficial
interest in a Restricted Global Note proposes
to transfer such beneficial interest to a
Person who shall take delivery thereof in the
form of a beneficial interest in an
Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this
subparagraph (D), if the Registrar so requests
or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in the Private
Placement Legend are no longer required in
order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuers shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR
DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL
NOTES TO RESTRICTED DEFINITIVE NOTES. If any holder of a
beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted Definitive Note
or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration
requirements of the Securities Act in accordance with
Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
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(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate
to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Issuers shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C)
hereof, a beneficial interest in the Regulation S Temporary
Global Note may not be exchanged for a Definitive Note or
transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B)
under the Securities Act, except in the case of a transfer
pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 903 or Rule 904.
(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest
in a Restricted Global Note may exchange such beneficial interest
for an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is
an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
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(C) such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form of
a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee
shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Issuers shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall not
bear the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR
BENEFICIAL INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted
Definitive Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note or to transfer such Restricted
Definitive Notes to a Person who takes delivery thereof in the form
of a beneficial interest in a Restricted Global Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note, a certificate from
such
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Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the
registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Issuers or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note,
increase or cause to be increased the aggregate principal amount
of, in the case of clause (A) above, the appropriate Restricted
Global Note, in the case of clause (B) above, the 144A Global
Note, and in the case of clause (c) above, the Regulation S
Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS
IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive
Note to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
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(C) such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuers shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE
NOTES. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied
by a written instruction of transfer in form satisfactory to the Registrar
duly executed by such Holder or by his attorney, duly authorized in writing.
In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant
to the following provisions of this Section 2.06(e).
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(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE
NOTES. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including
the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to
any other exemption from the registration requirements of
the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged
by the Holder thereof for an Unrestricted Definitive Note or
transferred to a Person or Persons who take delivery thereof in the
form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Restricted Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuers to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in
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the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note. Upon receipt of a request
to register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (i) one or more Unrestricted Global Notes in
an aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of
the Issuers, and accepted for exchange in the Exchange Offer and (ii)
Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the
Exchange Offer. Concurrently with the issuance of such Notes, the Trustee
shall cause the aggregate principal amount of the applicable Restricted
Global Notes to be reduced accordingly, and the Issuers shall execute and the
Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED IN RULE 144A THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER
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THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO ONE
OF THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global
Note or Definitive Note issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a
legend in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK)
("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OR
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN."
(iii) REGULATION S TEMPORARY GLOBAL NOTE LEGEND. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased
or canceled in whole and not in part, each such Global Note shall be returned
to or retained and canceled by the Trustee in accordance with Section 2.11
hereof. At any time prior to such cancellation, if any beneficial interest
in a Global Note is exchanged for or transferred to a Person who will
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take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such reduction; and if the beneficial interest is
being exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note, such other
Global Note shall be increased accordingly and an endorsement shall be made
on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such increase.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND
EXCHANGES.
(i) To permit registrations of transfers and exchanges,
the Issuers shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon the Issuers' order or at the
Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Issuers
may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06,
3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole
or in part, except the unredeemed portion of any Note being
redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Issuers, evidencing the
same debt, and entitled to the same benefits under this Indenture,
as the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (c) to register the transfer of
or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes and for all
other purposes, and none of the Trustee, any Agent or the Issuers
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may
be submitted by facsimile.
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SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Issuers and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Issuers shall issue and the
Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Issuers, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Issuers to protect the
Issuers, the Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Note is replaced. The Issuers may charge
for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Issuers and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Issuers or
an Affiliate of the Issuers holds the Note; however, Notes held by the
Company or a Subsidiary of the Company shall not be deemed to be outstanding
for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser. If the
principal amount of any Note is considered paid under Section 4.01 hereof, it
ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Issuers may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that
the Issuers consider appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the
Issuers shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes.
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Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Notes (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all canceled Notes
shall be delivered to the Issuers. The Issuers may not issue new Notes to
replace Notes that they have paid or that have been delivered to the Trustee
for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Issuers shall notify
the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment. The Issuers shall
fix or cause to be fixed each such special record date and payment date,
PROVIDED that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days
before the special record date, the Issuers (or, upon the written request of
the Issuers, the Trustee in the name and at the expense of the Issuers) shall
mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, they shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, on a PRO RATA basis,
by lot or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes
to be redeemed shall be selected, unless otherwise provided herein, not less
than 30 nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the
Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples
of
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$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Issuers shall
mail or cause to be mailed, by first class mail, a notice of redemption to
each Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at its expense; PROVIDED, HOWEVER, that
the Issuers shall have delivered to the Trustee, at least 45 days prior to
the redemption date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may
not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Issuers
shall deposit with the Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Notes
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to be redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Issuers any money deposited with the Trustee or the Paying
Agent by the Issuers in excess of the amounts necessary to pay the redemption
price of, and accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue
on the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Note was registered at the close of business on
such record date. If any Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Issuers to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent
lawful on any interest not paid on such unpaid principal, in each case at the
rate provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers
shall issue and, upon the Issuers' written request, the Trustee shall
authenticate for the Holder at the expense of the Issuers, a new Note equal
in principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Issuers shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to December 15, 2002. Thereafter, the Issuers shall have
the option to redeem the Notes, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 15 of
the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 .................................... 105.063%
2003 .................................... 103.375%
2004 .................................... 101.688%
2005 and thereafter ..................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time on or prior to December 15, 2000, the Issuers may on one or
more occasions redeem Notes with the net cash proceeds of one or more public
offerings of the Company's equity securities or the equity securities of any
of the Company's direct or indirect parents (to the extent such net proceeds
have been contributed to the Company as common equity capital), at a
redemption price equal to 110.125% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any; PROVIDED that at
least 65% of the principal amount of Notes originally issued remain
outstanding immediately after the occurrence of such redemption (excluding
Notes held by the Company or any of its respective Subsidiaries) and that
such redemption shall occur within 60 days of the date of the closing of any
such public offering.
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(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuers
shall be required to commence an offer to all Holders to purchase Notes (an
"ASSET SALE OFFER"), they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "OFFER PERIOD"). No
later than five Business Days after the termination of the Offer Period (the
"PURCHASE DATE"), the Issuers shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall
be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall
be payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers shall
send, by first class mail, a notice to the Trustee and each of the Holders.
The notice shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset
Sale Offer shall be made to all Holders. The notice, which shall govern the
terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale
Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Issuers default in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuers, the
Depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
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(g) that Holders shall be entitled to withdraw their election if
the Issuers, the Depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the
extent lawful, accept for payment, on a PRO RATA basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Notes tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Issuers in accordance with the terms of this Section 3.09. The Issuers, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than five Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Issuers for purchase, and
the Issuers shall promptly issue a new Note, and the Trustee, upon written
request from the Issuers shall authenticate and mail or deliver such new Note
to such Holder, in a principal amount equal to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Issuers to the Holder thereof. The Issuers shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the
due date money deposited by the Issuers in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Issuers shall pay all Liquidated Damages, if any, in
the same manner on the dates and in the amounts set forth in the Registration
Rights Agreement.
The Issuers shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any
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proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee
or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices
and demands to or upon the Issuers in respect of the Notes and this Indenture
may be served. The Issuers shall give prompt written notice to the Trustee
of the location, and any change in the location, of such office or agency.
If at any time the Issuers shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Issuers of their obligation to maintain an office or agency in
the Borough of Manhattan, the City of New York for such purposes. The
Issuers shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Issuers hereby designate the Corporate Trust Office of the
Trustee as one such office or agency of the Issuers in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Issuers shall furnish to the
Trustee and the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC
on Forms 10-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii)
all current reports that would be required to be filed with the SEC on Form
8-K if the Company were required to file such reports, in each case, within
the time periods specified in the SEC's rules and regulations. In addition,
following consummation of the Exchange Offer, whether or not required by the
rules and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. The Issuers shall at all
times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Issuers shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuers and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within
90 days after the end of each fiscal year, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during
the preceding fiscal year
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has been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this Indenture and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge
the Issuers have kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and are not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Issuers are taking or propose to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of or interest, if any, on the Notes is prohibited or if such
event has occurred, a description of the event and what action the Issuers
are taking or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.03(a) above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to
believe that the either Issuer has violated any provisions of Article 4 or
Article 5 hereof or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default
or Event of Default and what action the Issuers are taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuers and each of the Guarantors covenant (to the extent
that they may lawfully do so) that they shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuers and each of the Guarantors (to the extent that
they may lawfully do so) hereby expressly waive all benefit or advantage of
any such law, and covenant that they shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any
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payment in connection with any merger or consolidation involving the Company
or any of its Restricted Subsidiaries) or to the direct or indirect holders
of the Company's or any of its Restricted Subsidiaries' Equity Interests in
their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Interests) of the Company or to the
Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company
(other than any such Equity Interests owned by the Company or any
Wholly-Owned Restricted Subsidiary of the Company); (iii) make any payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes, except a
payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "RESTRICTED
PAYMENTS"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 of this Indenture; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii) and (viii) of the second
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of this Indenture (the "MEASUREMENT DATE") to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company since the Measurement Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company (other
than Disqualified Interests) or from the issue or sale of Disqualified
Interests or debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests or convertible debt
securities sold to a Subsidiary of the Company), plus (iii) to the extent
that any Restricted Investment that was made after the date of this Indenture
is sold for cash or otherwise liquidated or repaid for cash, the lesser of
(A) the cash return of capital with respect to such Restricted Investment
(less the cost of disposition, if any) and (B) the aggregate amount of such
Restricted Investment that was treated as a Restricted Payment when made.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a
Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments
under the first paragraph of this Section 4.07. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to
the fair market value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of
this Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Interests); PROVIDED
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of
the Company to the holders of its common Equity Interests on a pro rata
basis; (v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Subsidiary of the Company
held by any member of the Company's (or any of its Subsidiaries') management;
PROVIDED that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1,000,000 in any
twelve-month period and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction; (vi) the declaration of
the Jack Astor Vehicle as an Unrestricted Subsidiary on the date that it
becomes a Subsidiary of the Company; PROVIDED that it otherwise meets the
qualifications of an Unrestricted Subsidiary; (vii) distributions to partners
or owners of the Company in an aggregate amount during or with respect to any
fiscal period commencing after December 31, 1996, not to exceed the Tax
Amount for such period or for such prior periods commencing after December
31, 1996 that are subject to adjustments as a result of audits by tax
authorities; (viii) transfers of cash proceeds from the sale of the Notes not
to exceed, in the aggregate, $85.0 million, to finance the purchase of the
Company's limited partnership interests from the public holders of such
units, as set forth in the Offering Memorandum under the caption "Use of
Proceeds" and (ix) additional Restricted Payments not to exceed $5.0 million
after the date of this Indenture.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the
asset(s) or securities proposed to be transferred or issued by the Company or
such Subsidiary, as the case may be, pursuant to the Restricted Payment. The
fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $1.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, together with a copy of any fairness opinion
or appraisal required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a)(i) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (A)
on its Capital Interests or (B) with respect to any other interest or
participation in, or measured by, its profits or (ii) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (b) make loans or
advances to the Company or any of its Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions
existing under or by reasons of (i) this Indenture and the Notes, (ii)
applicable law, (iii) any instrument governing Indebtedness or Capital
Interests of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such
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acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred,
(iv) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (v) purchase
money obligations for property acquired in the ordinary course of business
that impose restrictions of the nature described in clause (c) above on the
property so acquired, (vi) any agreement for the sale of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
its sale, (vii) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced; (viii) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of Section 4.12
hereof that limit the right of the debtor to dispose of the assets securing
such Indebtedness; and (ix) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary
course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "INCUR") any
Indebtedness (including Acquired Debt) and the Company shall not issue any
Disqualified Interests and shall not permit any of its Restricted
Subsidiaries to issue preferred Equity Interests (including Disqualified
Interests); PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Debt) or issue Disqualified Interests and any of the
Company's Restricted Subsidiaries that is a Guarantor may incur Indebtedness
or issue preferred Equity Interests (including Disqualified Interests) if, in
each case, the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such Equity Interests are issued would have been
at least 2 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Equity Interests had been issued, as the case may
be, at the beginning of such four-quarter period.
The Company shall not incur any Indebtedness (nor will the
Guarantors guarantee any such Indebtedness) that is contractually
subordinated to any other Indebtedness of the Company unless such
Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; PROVIDED, HOWEVER, that no
Indebtedness of the Company shall be deemed to be contractually subordinated
to any other Indebtedness of the Company solely by virtue of being unsecured.
The foregoing provisions shall not apply to the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by
the Guarantors) of revolving credit Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
under Credit Facilities; PROVIDED that the aggregate principal amount of all
revolving credit Indebtedness and letters of credit outstanding under Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to $50.0 million;
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(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iii) the incurrence by the Issuers (and the Guarantee thereof
by the Guarantors) of Indebtedness represented by the Notes;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets or
a new Restricted Subsidiary; PROVIDED that such Indebtedness was incurred by
the prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by the Company or one of its Restricted Subsidiaries and was not
incurred in connection with, or in contemplation of, such acquisition by the
Company or one of its Restricted Subsidiaries; and PROVIDED FURTHER that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (v) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (v),
does not exceed $10 million;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) or any Indebtedness that was permitted
by the Indenture to be incurred pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of this Section 4.09;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly-Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that (i)
if the Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Company or a Subsidiary thereof and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly-Owned Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(ix) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(x) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted
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Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company that was not permitted
by this clause (x);
(xi) Indebtedness consisting of Permitted Investments of the
kind described in clause (f) of the definition of "Permitted Investments"; and
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xii), not to exceed $5.0
million.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xii)
above or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company shall, in its sole discretion, classify such item
of Indebtedness in any manner that complies with this Section 4.09. Accrual
of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends or
Disqualified Interests in the form of additional shares of the same class of
Disqualified Interests shall not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.09; PROVIDED, in each such case,
that the amount thereof is included in Fixed Charges of the Company as
accrued.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to: (i) sell, lease, convey or otherwise dispose of
any assets (including, without limitation, by way of a sale and leaseback)
other than sales of inventory and leases (or subleases) of restaurant
facilities and related equipment to franchisees, in each case, in the
ordinary course of business consistent with past practices (PROVIDED that the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Subsidiaries shall be governed by the
provisions of Sections 4.14 and 5.01 hereof), or (ii) issue or sell Equity
Interests of any of its Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions,
(a) that have a fair market value in excess of $1 million or (b) for net
proceeds in excess of $1 million (each of the foregoing, an "ASSET SALE"),
unless (x) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (y) except in
the case of a Permitted Non-Cash Transaction, at least 75% of the
consideration received therefor by the Company or such Restricted Subsidiary
is in the form of cash; PROVIDED, that the amount of (A) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet), of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (B) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are contemporaneously (subject to
ordinary settlement periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to
be cash for purposes of this provision. A transfer of assets by the Company
to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary,
and an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary
to the Company or to
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another Wholly-Owned Restricted Subsidiary, shall not be deemed to be an
Asset Sale. Any Restricted Payment that is permitted by Section 4.07 hereof
will not be deemed to be an Asset Sale.
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds (a) to permanently reduce
Indebtedness under the New Credit Facility (and to correspondingly reduce
commitments with respect thereto), or (b) to the acquisition of a majority of
the assets of, or a majority of the voting Capital Interests of, another
Permitted Business, the making of a capital expenditure or the acquisition of
other tangible long-term assets, in each case, that are used or useful in a
Permitted Business. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from such Asset Sale that are not finally applied
or invested as provided in the first sentence of this paragraph will be
deemed to constitute "EXCESS PROCEEDS." Within ten days of each date on
which the aggregate amount of Excess Proceeds exceeds $5 million, the Issuers
shall commence a PRO RATA Asset Sale Offer pursuant to Section 3.09 hereof to
purchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds at an offer price in cash in an amount equal to 100% of
the principal amount thereof on the date fixed for the closing of such offer
plus accrued and unpaid interest and Liquidated Damages thereon, if any. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use such
deficiency for any purpose not otherwise prohibited by the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
deemed to be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (b) the
Company delivers to the Trustee (i) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $1 million, a resolution of
the Board of Directors set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (a) above and that such
Affiliate Transaction has either been approved by a majority of the
disinterested members of the Board of Directors or has been approved in an
opinion issued by an accounting, appraisal or investment banking firm of
national standing as being fair to the Holders from a financial point of view
and (ii) with respect to any Affiliate Transaction of series of related
Affiliate Transactions involving aggregate consideration in excess of $5
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing; PROVIDED, HOWEVER, that (i)
any employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions
between or among the Company and/or its Restricted Subsidiaries, (iii)
payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company, (iv) any agreement in effect on the date of the
Indenture or any amendment thereto or transaction contemplated thereby (and
any replacement or amendment of any such agreement so long as any such
amendment or replacement thereof is not materially less favorable to the
Holders than the original agreement in effect on the date of the Indenture),
and (v) transactions permitted under Section 4.07 hereof shall not be deemed
Affiliate Transactions.
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SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign
or convey any right to receive income therefrom, except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect
(i) its partnership existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of
the Company or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
PROVIDED, HOWEVER, that the Company shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Subsidiaries, taken as a whole, and
that the loss thereof is not adverse in any material respect to the Holders
of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Issuers shall
make an offer (a "CHANGE OF CONTROL OFFER") to each Holder to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes at a purchase price each equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (the "CHANGE OF CONTROL
PAYMENT"). Within 10 days following any Change of Control, the Issuers shall
mail a notice to each Holder stating: (1) that the Change of Control Offer is
being made pursuant to this Section 4.14 and that all Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which
shall be no earlier than 30, nor later than 60 business days from the date
such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any
Note not tendered will continue to accrue interest; (4) that, unless the
Issuers default in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer
will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date; (6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have the Notes purchased; and (7) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof. The Issuers shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes in connection with a
Change of Control.
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(b) On the Change of Control Payment Date, the Issuers shall, to
the extent lawful, (1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with
the Paying Agent an amount equal to the Change of Control Payment in respect
of all Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions
thereof being purchased by the Issuers. The Paying Agent shall promptly mail
to each Holder of Notes so tendered payment in an amount equal to the
purchase price for the Notes, and the Trustee shall promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered
by such Holder, if any; PROVIDED, that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Issuers
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
SECTION 4.15. RESTRICTIONS ON ACTIVITIES OF FINANCE CORP.
Finance Corp. shall not hold any material assets, become liable
for any material obligations (other than its indemnification and contribution
obligations pursuant to the Purchase Agreement and the Registration Rights
Agreement) or engage in any significant business activities; PROVIDED that
Finance Corp. may be a co-obligator with respect to Indebtedness if the
Company is the primary obligor with respect to such Indebtedness and the net
proceeds of such Indebtedness are received by the Company or one of the
Company's Restricted Subsidiaries other than Finance Corp.
SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Company may enter into a sale and leaseback transaction if
(i) the Company could have (a) incurred Indebtedness in an amount equal to
the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to the provisions of Section 4.12 hereof, (ii) the
gross cash proceeds of such sale and leaseback transaction are at least equal
to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback transaction
and (iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, Section 4.10 hereof.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
WHOLLY-OWNED RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any
Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Capital Interests of any Wholly-Owned
Restricted Subsidiary of the Company to any Person (other than the Company or
a Wholly-Owned Restricted Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Interests of such Wholly-Owned Restricted Subsidiary and (b) the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 4.10 hereof and (ii) will not permit any
Wholly-Owned Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Interests
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly-Owned Restricted Subsidiary of the Company.
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SECTION 4.18. LINE OF BUSINESS.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent
as would not be material to the Company and its Subsidiaries, taken as a
whole.
SECTION 4.19. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
SECTION 4.20. ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Subsidiaries shall acquire or
create another Subsidiary after the date of this Indenture, then such newly
acquired or created Subsidiary shall become a Guarantor by executing a
Supplemental Indenture in the form attached hereto as Exhibit E and deliver
an Opinion of Counsel to the Trustee to the effect that such Supplemental
Indenture has been duly authorized, executed and delivered by such Subsidiary
and constitutes a valid and binding obligation of such Subsidiary,
enforceable against such Subsidiary in accordance with its terms (subject to
customary exceptions). The provisions of this Section 4.20 shall not apply
to (i) any Subsidiary organized outside of the United States and its
territories or (ii) any Subsidiary that has properly been designated as an
Unrestricted Subsidiary in accordance with this Indenture for so long as it
continues to constitute an Unrestricted Subsidiary.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions to, another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company pursuant to a supplemental indenture under
the Notes and this Indenture in a form reasonably satisfactory to the
Trustee, (iii) immediately after such transaction, no Default or Event of
Default exists and (iv) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) shall have Consolidated Net Worth (immediately after
the transaction) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) shall, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur
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at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all
of the assets of the Company in accordance with Section 5.01 hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale,
lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation
and not to the Company), and may exercise every right and power of the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; PROVIDED, HOWEVER, that the predecessor
Company shall not be relieved from the obligation to pay the principal of and
interest on the Notes except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for
a period of 30 days;
(b) the Issuers default in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise;
(c) the Company or any of its Subsidiaries fail to comply with any
of the provisions of Section 4.07, 4.09, 4.10, 4.14 or 5.01 hereof;
(d) the Company or any of its Subsidiaries fail to observe or
perform any other covenant, representation, warranty or other agreement in
this Indenture or the Notes for 30 days after notice to the Issuers by the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the date of this Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness under which there had been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5 million or more;
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(f) a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against the
Company or any of its Significant Subsidiaries or a group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary and such
judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, PROVIDED that the
aggregate of all such undischarged judgments exceeds $5 million;
(g) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become
due; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of
its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any of
its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary or for
all or substantially all of the property of the Company or any of
its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any
of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for
60 consecutive days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee
is held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under such Guarantor's Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) or (h) of
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Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except
nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
If an Event of Default occurs by reason of any willful action
(or inaction) taken ( or not taken) by or on behalf of the Issuers with the
intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs on or
before December 15, 2002 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Issuers with the intention of avoiding
the prohibition on redemption of the Notes prior to December 15, 2002, then
the premium payable for purposes of this paragraph for the period beginning
on the date hereof and ending on December 15, 2002 shall be 105.063% of the
amount that would otherwise by due but for the provisions of this paragraph,
plus accrued interest and Liquidated Damages, if any, to the date of payment.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf
of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event
of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on, the Notes (including in connection with an
offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or
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exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture that
the Trustee determines may be unduly prejudicial to the rights of other
Holders of Notes or that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without
the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in
its own name and as trustee of an express trust against the Issuers for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and,
to the extent lawful, interest and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders of the Notes allowed in any judicial proceedings
relative to the Issuers (or any other obligor
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upon the Notes), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute any money or other property
payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof. To the extent that the payment of any
such compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07
hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages,
if any and interest, respectively; and
THIRD: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders
of more than 10% in principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trustee
need perform only those duties that are specifically set forth in
this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) and Section 7.02 of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee
may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of the Issuers.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of the Issuers with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and
7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Issuers' use of the proceeds from the
Notes or any money paid to the Issuers or upon the Issuers' direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of
the Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it
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occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall
also transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders
of Notes shall be mailed to the Issuers and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Issuers shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuers shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Issuers shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture
against the Issuers (including this Section 7.07) and defending itself
against any claim (whether asserted by the Issuers or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or bad faith. The Trustee
shall notify the Issuers promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers shall not relieve
the Issuers of its obligations hereunder. The Issuers shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Issuers shall pay the reasonable fees and expenses
of such counsel. The Issuers need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Issuers' payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Issuers. The Holders of
Notes of a majority in principal amount of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Issuers in writing.
The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Issuers.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee,
PROVIDED all sums owing to the Trustee hereunder have been paid and subject
to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 7.08, the Issuers' obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has a combined capital
and surplus of at least $100 million as set forth in its most recent
published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the
Issuers shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and
the Trustee, on demand of and at the expense of the Issuers, shall execute
proper instruments acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 8.04 hereof, and as more fully set
forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Issuers'
obligations with respect to such Notes under Article 2 and Section 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Issuers' obligations in connection therewith and (d) this
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Article Eight. Subject to compliance with this Article Eight, the Issuers
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.04, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20
and 5.01 hereof with respect to the outstanding Notes on and after the date
the conditions set forth in Section 8.04 are satisfied (hereinafter,
"COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall
not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Notes, the
Issuers may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any
such covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall
not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Issuers' exercise
under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, Sections 6.01(d) through 6.01(f) hereof shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or investment bankers, to pay the principal
of, premium and Liquidated Damages, if any, and interest on the outstanding
Notes on the stated date for payment thereof or on the applicable redemption
date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Issuers has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that
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the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Notes pursuant to this Article
Eight concurrently with such incurrence) or insofar as Sections 6.01(g) or
6.01(h) hereof is concerned, at any time in the period ending on the 91st day
after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Issuers or
any of its Subsidiaries is a party or by which the Issuers or any of its
Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on
the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over any other creditors of the Issuers or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuers; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this
Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of
the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Issuers
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Issuers shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof
or the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of
the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuers from time to time upon the
request of the Issuers any money or non-callable Government Securities held
by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm
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of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then
be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.06. REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuers, in trust for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two
years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Issuers on its request or (if then held by
the Issuers) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a secured creditor, look only to the Issuers for payment
thereof, and all liability of the Trustee or such Paying Agent with respect
to such trust money, and all liability of the Issuers as trustee thereof,
shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense
of the Issuers cause to be published once, in the New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30
days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with
Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuers' obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time
as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED,
HOWEVER, that, if the Issuers makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations,
the Issuers shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers,
the Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a
Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Issuers' or a Guarantor's
obligations to the Holders of the Notes by a successor to the Issuers or a
Guarantor pursuant to Article 5 hereof;
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(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture
and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Issuers accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Issuers and
the Guarantors, if any, in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make
any further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into such amended
or supplemental Indenture that affects its own rights, duties or immunities
under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuers and
the Trustee may amend or supplement this Indenture (including Sections 3.09,
4.10 and 4.14 hereof), and the Subsidiary Guarantees and the Notes may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes (including Additional Notes, if
any) then outstanding voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default
or Event of Default (other than a Default or Event of Default in the payment
of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes,
if any) voting as a single class (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, the Notes).
Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Issuers accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Issuers in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture directly affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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After an amendment, supplement or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes
(including Additional Notes, if any) then outstanding voting as a single
class may waive compliance in a particular instance by the Issuers with any
provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption
of the Notes;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes,
if any) and a waiver of the payment default that resulted from such
acceleration;
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by Section 4.10 or 4.14 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of
a Note and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note, even if notation of
the consent is not made on any Note. However, any such Holder of a Note or
subsequent Holder of a Note may revoke the consent as to its Note if the
Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds
every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Issuers in exchange for all Notes may issue and the Trustee shall, upon
receipt of an Authentication Order, authenticate new Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Issuers may not sign an amendment or supplemental Indenture
until the Board of Directors approves it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject
to Section 7.01 hereof) shall be fully protected in relying upon, in addition
to the documents required by Section 10.04 hereof, an Officer's Certificate
and an Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 10.02. NOTICES.
Any notice or communication by the Issuers, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person
or mailed by first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the others' address
If to the Issuers:
c/o Perkins Family Restaurants, L.P.
6075 Popular Ave. Suite 800
Memphis, Tennessee 38119-4709
Telecopier No.: (901) 766-6482
Attention: Steven R. McClellan, Donald F. Wiseman
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With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Telecopier No.: (312) 706-7711
Attention: James T. Lidbury
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Telecopier No.: (860) 986-7920
Attention: Steve Cimalore
The Issuers, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices
or communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Issuers mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Issuers, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee
to take any action under this Indenture, the Issuers shall furnish to the
Trustee:
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(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the statements
set forth in Section 10.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or
she has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS.
No past, present or future director, officer, partner,
employee, incorporator or stockholder of the Issuers, as such, shall have any
liability for any obligations of the Issuers under the Notes, this Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Issuers or its Subsidiaries or of
any other Person. Any such indenture, loan or debt agreement may not be used
to interpret this Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part of this
Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.
[Signatures on following page]
65
<PAGE>
SIGNATURES
Dated as of December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By: /s/ Steven R. McClellan
-------------------------------
Name:
Title:
By: /s/ Donald F. Wiseman
-------------------------------
Name:
Title:
PERKINS FINANCE CORP.
By: /s/ Steven R. McClellan
-------------------------------
Name:
Title:
Attest: /s/ Donald F. Wiseman
- ---------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Steven Cimalore
-------------------------------
Name: STEVEN CIMALORE
Title: VICE PRSIDENT
Attest:
- ---------------------------------
<PAGE>
EXHIBIT A-1
(Face of Note)
10 1/8% Series A Senior Notes due 2007
No._____
CUSIP NO._________ $_____________
PERKINS FAMILY RESTAURANTS, L.P.
and
PERKINS FINANCE CORP.
promise to pay to______________________________________________
or registered assigns,
the principal sum of___________________________________________
Dollars on December 15, 2007
Interest Payment Dates: June 15, and December 15 of each year,
commencing December 15, 1998
Record Dates: June 1, and December 1
Dated: December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
PERKINS FINANCE CORP.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
By:
--------------------------------
A1-1
<PAGE>
(Back of Note)
10 1/8% Series A Senior Notes due 2007
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST ISSUERS (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED IN RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO ONE OF THE ISSUERS OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
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<PAGE>
1. INTEREST. Perkins Family Restaurants, L.P., a Delaware
limited partnership (the "Company") and Perkins Finance Corp. ("Finance
Corp.," and together with the Company, the "Issuers") promise to pay interest
on the principal amount of the Notes at 10 1/8% per annum from December 22,
1998 until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The
Issuers will pay interest and Liquidated Damages, if any, semi-annually on
June 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
PROVIDED that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the
first Interest Payment Date shall be June 15, 1998. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time
on demand at a rate that is 1% per annum in excess of the rate then in
effect; they shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers will pay interest on the
Notes except defaulted interest and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the June 15 or
December 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Issuers
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuers, payment of interest and Liquidated Damages
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to
the Issuers or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company of Connecticut, N.A. the Trustee under the Indenture, will
act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to any Holder. The Issuers or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE The Issuers issued the Notes under an Indenture
dated as of December 22, 1997 ("Indenture") between the Issuers and the
Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject
to all such terms, and Holders are referred to the Indenture and such Act for
a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
indenture shall govern and be controlling. The Notes are obligations of the
Issuers limited to $150 million in aggregate principal amount, of which $100
million will be issued on the date hereof.
5. OPTIONAL REDEMPTION.
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<PAGE>
(a) Except as set forth in subparagraph (b) of this Paragraph 5,
the Issuers shall not have the option to redeem the Notes prior to December
15, 2002. Thereafter, the Issuers shall have the option to redeem the Notes,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on December 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 . . . . . . . . . . . . . . . . . . 105.063%
2003 . . . . . . . . . . . . . . . . . . 103.375%
2004 . . . . . . . . . . . . . . . . . . 101.688%
2005 and thereafter. . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to December 15, 2000, the Issuers may redeem
Notes with the net cash proceeds of one or more public offerings of the
Company's equity securities of the equity securities of any of the Company's
direct or indirect parents (to the extent such net proceeds have been
contributed to the Company as common equity capital) at a redemption price
equal to 110.125% of the principal amount thereof; PROVIDED that at least 65%
in aggregate principal amount of the Notes originally issued remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 60 days of the date of the closing of such public
offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase (in either case, the "Change of Control
Payment"). Within 10 days following any Change of Control, the Issuers shall
mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Issuers shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes (including any Additional Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Issuers (or such
Subsidiary) may use such deficiency for
A1-4
<PAGE>
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a PRO RATA basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Issuers prior to any related purchase date and may elect
to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Issuers may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Issuers need not
exchange or register the transfer of any Note or portion of a Note selected
for redemption, except for the unredeemed portion of any Note being redeemed
in part. Also, the Issuers need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture the Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption
of the Issuers' or Guarantor's obligations to Holders of the Notes in case of
a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act, to provide
for the Issuance of Additional Notes in accordance with the limitations set
forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Liquidated Damages
on the Notes; (ii) default in payment when due of principal of or premium, if
any, on the Notes when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise,
(iii) failure by the Issuers to comply with Section 4.07, 4.09, 4.10, 4.14 or
5.01 of the Indenture; (iv) failure by the Issuers for 60 days after notice
to the Issuers by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with certain other
A1-5
<PAGE>
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Issuers which default results in
the acceleration of such Indebtedness prior to its express maturity; (vi)
certain final judgments for the payment of money that remain undischarged for
a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Issuers or any of its Material Subsidiaries (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor or any Person acting
on its behalf shall deny or disaffirm its obligations under such Guarantor's
Subsidiary Guarantee. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Notes will
become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Notes. The Issuers is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Issuers
is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Issuers or its Affiliates, and may otherwise
deal with the Issuers or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, partner,
employee, incorporator or stockholder, of the Issuers, as such, shall not
have any liability for any obligations of the Issuers under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of December 22, 1997, between the
Issuers and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
A1-6
<PAGE>
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Perkins Family Restaurants, L.P.
6075 Popular Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Steven R. McClellan
A1-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- -----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-----------------------------------------------------
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- -----------------------------------------------------------------------------
Date:
----------------
Your Signature:
-----------------------
(Sign exactly as your name appears on
the face of this Note)
SIGNATURE GUARANTEE.
A1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
------------ -----------------------
(Sign exactly as your name appears on
the Note)
Tax Identification No:
----------------
Signature Guarantee.
A1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease of
in Amount of increase this Global Note Signature of
Principal Amount in Principal Amount following such authorized officer
of of decrease (or of Trustee or
Date of Exchange this Global Note this Global Note increase) Note Custodian
- ---------------- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
10 1/8% Series A Senior Notes due 2007
No.
------
CUSIP NO. $
--------- -----------
PERKINS FAMILY RESTAURANTS, L.P.
and
PERKINS FINANCE CORP.
promise to pay to
-----------------------------------------------------
or registered assigns,
the principal sum of
--------------------------------------------------
Dollars on: December 15, 2007
Interest Payment Dates: June 15 and December 15 of each year,
commencing June 15, 1998
Record Dates: June 1, and December 1
Dated: December ___, 1997
PERKINS FAMILY RESTAURANTS, L.P.
BY: PERKINS MANAGEMENT COMPANY, INC.
ITS GENERAL PARTNER
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
PERKINS FINANCE CORP.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
THIS IS ONE OF THE GLOBAL
NOTES REFERRED TO IN THE
WITHIN-MENTIONED INDENTURE:
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
By:
------------------------------
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10 1/8% Series A Senior Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATE D NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST ISSUERS (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)
(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUESTS), (2) TO ONE
OF THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT
A2-2
<PAGE>
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Perkins Family Restaurants, L.P., a Delaware limited
partnership (the "Company") and Perkins Finance Corp. ("Finance Corp." and,
together with the Company, the "Issuers"), promise to pay interest on the
principal amount of this Note at 10 1/8% per annum from December 22, 1998
until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The
Issuers will pay interest and Liquidated Damages, if any, semi-annually on
June 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
PROVIDED that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the
first Interest Payment Date shall be June 15, 1998. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time
on demand at a rate that is 1% per annum in excess of the rate then in
effect; they shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the June 1 or
December 1 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of the Issuers maintained for such
purpose within or without the City and State of New York, or, at the option
of the Issuers, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on, all Global Notes and all other Notes the Holders of
which shall have provided wire transfer instructions to the Issuers or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company of Connecticut, N.A., the Trustee under the Indenture, will act
as Paying Agent and Registrar. The Issuers
A2-3
<PAGE>
may change any Paying Agent or Registrar without notice to any Holder. The
Issuers or any of its Subsidiaries may act in any such capacity.
4. INDENTURE The Issuers issued the Notes under an Indenture dated
as of December 22, 1997 ("Indenture") between the Issuers and the Trustee.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the indenture
shall govern and be controlling. The Notes are obligations of the Issuers
limited to $150 million in aggregate principal amount, of which $100 million
will be issued on the date hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Issuers shall not have the option to redeem the Notes prior to December 15,
2002. Thereafter, the Issuers shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period
beginning on December 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2002 ............................ 105.063%
2003 ............................ 103.375%
2004 ............................ 101.688%
2005 and thereafter.............. 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to December 15, 2000, the Issuers may redeem
Notes with the net cash proceeds of one or more public offerings of the
Company's equity securities of the equity securities of any of the Company's
direct or indirect parents (to the extent such net proceeds have been
contributed to the Company as common equity capital) at a redemption price
equal to 110.125% of the principal amount thereof; PROVIDED that at least 65%
in aggregate principal amount of the Notes originally issued remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 60 days of the date of the closing of such public
offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (in either case,
A2-4
<PAGE>
the "Change of Control Payment"). Within 10 days following any Change of
Control, the Issuers shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Issuers shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes (including any Additional Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Issuers (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a PRO RATA basis. Holders of Notes that are the subject of an
offer to purchase will receive an Asset Sale Offer from the Issuers prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Issuers may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Issuers need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Issuers need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Subsidiary
Guarantees or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to
or in place of certificated Notes, to provide for the assumption of the
Issuers' or Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely
affect the legal rights
A2-5
<PAGE>
under the Indenture of any such Holder, to comply with the requirements of
the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the
Indenture, or to allow any Guarantor to execute a supplemental indenture to
the Indenture and/or a Subsidiary Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of principal of or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise,
(iii) failure by the Issuers to comply with Section 4.07, 4.09, 4.10, 4.14 or
5.01 of the Indenture; (iv) failure by the Issuers for 60 days after notice
to the Issuers by the Trustee or the Holders of at least 25% in principal
amount of the Notes (including Additional Notes, if any) then outstanding
voting as a single class to comply with certain other agreements in the
Indenture, the Notes; (v) default under certain other agreements relating to
Indebtedness of the Issuers which default results in the acceleration of such
Indebtedness prior to its express maturity; (vi) certain final judgments for
the payment of money that remain undischarged for a period of 60 days; (vii)
certain events of bankruptcy or insolvency with respect to the Issuers or any
of its Material Subsidiaries (viii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Issuers is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Issuers is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or its Affiliates, and may otherwise deal with the
Issuers or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, partner,
employee, incorporator or stockholder, of the Issuers, as such, shall not
have any liability for any obligations of the Issuers under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
A2-6
<PAGE>
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of December 22, 1997, between the
Issuers and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Perkins Family Restaurants, L.P.
6075 Popular Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Steven R. McClellan
A2-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
Date:
------------------
Your Signature:
----------------------------
(Sign exactly as your name appears on this Note)
Signature Guarantee.
A2-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant
to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
-------------------- ------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
----------
Signature Guarantee.
A2-9
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or of other Restricted Global
Notes for an interest in this Regulation S Temporary Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of this
decrease in in Principal Amount Global Note Signature of
Principal Amount of following such authorized officer
of this Global Note decrease (or of Trustee or Note
Date of Exchange this Global Note ---------------- increase) Custodian
- ---------------- ---------------- -------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
c/o Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of December
22, 1997 (the "INDENTURE"), between Perkins Family Restaurants and Perkins
Finance Corp., as issuers (the "ISSUERS"), and State Street Bank and Trust
Company, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
______________, (the "TRANSFEROR") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the
"TRANSFER"), to __________ (the "TRANSFEREE"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies
that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the 144A Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the
time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that
B-1
<PAGE>
the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii)
no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S.Person (other than an Initial Purchaser). Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed
on the Regulation S Global Note, the Temporary Regulation S Global Note
and/or the Definitive Note and in the Indenture and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT
OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests
in Restricted Global Notes and Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act and any applicable blue sky
securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to one of the Issuers
or a subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or Restricted
Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided
by the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Definitive
Notes and in the Indenture and the Securities Act.
4. / / Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
B-2
<PAGE>
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION.
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuers.
-----------------------------
[Insert Name of Transferor]
By:
--------------------------
Name:
Title:
Dated:____________,_____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP__________), or
(ii) / / Regulation S Global Note (CUSIP_________), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP_________), or
(ii) / / Regulation S Global Note (CUSIP__________), or
(iii) / / Unrestricted Global Note (CUSIP__________); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
c/o Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes due 2007
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of December
___, 1997 (the "INDENTURE"), between Perkins Family Restaurants, L.P. (the
"COMPANY") and Perkins Finance Corp. ("FINANCE CORP." and, together with the
Company, the "ISSUERS"), and State Street Bank and Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given
to them in the Indenture.
____________, (the "OWNER") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount
of $____________ in such Note[s] or interests (the "EXCHANGE"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with
the Exchange of the Owner's beneficial interest
C-1
<PAGE>
in a Restricted Global Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities
Act and (iv) the Definitive Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with
the Owner's Exchange of a Restricted Definitive Note for a beneficial
interest in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant
to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Note and in the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] "144A Global Note," Regulation S Global Note, with an
equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation
of the proposed Exchange in accordance with the terms of the Indenture, the
C-2
<PAGE>
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuers.
-----------------------------
[Insert Name of Owner]
By:
--------------------------
Name:
Title:
Dated: ________________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 10 1/8% Senior Notes Due 2007
Reference is hereby made to the Indenture, dated as of
December ___, 1997 (the "INDENTURE"), between Perkins Family Restaurants,
L.P. (the "Company") and Perkins Finance Corp. ("Finance Corp." and, together
with the Company, the "Issuers"), and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the
Notes or any interest therein is subject to certain restrictions and
conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Notes or any interest
therein except in compliance with, such restrictions and conditions and the
United States Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should
sell the Notes or any interest therein, we will do so only (A) to one of the
Issuers or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (c)
to an institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Issuers a signed letter substantially in the
form of this letter and an Opinion of Counsel in form reasonably acceptable
to the Issuers to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E)
of this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
D-1
<PAGE>
3. We understand that, on any proposed resale of the
Notes or beneficial interest therein, we will be required to furnish to you
and the Issuers such certifications, legal opinions and other information as
you and the Issuers may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Notes purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Notes or beneficial
interest therein acquired by us must be effected through the Registrar.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each
of which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Issuers are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
------------------------------------
[Insert Name of Accredited Investor]
By:
---------------------------------
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as
of ________________, among __________________ (the "GUARANTEEING
SUBSIDIARY"), a subsidiary of PERKINS FAMILY RESTAURANTS, L.P. (or its
permitted successor), a Delaware limited partnership (the "COMPANY"), PERKINS
FINANCE CORP. ("FINANCE CORP" and, together with the Company, the "ISSUER",
the other Guarantors (as defined in the Indenture referred to herein, if any)
and STATE STREET BANK AND TRUST COMPANY, as trustee under the indenture
referred to below (the "TRUSTEE").
W I T N E S S E T H
WHEREAS, the Issuers have heretofore executed and delivered to
the Trustee an indenture (the "INDENTURE"), dated as of December 1997
providing for the issuance of an aggregate principal amount of up to
$100,000,000 in aggregate principal amount of__% Senior Notes due 2007 (the
"NOTES");
WHEREAS, the Indenture provides that under certain circumstances
the Guaranteeing Subsidiary shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiary shall
unconditionally guarantee all of the Issuers' Obligations under the Notes and
the Indenture on the terms and conditions set forth herein and therein (the
"SUBSIDIARY GUARANTEE"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary
hereby agrees to comply with and become liable for any obligations of the
Guarantors under the Indenture and as follows:
(a) To jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Notes or
the obligations of the Issuers hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on
the overdue principal of and interest on the Notes, if
any, if lawful, and all other obligations of the
Issuers to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof;
and
E-1
<PAGE>
(ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that
same will be promptly paid in full when due or
performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Issuers, any action
to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuers, any
right to require a proceeding first against the Issuers,
protest, notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except
by complete performance of the obligations contained in the
Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Issuers, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either the Issuers or the Guarantors,
any amount paid by either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect
of any obligations guaranteed hereby until payment in full
of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due
and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders
under the Guarantee.
E-2
<PAGE>
(i) The obligations of the Guarantor under its Subsidiary
Guarantee shall be limited to the maximum amount as will,
after giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant under
any applicable Bankruptcy or fraudulent conveyance laws, and
after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such
other Guarantor under the Indenture or its Subsidiary
Guarantee, result in the obligations of such Guarantor under
its Subsidiary Guarantee not constituting a fraudulent
transfer or conveyance.
3 EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary
agrees that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) the Person formed by or surviving any such consolidation
or merger (if other than a Guarantor or the Issuers)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee,
under the Notes, the Indenture and the Subsidiary Guarantee
on the terms set forth herein or therein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists;
(iii) the Guaranteeing Subsidiary, or any Person formed by or
surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect
to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately
preceding the transaction; and
(iv) the Company would be permitted, immediately after giving
effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph
of Section 4.09 of the Indenture.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon all of the Subsidiary's issuable
hereunder which theretofore shall not have been signed by the
Issuers and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
E-3
<PAGE>
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with
or into the Issuers or another Guarantor, or shall prevent
any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Issuers or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all to the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under
its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such
sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Issuers to the Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was
made by the Issuers in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from
its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Issuers or any Guaranteeing Subsidiary under the Notes,
any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Subsidiary waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
E-4
<PAGE>
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10 THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Issuers.
E-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Indenture to be duly executed and attested, all as of the
date first above written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By:
---------------------------------
Name:
Title:
PERKINS FAMILY RESTAURANTS, L.P.
By: PERKINS MANAGEMENT COMPANY, INC.
Its general partner
By:
---------------------------------
Name:
Title:
PERKINS FINANCE CORP.
By:
---------------------------------
Name:
Title:
[EXISTING GUARANTORS, IF ANY ]
By:
---------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, N.A.
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibit 5
January 29, 1998
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
Re: $130 million 10-1/8% Series B Senior Notes due 2007
---------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Perkins Family Restaurants, L.P. and Perkins
Finance Corp.(the "Issuers"), in connection with the preparation of an
registration statement on Form S-4 (the "Registration Statement") to register
under the Securities Act of 1933, as amended (the "Act"), an offer to
exchange (the "Exchange Offer") $130 million aggregate principal amount of
Series B 10-1/8% Senior Notes due 2007 (the "New Notes") for a like principal
amount of Series A 10-1/8% Senior Notes due 2007 (the "Old Notes"). The Old
Notes were issued under an indenture (the "Indenture") between the Issuers
and State Street Bank and Trust Company, as trustee. In this connection, we
have examined such corporate and other records, instruments, certificates and
documents as we considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Exchange Offer, the New Notes will have been duly authorized for issuance and,
when each New Note is duly executed, authenticated, issued and delivered, such
New Notes will constitute valid and legally binding obligations of the Issuers
entitled to the benefits of the Indenture, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditor's rights and to general equity principles (whether
considered in a proceeding at law or in equity).
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to Mayer, Brown & Platt under the caption "Legal
Matters."
<PAGE>
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
January 29, 1998
Page 2
Very truly yours,
/s/ Mayer Brown & Platt
-------------------------------
MAYER, BROWN & PLATT
<PAGE>
THIRD AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Among
THE RESTAURANT COMPANY,
PERKINS ACQUISITION CORP.
and
PERKINS FAMILY RESTAURANTS, L.P.
Dated as of September 11, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 Effective Time; Closing . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04 Agreement of Limited Partnership . . . . . . . . . . . . . . . 2
SECTION 1.05 Conversion of Securities; Merger Consideration . . . . . . . . 2
SECTION 1.06 Surrender of Units . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.07 Restricted Limited Partnership Unit Plan . . . . . . . . . . . 4
SECTION 1.08 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.09 PROC Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PERKINS
SECTION 2.01 Organization and Qualification . . . . . . . . . . . . . . . . 5
SECTION 2.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03 Authority Relative to this Agreement . . . . . . . . . . . . . 6
SECTION 2.04 No Conflict; Required Filings and Consents . . . . . . . . . . 6
SECTION 2.05 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.07 SEC Filings; Financial Statements . . . . . . . . . . . . . . . 7
SECTION 2.08 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.09 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.10 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGERCO. AND TRC
SECTION 3.01 Corporate Organization . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.02 Authority Relative to this Agreement . . . . . . . . . . . . . 8
SECTION 3.03 No Conflict; Required Filings and Consents . . . . . . . . . . 9
SECTION 3.04 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.05 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01 Meeting of Unitholders . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.02 Proxy Statement and Schedule 13E-3 . . . . . . . . . . . . . . 10
SECTION 4.03 Further Action; Reasonable Best Efforts . . . . . . . . . . . . 10
SECTION 4.05 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.06 Updated Fairness Opinion . . . . . . . . . . . . . . . . . . . 11
SECTION 4.07 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.08 Capital Contributions . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 Conditions to Each Party's Obligation to Effect the Merger . . 12
SECTION 5.02 Additional Conditions to Obligations of TRC and MergerCo.
to Effect the Merger . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.03 Additional Conditions to Obligation of Perkins to effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.03 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.04 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.05 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 Non-Survival of Representations, Warranties and Agreements . . 15
SECTION 7.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.03 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.04 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.05 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . 16
SECTION 7.06 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.07 Specific Performance . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
SECTION 7.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
THIRD AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
September 11, 1997 (this "AGREEMENT") among The Restaurant Company, a Delaware
corporation ("TRC"), Perkins Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Perkins Management Company, Inc. ("MERGERCO."), and
Perkins Family Restaurants, L.P., a Delaware limited partnership ("PERKINS").
WHEREAS, the Board of Directors (the "BOARD") of Perkins Management
Company, Inc. ("PMC" or in its capacity as the sole general partner of Perkins,
the "GENERAL PARTNER"), has (A) determined that this Agreement and the
transactions contemplated hereby (the "TRANSACTIONS") are fair to and in the
best interests of holders (other than TRC, its affiliates and the officers,
directors and key employees of TRC and its affiliates) of depositary units
("UNITS") representing limited partners' interests in Perkins (the "PUBLIC
UNITHOLDERS"), (B) approved and adopted this Agreement and the Transactions,
including the merger of MergerCo. with and into Perkins (the "MERGER") in
accordance with the Delaware General Corporation Law (the "DGCL") and the
Delaware Revised Uniform Limited Partnership Act ("DRULPA") and upon the terms
and subject to the conditions set forth herein, and (C) recommended that the
Public Unitholders approve and adopt this Agreement and the Transactions; and
WHEREAS, Morgan Keegan & Company, Inc. ("MORGAN KEEGAN") has delivered
to the Board a written opinion that the consideration to be received by the
Public Unitholders pursuant to the Merger is fair to the Public Unitholders from
a financial point of view (the "MORGAN KEEGAN OPINION"); and
WHEREAS, the Boards of Directors of MergerCo. and TRC have each
determined that this Agreement and the Transactions, including the Merger, are
in the best interests of the stockholders of MergerCo. and TRC; and
WHEREAS, in order to protect the interests of the Public Unitholders,
the Board has determined that the Merger and this Agreement require the
affirmative vote of the holders of a majority of the Units that are held by the
Public Unitholders (the "PUBLIC UNITS") actually voting on the Merger ("PUBLIC
UNITHOLDER APPROVAL");
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, TRC, MergerCo. and the General Partner, on behalf of Perkins, hereby
agree as follows:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions set
forth in ARTICLE V, and in accordance with Section 263 of the DGCL and Section
17-211 of the DRULPA, at the Effective Time (as hereinafter defined) MergerCo.
shall be merged with and into Perkins. As a result of the Merger, the separate
corporate existence of MergerCo. shall cease and Perkins shall continue as the
surviving partnership after the Merger (the "SURVIVING PARTNERSHIP").
SECTION 1.02 EFFECTIVE TIME; CLOSING. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
ARTICLE V, the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger with the Secretary of State of the State of Delaware
(the "CERTIFICATE OF MERGER"), in such form as is required by, and executed in
accordance with the relevant provisions of, the DGCL and the DRULPA (the date
and time of such filing being the "EFFECTIVE TIME"). Prior to such filing, a
closing shall be held at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois, 60603, or such other place as the parties shall
agree, for the purpose of confirming the satisfaction or waiver, as the case may
be, of the conditions set forth in ARTICLE V (the "CLOSING").
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL and
DRULPA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of MergerCo. and Perkins shall vest in the Surviving Partnership, and
all debts, liabilities, obligations, restrictions, disabilities and duties of
MergerCo. and Perkins shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Partnership.
SECTION 1.04 AGREEMENT OF LIMITED PARTNERSHIP. The Agreement of Limited
Partnership of Perkins Family Restaurants, L.P. (the "PARTNERSHIP AGREEMENT")
shall be the Agreement of Limited Partnership of the Surviving Partnership and
thereafter may be amended as provided in the Partnership Agreement or by law.
This Agreement shall effect no amendment or other change whatsoever to the
Partnership Agreement except that the Partnership Agreement shall be amended as
provided in EXHIBIT 1.04.
SECTION 1.05 CONVERSION OF SECURITIES; MERGER CONSIDERATION. At the
Effective Time, by virtue of the Merger and without any action on the part of
TRC, MergerCo. or the holders of any of the following securities:
2
<PAGE>
(a) Each Public Unit and each Unit held by any person other than TRC
or its direct or indirect subsidiaries, including any Units that are then
outstanding but subject to restriction and held by participants in the Unit
Plan (as hereinafter defined), shall be canceled and shall be converted
automatically into the right to receive an amount equal to $14 per Unit in
cash (the "MERGER CONSIDERATION") payable, without interest, to the holder
of such Unit;
(b) Each general or limited partnership interest of Perkins owned by
TRC or any direct or indirect subsidiary of TRC immediately prior to the
Effective Time shall remain a general or limited partnership interest of
the Surviving Partnership and no payment or distribution shall be made with
respect thereto;
(c) Each Unit held in the treasury of Perkins immediately prior to
the Effective Time shall be canceled and retired and no payment shall be
made with respect thereto; and
(d) Each share of Common Stock, par value $.01 per share, of
MergerCo. issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one Unit in the Surviving
Partnership.
SECTION 1.06 SURRENDER OF UNITS. (a) Prior to the Effective Time, TRC
shall designate a bank or trust company to act as agent (the "PAYING AGENT") for
the holders of Units to receive the funds to which they shall become entitled
pursuant to SECTION 1.05(a). Promptly after the Effective Time, the Surviving
Partnership shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Units entitled to receive the Merger Consideration
pursuant to SECTION 1.05(a) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the depositary
receipts that formerly evidenced such Units (each a "RECEIPT") shall pass, only
upon proper delivery of the Receipts to the Paying Agent) and instructions for
use in effecting the surrender of the Receipts pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Receipt, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Receipt shall be entitled to
receive in exchange therefor the Merger Consideration for each Unit formerly
evidenced by such Receipt, and such Receipt shall then be canceled. No interest
shall accrue or be paid on the Merger Consideration payable upon the surrender
of any Receipt for the benefit of the holder of such Receipt. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Receipt is registered on the books of the depositary, it
shall be a condition of payment that the Receipt so surrendered shall be
endorsed properly or otherwise be in proper form for transfer and that the
person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Receipt surrendered or shall have established
to the satisfaction of the Surviving Partnership that such taxes either have
been paid or are not applicable.
3
<PAGE>
(b) When and as needed, TRC, MergerCo. or Perkins shall deposit, or
cause to be deposited, in trust with the Paying Agent the Merger Consideration
to which the holders of Units shall be entitled at the Effective Time pursuant
to SECTION 1.05(a) hereof.
(c) The Merger Consideration shall be invested by the Paying Agent;
PROVIDED, that such investments shall be limited to direct obligations of the
United States of America, obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment of principal and
interest, commercial paper rated of the highest quality by Moody's Investors
Services, Inc. or Standard & Poor's, or certificates of deposit issued by a
commercial bank having at least $1,000,000,000 in assets; and PROVIDED, FURTHER,
that no loss on investment made pursuant to this SECTION 1.06(c) shall relieve
TRC or MergerCo. of its obligation to pay the Merger Consideration pursuant to
SECTION 1.05(a).
(d) At any time following the sixth month after the Effective Time,
the Surviving Partnership shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Units (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Partnership (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Receipts held by them.
Notwithstanding the foregoing, neither the Surviving Partnership nor the Paying
Agent shall be liable to any holder of a Unit for any Merger Consideration
delivered in respect of such Unit to a public official pursuant to any abandoned
property, escheat or other similar law.
(e) After the close of business on the day of the Effective Time,
there shall be no further registration of transfers of Units on the records of
the depositary for the Units. From and after the Effective Time, the holders of
Units outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Units except as otherwise provided herein or by
applicable law.
SECTION 1.07 RESTRICTED LIMITED PARTNERSHIP UNIT PLAN. After the date of
this Agreement, Perkins shall not issue any Units pursuant to its Restricted
Limited Partnership Unit Plan of October 22, 1987 (the "UNIT PLAN") and shall
terminate the Unit Plan, effective as of the Effective Date.
SECTION 1.08 REDEMPTION. Immediately after the Effective Time, the
Surviving Partnership shall redeem, for $14 per Unit, all Units received by PMC
in connection with the conversion of MergerCo.'s common stock in the Merger.
SECTION 1.09 PROC MERGER. Prior to the Effective Time, Perkins will, and
TRC will cause PMC to, cause Perkins Restaurants Operating Company, L.P.
("PROC") to be merged with and into Perkins with Perkins being the surviving
partnership in such merger, on such terms as Perkins, TRC and PMC may determine.
4
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PERKINS
Perkins hereby represents and warrants to MergerCo. and TRC that:
SECTION 2.01 ORGANIZATION AND QUALIFICATION. Perkins and each partnership
controlling, controlled by or under common control with Perkins (an "AFFILIATED
PARTNERSHIP"), including, without limitation, PROC, is a partnership duly
organized, validly existing and in good standing under Delaware law and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). Each of Perkins and its Affiliated Partnerships is duly qualified to do
business, is in good standing and has obtained all necessary licenses and
approvals in all jurisdictions where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with Perkins or any Affiliated
Partnership, the term "MATERIAL ADVERSE EFFECT" means any change or effect that
is or is reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities), results of operations
or prospects of Perkins and its Affiliated Partnerships taken as a whole. A
true and complete list of all Affiliated Partnerships, together with the
jurisdiction of organization of each Affiliated Partnership and the percentage
of ownership in each Affiliated Partnership owned by Perkins, is set forth in
SECTION 2.01 of the Disclosure Schedule to this Agreement previously delivered
by Perkins to TRC (the "DISCLOSURE SCHEDULE"). Except as disclosed in such
SECTION 2.01, Perkins does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
SECTION 2.02 CAPITALIZATION. As of the date hereof, (i) 10,487,495 Units
are issued and outstanding, (ii) 5,043,000 Units are held by Perkins
Restaurants, Inc., a wholly owned subsidiary of TRC, (iii) 5,268,410 Units are
held by the Public Unitholders and (iv) 176,085 Units are held by employees of
TRC and its affiliates. Perkins owns a 99% limited partner's interest in PROC,
the entity through which the operations of Perkins are conducted. PMC, a wholly
owned subsidiary of Perkins Restaurants, Inc., a wholly owned subsidiary of TRC,
is the sole general partner of Perkins and PROC. PMC owns a 1% general
partner's interest in each partnership. Except as set forth in SECTION 4.08,
there are no options, warrants or rights, agreements, arrangements or
commitments of any character relating to the issued or unissued Units of Perkins
or any Affiliated Partnership or obligating Perkins or any Affiliated
5
<PAGE>
Partnership to issue or sell any Units, or other partnership interests in,
Perkins or any Affiliated Partnership. Except as set forth in SECTION 1.08,
there are no outstanding contractual obligations of Perkins or any Affiliated
Partnership to repurchase, redeem or otherwise acquire any Units or any
partnership interests of any Affiliated Partnership.
SECTION 2.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The General Partner
has all necessary partnership power and authority to execute and deliver this
Agreement on behalf of Perkins. The execution and delivery of this Agreement
by the General Partner, on behalf of Perkins, and the consummation by Perkins
and the General Partner of the Transactions have been duly and validly
authorized by all necessary partnership action and no other partnership
proceedings on the part of Perkins or the General Partner are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, (i) the approval and adoption of this Agreement by a
Majority Interest (as defined in the Partnership Agreement), (ii) Public
Unitholder Approval as required by the terms of this Agreement, and (iii) the
filing and recordation of appropriate merger documents as required by the DGCL
and DRULPA). This Agreement has been duly and validly executed and delivered by
the General Partner, on behalf of Perkins, and, assuming the due authorization,
execution and delivery by MergerCo. and TRC, constitutes a legal, valid and
binding obligation of Perkins, enforceable against Perkins in accordance with
its terms.
SECTION 2.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the General Partner, on behalf of
Perkins, do not, and the performance of this Agreement by Perkins will not, (i)
conflict with or violate the organizational documents of Perkins or any
Affiliated Partnership, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Perkins or any Affiliated Partnership or
by which any property or asset of Perkins or any Affiliated Partnership is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Perkins or any Affiliated Partnership pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Perkins or any Affiliated
Partnership is a party or by which Perkins or any Affiliated Partnership or any
of their respective properties is bound or affected except, in the case of this
clause (iii), for breaches, defaults, rights, liens and encumbrances which would
not individually or in the aggregate have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the General
Partner, on behalf of Perkins, do not, and the performance of this Agreement by
Perkins will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"),
state securities or "blue sky" laws ("BLUE SKY LAWS") and state takeover laws,
and filing and recordation of appropriate merger documents as required by the
DGCL and the DRULPA and
6
<PAGE>
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent Perkins from performing its
obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 2.05 COMPLIANCE. Neither Perkins nor any Affiliated Partnership
is in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Perkins or any Affiliated
Partnership or by which any property or asset of Perkins or any Affiliated
Partnership is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Perkins or any Affiliated Partnership is a party or by which
Perkins or any Affiliated Partnership or any property or asset of Perkins or any
Affiliated Partnership is bound or affected, except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 2.06 LITIGATION. Except as set forth in the SEC Filings (as
hereinafter defined) or SECTION 2.06 of the Disclosure Schedule, there are no
actions, suits, claims, investigations or proceedings pending or threatened
against, relating to, involving or otherwise affecting Perkins or any Affiliated
Partnership or any of their respective properties or assets before any court,
governmental agency, commission, or administrative or regulatory authority
which, if adversely decided, in the aggregate, would have a Material Adverse
Effect or would affect the consummation of the Transactions.
SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS. As of their respective
dates, none of the reports, statements and registration statements filed by
Perkins with the SEC since January 1, 1994 (including, without limitation,
Perkins' (i) Annual Report on Form 10-K for the year ended December 31, 1996,
and (ii) Quarterly Reports on Form 10-Q for the three months ended March 31,
1997 and the six months ended June 30, 1997 (the "SEC FILINGS") contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Perkins included in the SEC Filings
present fairly the financial position and the results of operations and cash
flows of Perkins as of the dates or for the periods indicated therein in
conformity with generally accepted accounting principles applied on a consistent
basis (except as otherwise indicated in such financial statements or the notes
thereto), subject, in the case of unaudited interim consolidated financial
statements, to normal recurring year-end adjustments.
SECTION 2.08 PROXY STATEMENT. The proxy statement to be sent to the
holders of Units (such proxy statement, as amended or supplemented, being
referred to herein as the "PROXY STATEMENT"), shall not, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to the
holders of Units, at the time of the Unitholders' Meeting (as hereinafter
defined) and at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they
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are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Unitholders' Meeting which shall have become false or misleading. The Proxy
Statement shall comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations thereunder.
SECTION 2.09 BROKERS. No broker, finder or investment banker (other than
Morgan Keegan) is entitled to any brokerage, finder's or other fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Perkins. Perkins has heretofore furnished to TRC a complete and correct copy
of all agreements between Perkins and Morgan Keegan pursuant to which such firm
would be entitled to any payment relating to the Transactions.
SECTION 2.10 FAIRNESS OPINION. The Board has received from Morgan
Keegan the Morgan Keegan Opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGERCO. AND TRC
MergerCo. and TRC hereby, jointly and severally, represent and warrant
to Perkins that:
SECTION 3.01 CORPORATE ORGANIZATION. Each of MergerCo. and TRC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
TRC Material Adverse Effect (as defined below). When used in connection with
MergerCo. or TRC, the term "TRC MATERIAL ADVERSE EFFECT" means any change or
effect that is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities), results of
operations or prospects of MergerCo. or TRC and their respective subsidiaries
taken as a whole.
SECTION 3.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of MergerCo. and
TRC has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by MergerCo. and TRC
and the consummation by MergerCo. and TRC of the Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of MergerCo. or TRC are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL and DRULPA). This Agreement has been duly and validly executed and
delivered by MergerCo.
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and TRC and, assuming the due authorization, execution and delivery by
Perkins, constitutes a legal, valid and binding obligation of each of
MergerCo. and TRC enforceable against each of MergerCo. and TRC in accordance
with its terms.
SECTION 3.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by MergerCo. and TRC do not, and the
performance of this Agreement by MergerCo. and TRC will not, (i) conflict with
or violate the articles of incorporation or by-laws or similar organizational
documents of either MergerCo. or TRC, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to MergerCo. or TRC or by
which any property or asset of either of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of
MergerCo. or TRC pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which MergerCo. or TRC is a party or by which MergerCo. or TRC or any
property or asset of either of them is bound or affected, except for any such
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a TRC Material Adverse Effect.
(b) The execution and delivery of this Agreement by MergerCo. and TRC
do not, and the performance of this Agreement by MergerCo. and TRC will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange Act, the HSR
Act, Blue Sky Laws and state takeover laws and filing and recordation of
appropriate merger documents as required by the DGCL and the DRULPA and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger, or otherwise prevent MergerCo. or TRC from performing their
respective obligations under this Agreement.
SECTION 3.04 PROXY STATEMENT. The information supplied by TRC for
inclusion in the Proxy Statement will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to the holders of Units, at
the time of the Unitholders' meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies in connection with the Unitholders' Meeting which shall have become
false or misleading. Notwithstanding the foregoing, MergerCo. and TRC make no
representation or warranty with respect to any information supplied by Perkins
or any of its representatives which is contained in any of the foregoing
documents.
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SECTION 3.05 BROKERS. No broker, finder or investment banker (other than
Smith Barney, Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of MergerCo. or TRC.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01 MEETING OF UNITHOLDERS. (a) The General Partner shall, in
accordance with applicable law and the Partnership Agreement, (i) duly call,
give notice of, convene and hold a meeting of the holders of Units as soon as
practicable following the date hereof for the purpose of considering and taking
action on this Agreement and the Transactions (the "UNITHOLDERS' MEETING") and
(ii) subject to its fiduciary duties under applicable law, (A) include in the
Proxy Statement the recommendation of the General Partner that the Public
Unitholders approve and adopt this Agreement and the Transactions and (B) use
its reasonable best efforts to obtain such approval and adoption. At the
Unitholders' Meeting, TRC shall, if Public Unitholder Approval is obtained,
cause all Units and general partners' interests then owned by it and its direct
and indirect wholly owned subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the Transactions.
SECTION 4.02 PROXY STATEMENT AND SCHEDULE 13E-3. (a) Perkins shall file
the Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC. TRC and
Perkins shall cooperate with each other in the preparation of the Proxy
Statement, and each of Perkins, TRC and MergerCo. agrees to use its reasonable
best efforts, after consultation with the other parties hereto, to respond
promptly to all comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Units at the earliest practicable time.
(b) TRC and Perkins shall together prepare and file with the SEC a
Transaction Statement on Schedule 13E-3 (the "SCHEDULE 13E-3") under the
Exchange Act at the time of filings made in connection with the Proxy Statement,
and shall file with the SEC appropriate amendments to the Schedule 13E-3. The
Schedule 13E-3 will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 4.03 FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, making and facilitating a prompt
filing under the HSR Act and using its reasonable best efforts to obtain all
licenses, permits, consents,
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approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with Perkins and its Affiliated
Partnerships as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Merger. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall use their reasonable best efforts to take all such
action.
SECTION 4.04 PUBLIC ANNOUNCEMENTS. TRC and Perkins shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any Transaction and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law.
SECTION 4.05 FINANCING. TRC shall use its reasonable best efforts to
obtain financing for aggregate funds sufficient to satisfy the obligations of
TRC, PMC, Perkins and MergerCo. hereunder, including, without limitation, the
obligation to pay the Merger Consideration pursuant to SECTION 1.05(a) and to
pay all related fees and expenses payable by TRC, PMC, Perkins and MergerCo. in
connection with the Merger and the other Transactions (the "FINANCING").
Perkins shall use its reasonable best efforts to facilitate the Financing and at
the Closing shall be the borrower thereunder at TRC's request.
SECTION 4.06 UPDATED FAIRNESS OPINION. The Parties shall use their
reasonable best efforts to obtain from Morgan Keegan a written fairness opinion,
dated as of the date of the Proxy Statement, and otherwise substantially the
same as the Morgan Keegan Opinion (the "UPDATED MORGAN KEEGAN OPINION").
SECTION 4.07 DISTRIBUTIONS. Perkins shall make a final cash distribution
of $0.325 per Unit to Unitholders of record, as of September 30, 1997, for the
third quarter of Perkins' fiscal year, payable on or before November 20, 1997,
and between the date of such distribution and the Effective Time shall cease
making distributions.
SECTION 4.08 CAPITAL CONTRIBUTIONS. In order to prevent a "termination"
of the partnership for federal income tax purposes, TRC or one of its affiliates
agrees to contribute cash to Perkins in the amount of $4.410 million to acquire
newly issued Units of Perkins prior to the Effective Time and shall be entitled
to contribute any amount necessary to pay any costs incurred by Perkins or the
Affiliated Partnerships in connection with the repayment of their existing
indebtedness or any other transaction connected with the Merger; PROVIDED,
HOWEVER, that if the Merger is for any reason not consummated, such capital
contribution may be withdrawn and shall be repaid by Perkins promptly upon
notice from TRC or such affiliate. Any expense paid by TRC or its affiliates
pursuant to this SECTION 4.08 shall be specially allocated to the party paying
such expense in order to satisfy the "substantial economic effect" requirement
of Section 704(b) of the Internal Revenue Code of 1986, as amended.
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ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the Transactions, including the Merger, shall
have been approved and adopted by a Majority Interest (as defined in the
Partnership Agreement) and by the affirmative vote of a majority of the
Public Units actually voting on the Merger;
(b) No governmental authority or other agency or commission or court
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is then
in effect and has the effect of making the acquisition of Units by
MergerCo. or TRC or any affiliate of either of them illegal or otherwise
restricting, preventing or prohibiting consummation of the Transactions;
(c) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated; and
(d) Morgan Keegan shall have provided and not withdrawn the Updated
Morgan Keegan Opinion.
SECTION 5.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRC AND MERGERCO. TO
EFFECT THE MERGER. The obligations of TRC and MergerCo. to effect the Merger
are further subject to the satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Perkins contained in this Agreement shall be true and correct
in all material respects when made and on and as of the Effective Time,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Effective Time, except for any
representation or warranty made or given as of a specified time, which
shall have been true and correct in all material respects as of such time;
(b) AGREEMENTS AND COVENANTS. Perkins shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time;
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(c) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
event shall have occurred or shall be reasonably expected to occur which
has, or is reasonably expected to have, a Material Adverse Effect;
(d) LITIGATION, ETC. There shall be no pending or threatened actions
or proceedings by any person against Perkins or its Affiliated
Partnerships, TRC, the General Partner, MergerCo., or any of their
subsidiaries or any director, officer or employee thereof challenging or in
any way or in any manner seeking to restrict or prohibit the Merger or any
other Transaction or seeking to obtain any damages against any person as a
result of the Merger or any other Transaction; and
(e) FINANCING. The Financing shall be available on terms
satisfactory to TRC.
SECTION 5.03 ADDITIONAL CONDITIONS TO OBLIGATION OF PERKINS TO EFFECT THE
MERGER. The obligation of Perkins to effect the Merger is further subject to
the satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TRC and MergerCo. contained in this Agreement shall be true
and correct in all material respects when made and on and as of the
Effective Time, except for changes contemplated by this Agreement, with the
same force and effect as if made on and as of the Effective Time, except
for any representation or warranty made or given as of a specified time,
which shall have been true and correct in all material respects as of such
time; and
(b) AGREEMENTS AND COVENANTS. TRC and MergerCo. shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions by the Public Unitholders:
(a) By mutual written consent duly authorized by the Boards of
Directors of MergerCo., TRC and the General Partner; or
(b) By either TRC or Perkins if (i) the Effective Time shall not have
occurred on or before February 28, 1998; PROVIDED, HOWEVER, that the right
to terminate this
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Agreement under this SECTION 6.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (ii) any court of competent jurisdiction or other
governmental authority shall have issued an order, decree or ruling or
taken any action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable; or
(c) By Perkins if the Board shall have determined that it has a
fiduciary duty to withdraw its approval or recommendation of this
Agreement, the Merger or any other Transaction.
(d) By TRC if the Board shall have withdrawn or modified in a manner
adverse to TRC its approval or recommendation of this Agreement or the
Merger.
SECTION 6.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to SECTION 6.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto except as
set forth in SECTIONS 6.03 and 7.01; PROVIDED, HOWEVER, that neither anything
herein nor the termination of this Agreement shall relieve any party from
liability for any breach hereof.
SECTION 6.03 FEES AND EXPENSES. All fees, costs and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
bearing such cost.
SECTION 6.04 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of the Boards of Directors of TRC,
MergerCo. and the General Partner at any time prior to the Effective Time;
PROVIDED, HOWEVER, that after the approval and adoption of this Agreement and
the Transactions by the Public Unitholders, no amendment may be made which would
reduce the amount or change the type of consideration to which each Public
Unitholder shall be entitled upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 6.05 WAIVER. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
SECTION 6.01, as the case may be, except that the agreements set forth in
ARTICLE I and SECTION 4.08 shall survive the Effective Time indefinitely and
those set forth in SECTION 6.02 and SECTION 6.03 shall survive termination
indefinitely.
SECTION 7.02 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this SECTION 7.02):
if to TRC or MergerCo.:
Michael P. Donahoe
The Restaurant Company
One Pierce Place
Suite 100E
Itasca, IL 60143
Facsimile: (630) 250-0382
if to Perkins:
Steven R. McClellan
Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Memphis, TN 38119
Facsimile: (901) 766-6482
SECTION 7.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a specified person means a person who directly
or indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any Units means a person who
shall be deemed to be the beneficial owner of such Units (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the
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Exchange Act) beneficially owns, directly or indirectly, (ii) which such
person or any of its affiliates or associates has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Units;
(c) "BUSINESS DAY" means any day on which the principal offices of
the SEC in Washington D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of Perkins, MergerCo., TRC, the
Surviving Partnership or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 7.04 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 7.05 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them,
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with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that TRC and MergerCo. may
assign all or any of their rights and obligations hereunder to any affiliate
of TRC provided that no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not perform such obligations.
SECTION 7.06 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Article I (which, solely from and after the
Effective Time, is intended to be for the benefit of the Public Unitholders).
SECTION 7.07 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 7.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State.
SECTION 7.09 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, TRC, MergerCo. and Perkins have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
THE RESTAURANT COMPANY
By:______________________________________
Title:
PERKINS ACQUISITION CORP.
By:______________________________________
Title:
PERKINS FAMILY RESTAURANTS, L.P.
By: PERKINS MANAGEMENT COMPANY,
its General Partner
By:______________________________________
Title:
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of December 22, 1997
by and among
PERKINS FAMILY RESTAURANTS, L.P.
(the "Borrower")
THE RESTAURANT COMPANY
PERKINS RESTAURANTS, INC.
PERKINS MANAGEMENT COMPANY, INC.
PERKINS FINANCE CORP.
(the "Guarantors")
BANKBOSTON, N.A.
and the other financial institutions from time to time
listed on Schedule 1 hereto
(the "Banks")
and
BANKBOSTON, N.A., as Agent and Administrative Agent
(the "Agent")
NATIONSBANK, N.A., as Syndication Agent
with
BANCBOSTON SECURITIES INC.,
Having Acted as Arranger
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION. 1
1.1. Definitions. 1
1.2. Rules of Interpretation. 15
2. THE REVOLVING CREDIT FACILITY. 16
2.1. Commitment to Lend. 16
2.2. Commitment Fee. 16
2.3. Reduction of Total Revolving Credit Commitment. 16
2.4. The Revolving Credit Notes. 17
2.5. Interest on Revolving Credit Loans. 17
2.6. Requests for Revolving Credit Loans. 17
2.7. Conversion Options. 18
2.7.1. Conversion to Different Type of
Revolving Credit Loan. 18
2.7.2. Continuation of Type of Revolving Credit Loan. 18
2.7.3. Eurodollar Rate Loans. 18
2.8. Funds for Revolving Credit Loans. 18
2.8.1. Funding Procedures. 18
2.8.2. Advances by Agent. 19
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. 19
3.1. Maturity. 19
3.2. Mandatory Repayments of Revolving Credit Loans. 19
3.3. Optional Repayments of Revolving Credit Loans. 19
4. [Intentionally Omitted]. 20
5. LETTERS OF CREDIT. 20
5.1. Letter of Credit Commitment. 20
5.1.1. Commitment to Issue Letters of Credit. 20
5.1.2. Letter of Credit Applications. 20
5.1.3. Terms of Letters of Credit. 20
5.1.4. Reimbursement Obligations of Banks. 20
5.1.5. Participations of Banks. 21
5.2. Reimbursement Obligation of the Borrower. 21
5.3. Letter of Credit Payments. 21
5.4. Obligations Absolute. 22
5.5. Reliance by Issuer. 22
5.6. Letter of Credit Fee. 22
6. CERTAIN GENERAL PROVISIONS. 23
6.1. Fees. 23
6.2. [Intentionally Omitted]. 23
6.3. Funds for Payments. 23
6.3.1. Payments to Agent. 23
6.3.2. No Offset, etc. 23
6.4. Computations. 24
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6.5. Inability to Determine Eurodollar Rate. 24
6.6. Illegality. 24
6.7. Additional Costs, etc. 24
6.8. Capital Adequacy. 25
6.9. Certificate. 26
6.10. Indemnity. 26
6.11. Interest After Default. 26
6.11.1. Overdue Amounts. 26
6.11.2. Amounts Not Overdue. 26
6.11.3. Letters of Credit. 26
6.12. Replacement of Individual Banks. 27
7. COLLATERAL SECURITY AND GUARANTIES. 27
7.1. Security of Borrower. 27
7.2. Guaranties and Security of Subsidiaries. 27
7.3. Collateral Notes. 27
8. REPRESENTATIONS AND WARRANTIES. 27
8.1. Corporate Authority. 27
8.1.1. Existence; Good Standing. 27
8.1.2. Authorization. 28
8.1.3. Enforceability. 28
8.2. Governmental Approvals. 28
8.3. Title to Properties; Leases. 28
8.4. Financial Statements and Projections. 28
8.4.1. Financial Statements. 28
8.4.2. Projections. 29
8.5. No Material Changes, etc. 29
8.6. Franchises, Patents, Copyrights, etc. 29
8.7. Litigation. 29
8.8. No Materially Adverse Contracts, etc. 30
8.9. Compliance with Other Instruments, Laws, etc. 30
8.10. Tax Status. 30
8.11. No Event of Default. 30
8.12. Holding Company and Investment Company Acts. 30
8.13. Absence of Financing Statements, etc. 30
8.14. Employee Benefit Plans. 30
8.14.1. In General. 30
8.14.2. Terminability of Welfare Plans. 30
8.14.3. Guaranteed Pension Plans. 31
8.14.4. Multiemployer Plans. 31
8.15. Use of Proceeds. 31
8.15.1. General. 31
8.15.2. Regulations U and X. 31
8.15.3. Ineligible Securities. 31
8.16. Chief Executive Offices. 32
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8.17. Disclosure. 32
8.18. Environmental Compliance. 32
8.19. Subsidiaries, etc. 33
8.20. Fiscal Year. 34
8.21. Solvency. 34
9. AFFIRMATIVE COVENANTS. 34
9.1. Punctual Payment. 34
9.2. Maintenance of Office. 34
9.3. Records and Accounts. 34
9.4. Financial Statements, Certificates and Information. 34
9.5. Notices. 35
9.5.1. Defaults. 35
9.5.2. Environmental Events. 35
9.5.3. Notification of Claim against Collateral. 36
9.5.4. Notice of Litigation and Judgments. 36
9.6. Existence; Maintenance of Properties. 36
9.6.1. Existence. 36
9.6.2. Maintenance of Properties. 36
9.7. Insurance. 36
9.8. Taxes. 37
9.9. Inspection of Properties and Books, etc. 37
9.9.1. General. 37
9.9.2. Environmental Assessments. 37
9.10. Compliance with Laws, Contracts, Licenses, and Permits. 37
9.11. Employee Benefit Plans. 38
9.12. Use of Proceeds. 38
9.13. Additional Mortgaged Property. 38
9.14. Further Assurances. 39
9.15. Conduct of Business. 39
9.16. Interest Rate Protection Arrangements. 39
9.17. Cash Management. 39
10. CERTAIN NEGATIVE COVENANTS. 39
10.1. Restrictions on Indebtedness. 39
10.2. Restrictions on Liens. 41
10.3. Restrictions on Investments. 42
10.4. Distributions. 43
10.5. Merger, Consolidation and Disposition of Assets. 43
10.6. Sale and Leaseback. 45
10.7. Compliance with Environmental Laws. 45
10.8. Employee Benefit Plans. 45
10.9. Change in Fiscal Year. 46
10.10. Changes in Terms of Partnership Documents. 46
10.11. Transactions with Affiliates. 46
10.12. Prepayment of Other Indebtedness. 46
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10.13. Restrictions On Negative Pledges. 46
10.14. Concerning PFC. 46
11. FINANCIAL COVENANTS OF THE BORROWER. 46
11.1. Leverage Ratio. 46
11.2. Net Worth. 47
11.3. Cash Flow Ratio. 47
11.4. Interest Coverage Ratio. 47
11.5. Capital Expenditures. 47
12. CLOSING CONDITIONS. 48
12.1. Loan Documents. 48
12.2. Certified Copies of Charter Documents. 48
12.3. Corporate and Partnership Action. 48
12.4. Incumbency Certificate. 48
12.5. Validity of Liens. 48
12.6. Perfection Certificates and UCC Search Results. 49
12.7. Taxes. 49
12.8. Title Insurance. 49
12.9. Landlord Consents. 49
12.10. Hazardous Waste Assessments. 49
12.11. Certificates of Insurance. 49
12.12. Solvency Opinion. 49
12.13. Opinions of Counsel. 49
12.14. Payment of Fees. 50
12.15. Existing Indebtedness. 50
12.16. Capital Structure. 50
12.17. Repurchase; Merger, Etc.. 50
12.18. No Material Adverse Change. 50
12.19. Balance Sheets. 50
12.20. No Litigation. 50
12.21. Consents and Approvals. 50
12.22. Other Documentation. 51
12.23. Commercial Finance Examination. 51
12.24. Collateral Valuation. 51
13. CONDITIONS TO ALL BORROWINGS. 51
13.1. Representations True; No Event of Default. 51
13.2. No Legal Impediment. 51
13.3. Governmental Regulation. 51
13.4. Proceedings and Documents. 51
14. EVENTS OF DEFAULT; ACCELERATION; ETC. 52
14.1. Events of Default and Acceleration. 52
14.2. Termination of Commitments. 54
14.3. Remedies. 54
14.4. Distribution of Collateral Proceeds. 55
15. SETOFF. 55
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16. THE AGENT. 56
16.1. Authorization. 56
16.2. Employees and Agents. 56
16.3. No Liability. 56
16.4. No Representations. 56
16.5. Payments. 56
16.5.1. Payments to Agent. 57
16.5.2. Distribution by Agent. 57
16.5.3. Delinquent Banks. 57
16.6. Holders of Notes. 57
16.7. Indemnity. 58
16.8. Agent as Bank; Syndication Agent. 58
16.9. Resignation. 58
16.10. Removal of Agent. 58
16.11. Notification of Defaults and Events of Default. 58
16.12. Duties in the Case of Enforcement. 59
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 59
17.1. Sharing of Information with Section 20 Subsidiary. 59
17.2. Confidentiality. 59
17.3. Prior Notification. 59
17.4. Other. 60
18. EXPENSES. 60
19. INDEMNIFICATION. 60
20. SURVIVAL OF COVENANTS, ETC. 61
21. ASSIGNMENT AND PARTICIPATION. 61
21.1. Conditions to Assignment by Banks. 61
21.2. Certain Representations and Warranties; Limitations;
Covenants. 62
21.3. Register. 63
21.4. New Notes. 63
21.5. Participations. 63
21.6. Disclosure. 63
21.7. Assignee or Participant Affiliated with the Borrower. 64
21.8. Miscellaneous Assignment Provisions. 64
21.9. Assignment by Borrower and Guarantors. 64
22. NOTICES, ETC. 64
23. GOVERNING LAW. 65
24. HEADINGS. 65
25. COUNTERPARTS. 65
26. ENTIRE AGREEMENT, ETC. 65
27. WAIVER OF JURY TRIAL. 65
28. CONSENTS, AMENDMENTS, WAIVERS, ETC. 66
29. GUARANTY. 66
29.1. Guaranty. 66
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29.2. Guaranteed Obligations. 66
29.3. Guaranty Absolute. 67
29.4. Authorized Actions. 67
29.5. Effectiveness; Enforcement. 68
29.6. Waiver. 68
29.7. Subordination; Subrogation Rights. 68
29.8. Concerning Joint and Several Liability of the Guarantors. 69
29.9. New Guarantors. 71
29.10. Limitation on Liability. 71
30. SEVERABILITY. 71
31. RIGHT TO PUBLICIZE. 71
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE 1 Banks; Revolving Credit Commitments; Revolving Credit
Commitment Percentages
SCHEDULE 5.1.1 Letters of Credit
SCHEDULE 8.3 Title to Properties; Leases
SCHEDULE 8.7 Litigation
SCHEDULE 8.19 Subsidiaries
SCHEDULE 10.1 Existing Indebtedness
SCHEDULE 10.2 Existing Liens
SCHEDULE 10.3 Existing Investments
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Revolving Credit Loan Request
EXHIBIT C Form of Compliance Certificate
EXHIBIT D Form of Assignment and Acceptance
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of December 22, 1997, by and
among , PERKINS FAMILY RESTAURANTS, L.P., a Delaware limited partnership (the
"Borrower"), THE RESTAURANT COMPANY ("TRC"), a Delaware corporation, PERKINS
RESTAURANTS, INC., a Minnesota corporation ("PRI") and PERKINS MANAGEMENT
COMPANY, INC., a Delaware corporation ("PMC"), PERKINS FINANCE CORP., a
Delaware corporation (together with TRC, PRI and PMC, the "Guarantors"),
BANKBOSTON, N.A. ("BKB"), a national banking association and the other
lending institutions listed on SCHEDULE 1 and BANKBOSTON, N.A. as agent and
administrative agent for itself and such other lending institutions, and
NATIONSBANK, N.A., as Syndication Agent (the "Syndication Agent").
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS.
The following terms shall have the meanings set forth in this Section 1
or elsewhere in the provisions of this Credit Agreement referred to below:
ADDITIONAL SENIOR NOTES. The unsecured Senior Notes of the Borrower to
be issued pursuant to the shelf registration made in connection with the
Senior Notes, in an aggregate principal amount not to exceed $20,000,000,
with an interest rate PER ANNUM not in excess of 11.5%, issued pursuant to
the Senior Indenture, and on terms and conditions substantially the same as
those relating to the Senior Notes and otherwise approved by, the Agent.
ADJUSTMENT DATE. The first day of the month immediately following the
month in which a Compliance Certificate is delivered by the Borrower pursuant
to Section 9.4(d).
AFFILIATE. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower
were issuing securities.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time.
AGENT. BKB acting as agent for the Banks, or such successor Agent as
may be appointed pursuant to Section 16.9 or Section 16.10 hereof.
AGENT'S SPECIAL COUNSEL. Bingham Dana LLP or such other counsel as may
be approved by the Agent.
APPLICABLE MARGIN. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "RATE
ADJUSTMENT PERIOD"), the Applicable Margin with respect to Revolving Credit
Loans, (for Base Rate Loans and Eurodollar Rate Loans) and for the Letters of
Credit shall be the applicable percentage set forth below with respect to
each such Loan or Letter of Credit, as the case may be, corresponding to the
Borrower's Leverage Ratio, as determined at the end of the fiscal quarter of
the Borrower and its Subsidiaries ending immediately prior to the applicable
Rate Adjustment Period:
REVOLVING CREDIT LOANS
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EURODOLLAR
LEVERAGE BASE RATE LOANS AND
RATIO RATE LETTERS OF
LOANS CREDIT
- ------------------------------------------------------------------------------
I LESS THAN 2.75:1 0.50% 2.00%
- ------------------------------------------------------------------------------
II GREATER THAN 2.75:1 and 1.00% 2.50%
LESS THAN 3.50:1
- ------------------------------------------------------------------------------
III GREATER THAN 3.50:1 1.50% 3.00%
- ------------------------------------------------------------------------------
Notwithstanding the foregoing, (a) for the period commencing on the Closing
Date through the end of the month in which the quarterly compliance
certificate for the fiscal quarter ending December 31, 1997 is delivered
pursuant to Section 9.4(d) hereof, the Applicable Margin shall be that
percentage corresponding to Level III in the table above; and (b) if the
Borrower fails to deliver any Compliance Certificate pursuant to Section
9.4(d) hereof, then for the period commencing on the first day of the month
immediately following the date such Compliance Certificate was due through
the date immediately preceding the Adjustment Date that occurs immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be that percentage corresponding to Level III in the
table above.
ARRANGER. BancBoston Securities Inc.
ASSIGNMENT AND ACCEPTANCE. See Section 21.1.
BALANCE SHEET DATE. December 31, 1996.
BANKS. BKB and the other lending institutions listed on SCHEDULE 1
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 21.
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds
Effective Rate" shall mean for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three funds brokers of recognized standing selected by the Agent.
BASE RATE LOANS. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
BKB. As defined in the preamble hereto.
BORROWER. As defined in the preamble hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the
case of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
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CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will); PROVIDED that Capital
Assets shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance
with generally accepted accounting principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet
of the lessee or obligor in accordance with generally accepted accounting
principles.
CASH FLOW RATIO. As at the end of each fiscal quarter of the Borrower,
the ratio of (a) Consolidated Cash Flow for the period of the four (4)
consecutive fiscal quarters then ending to (b) Consolidated Financial
Obligations for the period of the four (4) consecutive fiscal quarters then
ending.
CERCLA. See Section 8.18(a).
CLOSING DATE. The first date on which the conditions set forth in
Sections 12 and 13 have been satisfied and any Loans are to be made or any
Letter of Credit is to be issued hereunder.
CODE. The Internal Revenue Code of 1986.
COLLATERAL. All of the property, rights and interests of the Borrower
and the Guarantors that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
COLLATERAL NOTES. See Section 7.3.
CONSOLIDATED OR CONSOLIDATED. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and
all of its Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
CONSOLIDATED CASH FLOW. For any period, the sum of (a) the Consolidated
Net Income of the Borrower and its Subsidiaries for such period, MINUS (b)
Tax Distributions made and cash taxes paid during such period, PLUS (c) to
the extent deducted in the calculation of Consolidated Net Income,
depreciation and amortization for such period, PLUS (d) Consolidated Total
Interest Expense for such period, PLUS (e) to the extent deducted in the
calculation of Consolidated Net Income, income tax expense for such period,
PLUS (f) income of a non-wholly-owned Subsidiary of the Borrower which is
properly attributable to minority interest and which has been deducted in the
calculation of Consolidated Net Income but which has not been distributed by
such Subsidiary, PLUS (g) to the extent deducted in the calculation of
Consolidated Net Income and without duplication, other non-cash charges, if
any, for such period, MINUS (h) the aggregate amount of Maintenance Capital
Expenditures made during such period, PLUS (i) to the extent deducted in the
calculation of Consolidated Net Income and without duplication, nonrecurring
noncapitalized transaction expenses relating to the Repurchase and the
transactions contemplated hereby.
CONSOLIDATED EBITDA. For any period, the sum of (a) the Consolidated
Net Income of the Borrower and its Subsidiaries for such period, PLUS (b)
income of a non-wholly-owned
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Subsidiary of the Borrower which is properly attributable to minority
interest and which has been deducted in the calculation of Consolidated Net
Income but which has not been distributed by such Subsidiary, PLUS (c)
Consolidated Total Interest Expense for such period, PLUS (d) to the extent
deducted in the calculation of Consolidated Net Income, income tax expense
for such period, PLUS (e) to the extent deducted in the calculation of
Consolidated Net Income, depreciation and amortization for such period, PLUS
(f) to the extent deducted in the calculation of Consolidated Net Income and
without duplication, other non-cash charges of the Borrower and its
Subsidiaries for such period PLUS (g) to the extent deducted in the
calculation of Consolidated Net Income and without duplication, nonrecurring
noncapitalized transaction expenses relating to the Repurchase and the
transactions contemplated hereby.
CONSOLIDATED FINANCIAL OBLIGATIONS. For any period, the sum of all
scheduled payments (including without limitation, principal, interest and
commitment fees) on Indebtedness of the Borrower and its Subsidiaries,
including Capitalized Leases, during such period.
CONSOLIDATED FUNDED INDEBTEDNESS. At any time, the sum of (a) the
aggregate amount of Indebtedness of the Borrower and its Subsidiaries, on a
consolidated basis, relating to the borrowing of money or the obtaining of
credit or in respect of Capitalized Leases, PLUS (b) without duplication, all
reimbursement obligations of such Persons in respect of letters of credit
outstanding, PLUS (c) without duplication, all Indebtedness guaranteed by the
Borrower or any of its Subsidiaries.
CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all
expenses, taxes, and other proper charges, but before deduction of Tax
Distributions, determined in accordance with generally accepted accounting
principles.
CONSOLIDATED NET WORTH. The excess of Consolidated Total Assets over
Consolidated Total Liabilities.
CONSOLIDATED TOTAL ASSETS. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the remainder of
(a) the aggregate amount of interest required to be paid or accrued by the
Borrower and its Subsidiaries during such period on all Indebtedness of the
Borrower and its Subsidiaries outstanding during all or any part of such
period, whether such interest was or is required to be reflected as an item
of expense or capitalized, including payments consisting of interest in
respect of Capitalized Leases and including commitment fees, agency fees,
facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money, MINUS (b) interest income of the
Borrower and its Subsidiaries for such period, in each case, determined on a
consolidated basis for such Persons in accordance with generally accepted
accounting principles.
CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with
Section 2.7.
CREDIT AGREEMENT. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
CREDIT APPROVED. A Person that at the time it becomes an assignee of
any Bank pursuant to Section 21 hereof (a) has a credit rating of at least
the greater of (i) BBB by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or Baa2 by Moody's
<PAGE>
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Investor's Service, Inc. and (ii) the rating, if any, issued by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or by
Moody's Investor's Service, Inc. in respect of senior debt issued by the
Borrower, or (b) has been approved by the Borrower and the Agent in writing
to be an Eligible Assignee.
DEFAULT. See Section 14.1.
DELINQUENT BANK. See Section 16.5.3.
DISTRIBUTION. The declaration or payment of any dividend or other
distribution on or in respect of any Equity Interests of a Person, other than
dividends or distributions payable solely in Equity Interests of such Person
of the same class; the purchase, redemption, or other retirement of any
Equity Interests of a Person, directly or indirectly through a Subsidiary of
such Person or otherwise; the return of capital by a Person to the holders of
its Equity Interests as such; or any other distribution on or in respect of
any Equity Interests of a Person.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States of America that will be making or
maintaining Base Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be made, and
the date on which any Revolving Credit Loan is converted or continued in
accordance with Section 2.7.
ELIGIBLE ASSIGNEE. Any of (a) a Credit Approved commercial bank or
finance company organized under the laws of the United States of America, or
any State thereof or the District of Columbia, and having total assets in
excess of $5,000,000,000; (b) a Credit Approved savings and loan association
or savings bank organized under the laws of the United States of America, or
any State thereof or the District of Columbia, and having a net worth of at
least $500,000,000, calculated in accordance with generally accepted
accounting principles; (c) a Credit Approved commercial bank organized under
the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision
of any such country, and having total assets in excess of $5,000,000,000,
PROVIDED that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (d) the central bank of any country which is a member of the OECD
and is Credit Approved; (e) any investment company registered under the
Investment Company Act of 1940, as amended, and any insurance company; and
(f) if, but only if, any Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Agent, such approval not to be
unreasonably withheld.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. See Section 8.18(a).
EPA. See Section 8.18(b).
EQUITY INTERESTS. All equity interests of a Person, including any (a)
common or preferred stock, (b) limited or general partnership interests, (c)
limited liability company membership interests, (d) options, warrants, or
other rights to purchase or acquire any Equity Interest, or (e) securities
convertible into any Equity Interest.
<PAGE>
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ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender
subject thereto would be required to maintain reserves under Regulation D of
the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D), if such
liabilities were outstanding. The Eurocurrency Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent in its
sole discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Bank
designated as such in SCHEDULE 1 hereto; thereafter, such other office of
such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (a) the rate at which the Agent's
Eurodollar Lending Office is offered Dollar deposits at 10:00 a.m. (Boston
time) two Eurodollar Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations of such Eurodollar Lending Office are
customarily conducted, for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of the Eurodollar Rate Loan of BKB to which such Interest Period
applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve
Rate, if applicable.
EURODOLLAR RATE LOANS. Revolving Credit Loans bearing interest
calculated by reference to the Eurodollar Rate.
EVENT OF DEFAULT. See Section 14.1.
EXISTING CREDIT AGREEMENT. The Revolving Credit and Term Loan
Agreement, dated as of June 25, 1997, by and among the Borrower, BKB and the
other banks party thereto, and BKB as agent for itself and such banks.
FEE LETTER. The letter agreement dated September 29, 1997 between TRC
and the Agent.
FRONTING FEE. See Section 5.6.
GENERAL PARTNER. PMC.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in Section 11,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards
<PAGE>
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Board and its predecessors, in effect for the fiscal year ended on the
Balance Sheet Date, and (ii) to the extent consistent with such principles,
the accounting practice of the Borrower reflected in its financial statements
for the year ended on the Balance Sheet Date, and (b) when used in general,
other than as provided above, means principles that are (i) consistent with
the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time, and (ii)
consistently applied with past financial statements of the Borrower adopting
the same principles, provided that in each case referred to in this
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles)
as to financial statements in which such principles have been properly
applied. In connection with the conversion of the Borrower into corporate
form, the provisions of this Credit Agreement, including without limitation
Sections 10 and 11, shall not give effect to any purchase accounting
adjustments made in connection with such conversion until this Credit
Agreement shall have been appropriately amended to reflect such adoption in a
manner reasonably acceptable to the parties hereto.
GUARANTEED OBLIGATIONS. See Section 29.2.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
GUARANTORS. As defined in the preamble hereto, which term shall include
the wholly-owned Subsidiaries of the Borrower which become parties to this
Credit Agreement from time to time pursuant to Section 29.9 hereof.
GUARANTY. See Section 29.1.
HAZARDOUS SUBSTANCES. See Section 8.18(b).
IMPROVEMENT CAPITAL EXPENDITURES. Capital Expenditures relating to the
improvement of existing operating units of the Borrower and its Subsidiaries,
as described in the projections delivered pursuant to Section 8.4.2.
INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such
Person and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses,
(iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized Lease,
<PAGE>
(vi) every obligation of such Person under any lease (a "synthetic
lease") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes,
(vii) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (C) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith,
(viii) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights,
(ix) every obligation of such Person under any forward contract
(other than forward contracts relating to the purchase of commodities used
in the operation of the Borrower's business, entered into between such
Person and the suppliers of such commodities), futures contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the value of
which is dependent upon interest rates, currency exchange rates,
commodities or other indices,
(x) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law, and
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(i) through (x) (the "primary obligation") of another Person (the "primary
obligor"), in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (A) to purchase or pay
(or advance or supply funds for the purchase of) any security for the
payment of such primary obligation, (B) to purchase property, securities or
services for the purpose of assuring the payment of such primary
obligation, or (C) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any forward contract, futures contract,
swap, interest rate protection arrangements or exchange rate protection
arrangements shall be the net liability of the Borrower and its Subsidiaries
under such arrangements at such time, calculated on a basis satisfactory to
the Agent in accordance with accepted practice, (v) any Indebtedness, issued
at a price that is less than the principal amount at maturity thereof, shall
be the amount of the liability in respect thereof determined in accordance
with generally accepted accounting principles, (w) any Capitalized Lease
shall be the principal component of the aggregate of the rentals obligation
under such Capitalized Lease payable over the term thereof that is not
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subject to termination by the lessee, (x) any sale of receivables shall be
the amount of unrecovered capital or principal investment of the purchaser
(other than the Borrower or any of its wholly-owned Subsidiaries) thereof,
excluding amounts representative of yield or interest earned on such
investment, (y) any synthetic lease shall be the stipulated loss value,
termination value or other equivalent amount and (z) any equity related
purchase obligation shall be the maximum fixed redemption or purchase price
thereof inclusive of any accrued and unpaid dividends to be comprised in such
redemption or purchase price.
INELIGIBLE SECURITIES. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
INTEREST COVERAGE RATIO. As at the end of each fiscal quarter of the
Borrower, the ratio of (a) Consolidated EBITDA for the period of the four (4)
consecutive fiscal quarters then ending to (b) Consolidated Total Interest
Expense for the period of the four (4) consecutive fiscal quarters then
ending, PROVIDED that, for each fiscal quarter of the Borrower ending on or
before December 31, 1998, Consolidated Total Interest Expense shall be
determined on a Pro Forma Basis as if all Indebtedness of the Borrower and
its Subsidiaries, including, without limitation, the Loans and the Senior
Notes, were incurred on the first day of such period of four fiscal quarters.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan, the last day of
each calendar quarter; and (b) as to any Eurodollar Rate Loan in respect of
which the Interest Period is (i) 3 months or less, the last day of such
Interest Period, and (ii) more than 3 months, the date that is 3 months from
the first day of such Interest Period and, in addition, the last day of such
Interest Period.
INTEREST PERIOD. With respect to each Revolving Credit Loan,
(a) initially, the period commencing on the Drawdown Date of such Loan and
ending on the last day of one of the periods set forth below, as selected by
the Borrower in a Revolving Credit Loan Request (i) for any Base Rate Loan,
the last day of the calendar quarter; and (ii) for any Eurodollar Rate Loan,
1, 2, 3 or 6 months; and (b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such Revolving Credit
Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; PROVIDED that all of the
foregoing provisions relating to Interest Periods are subject to the
following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in Section
2.7, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no
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numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date shall
end on the Revolving Credit Loan Maturity Date.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of,
or for loans, advances, capital contributions or transfers of property to, or
in respect of any guaranties (or other commitments described under
Indebtedness) or obligations of any Person (other than in respect of accounts
receivable arising in the ordinary course of business). In determining the
aggregate amount of Investments outstanding at any particular time: (a) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still outstanding
(after giving effect to any limit on the amount of such guaranty); (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is
paid; (c) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (d)
there shall not be deducted in respect of any Investment any amounts received
as earnings on such Investment, whether as dividends, interest or otherwise,
except that accrued interest included as provided in the foregoing clause (b)
may be deducted when paid; and (e) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.
LETTER OF CREDIT. See Section 5.1.1.
LETTER OF CREDIT APPLICATION. See Section 5.1.1.
LETTER OF CREDIT FEE. See Section 5.6.
LETTER OF CREDIT PARTICIPATION. See Section 5.1.4.
LEVERAGE RATIO. As at the end of any fiscal quarter of the Borrower,
the ratio of (a) Consolidated Funded Indebtedness at such date to (b)
Consolidated EBITDA for the period of the four (4) consecutive fiscal
quarters then ending.
LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Security Documents.
LOANS. The Revolving Credit Loans.
MAINTENANCE CAPITAL EXPENDITURES. All Capital Expenditures other than
Improvement Capital Expenditures, New Site Capital Expenditures and
Remodeling Capital Expenditures.
MAJORITY BANKS. As of any date, any combination of Banks, excluding
Delinquent Banks, whose aggregate Revolving Credit Commitments constitute at
least fifty-one percent (51%) of the Total Revolving Credit Commitment
(excluding the Revolving Credit Commitments of such Delinquent Banks) or, if
the Total Revolving Credit Commitment has been terminated, any combination of
Banks, excluding Delinquent Banks, holding at least fifty-one percent (51%)
of the outstanding principal amount of the Notes on such date (excluding
amounts outstanding on the Notes payable to such Delinquent Banks).
<PAGE>
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MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
MERGER. The merger of PAC with and into the Borrower, with the Borrower
to be the surviving partnership of such merger, pursuant to the Merger
Agreement.
MERGER AGREEMENT. The Second Amended and Restated Agreement and Plan of
Merger, dated as of September 11, 1997, among TRC, PAC and the Borrower, in
the form delivered to the Agent prior to the Closing Date.
MORTGAGED PROPERTY. Any Real Estate which is subject to a mortgage.
MORTGAGES. The several mortgages and deeds of trust, dated or to be
dated on or prior to the Closing Date, and each of the mortgages and deeds of
trust which may be delivered after the Closing Date in accordance with
Section 9.13, from the Borrower or, as the case may be, its Subsidiaries, to
the Agent with respect to the interests of the Borrower and its Subsidiaries
in the Real Estate and in form and substance satisfactory to the Agent.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
NET CASH PROCEEDS. The cash proceeds received from the issuance of
equity after the Closing Date, net of all costs of sale, underwriting or
brokerage costs, and (so long as no Default or Event of Default shall have
occurred and be continuing) taxes paid or payable as a result thereof by any
of the Guarantors, the Borrower or any of their Subsidiaries.
NEW SITE CAPITAL EXPENDITURES. Capital Expenditures relating to the
construction or acquisition of new operating units of the Borrower and its
Subsidiaries after the Closing Date.
NOTE(S). The Revolving Credit Notes and the Collateral Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement
or arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred (i) under this Credit Agreement or any of the other Loan Documents,
(ii) in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Applications, Letters of
Credit or other instruments at any time evidencing any thereof or (iii) in
respect of any foreign exchange or derivative arrangements entered into among
the Borrower and the Agent or any Bank.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PAC. Perkins Acquisition Corp., a Delaware corporation.
PARTNERSHIP DOCUMENTS. The limited partnership agreement of the
Borrower, including all exhibits to such agreement and the certificate of
limited partnership of the Borrower.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERKINS GROUP. The Guarantors, the Borrower, and the Borrower's
Subsidiaries.
<PAGE>
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PERMITTED ACQUISITION. See Section 10.5(c) hereof.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 10.2.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
PMC. As defined in the preamble hereto.
PRI. As defined in the preamble hereto.
PRO FORMA BASIS. In connection with any proposed Permitted Acquisition,
the calculation of compliance with the financial covenants described in
Section 10.5(c) hereof by the Borrower and its Subsidiaries (including the
Person to be acquired) with reference to the audited historical financial
results, if available, or such other management reports as approved by the
Agent, of such Person and the Borrower and its Subsidiaries for the
applicable Test Period after giving effect on a PRO FORMA basis to such
Permitted Acquisition in the manner described in (a), (b) and (c) below; and,
following a Permitted Acquisition, the calculation of compliance with the
covenants set forth in Section 11 for the fiscal quarter in which such
Permitted Acquisition occurred and each of the three fiscal quarters
immediately following such Permitted Acquisition with reference to the
audited historical financial results, if available, or such other management
reports as approved by the Agent of the Person so acquired and the Borrower
and its Subsidiaries for the applicable Test Period after giving effect on a
PRO FORMA basis to such Permitted Acquisition in the manner described in (a),
(b) and (c) below:
(a) all Indebtedness (whether under this Credit Agreement or
otherwise) and any other balance sheet adjustments incurred or made in
connection with the Permitted Acquisition shall be deemed to have been
incurred or made on the first day of the Test Period, and all Indebtedness
of the Person acquired or to be acquired in such Permitted Acquisition
which was or will have been repaid in connection with the consummation of
the Permitted Acquisition shall be deemed to have been repaid on the first
day of the Test Period;
(b) all Indebtedness assumed to have been incurred pursuant to the
preceding clause (a) shall be deemed to have borne interest at the (i) the
arithmetic mean of (A) the Eurodollar Rate for Eurodollar Rate Loans having
an Interest Period of one month in effect on the first day of the Test
Period and (B) the Eurodollar Rate for Eurodollar Rate Loans having an
Interest Period of one month in effect on the last day of the Test Period
PLUS (ii) the Applicable Margin with respect to Revolving Credit Loans
which are Eurodollar Rate Loans then in effect (after giving effect to the
Permitted Acquisition on a PRO FORMA Basis); and
(c) other reasonable cost savings, expenses and other income
statement or operating statement adjustments which are attributable to the
change in ownership and/or management resulting from such Permitted
Acquisition as may be approved by the Agent in writing (which approval
shall not be unreasonably withheld) shall be deemed to have been realized
on the first day of the Test Period.
RCRA. See Section 8.18(a).
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
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RECORD. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any
Bank with respect to any Loan referred to in such Note.
REGISTER. See Section 21.3.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse BKB on
account of any drawing under any Letter of Credit as provided in Section 5.2.
REMODELING CAPITAL EXPENDITURES. Capital Expenditures relating to the
remodeling of existing operating and manufacturing units of the Borrower and
its Subsidiaries, as described in the projections delivered pursuant to
Section 8.4.2.
REPLACEMENT BANK. See Section 6.12 hereof.
REPURCHASE. Collectively, (i) the purchase by the Borrower of the
limited partnership interests of the Borrower owned by the public unit
holders thereof, as described in the Repurchase Documents and (ii) the
refinancing of certain existing Indebtedness of the Borrower, as described in
the Preliminary Offering Memorandum relating to the Senior Notes, dated
December 3, 1997.
REPURCHASE DOCUMENTS. The Perkins Family Restaurants, L.P. Proxy
Statement, dated November 28, 1997, in the form delivered to the Agent prior
to the Closing Date.
REVOLVING CREDIT COMMITMENT. With respect to each Bank, the amount set
forth on SCHEDULE 1 hereto as the amount of such Bank's commitment to make
Revolving Credit Loans to the Borrower, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions
hereof, zero.
REVOLVING CREDIT COMMITMENT PERCENTAGE. With respect to each Bank, the
percentage set forth on SCHEDULE 1 hereto as such Bank's percentage of the
aggregate Revolving Credit Commitments of all of the Banks.
REVOLVING CREDIT LOAN MATURITY DATE. January 1, 2003.
REVOLVING CREDIT LOAN REQUEST. See Section 2.6.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by
the Banks to the Borrower pursuant to Section 2.
REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving
Credit Note.
REVOLVING CREDIT NOTE(S). See Section 2.4.
SARA. See Section 8.18(a).
SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
SECURITIES PLEDGE AGREEMENT. The Securities Pledge Agreement, dated as
of the date hereof, among TRC, PRI, PMC and the Agent, in form and substance
satisfactory to the Banks and the Agent.
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SECURITY AGREEMENTS. Collectively, (i) the Security Agreement, dated as
of the date hereof, between the Borrower and the Agent and (ii) the Security
Agreement, dated as of the date hereof, between PFC and the Agent, in each
case, in form and substance satisfactory to the Banks and the Agent.
SECURITY DOCUMENTS. The Guaranty, the Security Agreements, the
Mortgages, the Trademark Security Agreement, the Securities Pledge Agreement,
the Stock Pledge Agreement, and all other instruments and documents,
including, without limitation, Uniform Commercial Code financing statements,
required to be executed or delivered pursuant to any Security Document.
SENIOR INDENTURE. The Indenture, dated as of December 22, 1997, between
the Borrower and State Street Bank and Trust Company of Connecticut, N.A., as
trustee, relating to the Senior Notes, on substantially the terms as
described in the Preliminary Offering Memorandum relating to the Senior
Notes, dated December 3, 1997, and otherwise in the form which shall have
been delivered to, and approved by, the Agent.
SENIOR NOTES. The 10.125% unsecured Senior Notes due 2007, of the
Borrower, issued pursuant to the Senior Indenture in an aggregate principal
amount not to exceed $130,000,000, on substantially the terms as described in
the Preliminary Offering Memorandum relating thereto, dated December 3, 1997.
STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated as of the
date hereof, between the Borrower and the Agent, in form and substance
satisfactory to the Banks and the Agent.
SUBSIDIARY. Any corporation, partnership, association, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes) of the outstanding Voting Stock.
SUBSTITUTED BANK. See Section 6.12 hereof.
SYNDICATION AGENT. As defined in the preamble hereto.
TAX DISTRIBUTIONS. For any period, Distributions made by the Borrower
to the holders of its Equity Interests in an amount equal to the tax
liability of such Persons resulting from their ownership of the Equity
Interests of the Borrower.
TEST PERIOD. (a) In connection with the calculation of financial
covenant compliance on a Pro Forma Basis as required by Section 10.5(c)(v)
with respect to any proposed Permitted Acquisition, the period of four fiscal
quarters most recently ended prior to such Permitted Acquisition for which
financial information is available, and (b) in connection with the
calculation of the covenants set forth in Section 11 hereof following any
Permitted Acquisition, the period of all fiscal quarters (and any portion of
a fiscal quarter) prior to the date of such Permitted Acquisition included in
the calculation of such financial covenant.
TITLE INSURANCE COMPANY. Old Republic National Title Insurance Company.
TITLE POLICY. In relation to each Mortgaged Property, an ALTA standard
form title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Agent may require, any such reinsurance to
be with direct access endorsements) in such amount as may be determined by
the Agent insuring the priority of the Mortgage of such Mortgaged Property
and that the Borrower or one of its Subsidiaries holds marketable fee simple
title to such Mortgaged Property, subject only to the encumbrances permitted
by such Mortgage and which shall not contain exceptions for mechanics liens
or persons in occupancy,
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shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to the Agent in its sole discretion, and
shall contain such endorsements and affirmative insurance as the Agent in its
discretion may require, including but not limited to (i) comprehensive
endorsement, (ii) variable rate of interest endorsement, (iii) usury
endorsement, (iv) revolving credit endorsement, and (v) doing business
endorsement.
TOTAL REVOLVING CREDIT COMMITMENT. The sum of the Revolving Credit
Commitments of the Banks, as in effect from time to time.
TRADEMARK SECURITY AGREEMENT. The Trademark Security Agreement, dated
as of the date hereof, between the Borrower and the Agent, in form and
substance satisfactory to the Banks and the Agent.
TRC. As defined in the preamble hereto.
TYPE. As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a Eurodollar Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto
adopted by BKB in the ordinary course of its business as a letter of credit
issuer and in effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse BKB on the date specified in, and in
accordance with, Section 5.2.
VOTING STOCK. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, partnership, association,
trust or other business entity involved, whether or not the right so to vote
exists by reason of the happening of a contingency.
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the
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Commonwealth of Massachusetts, have the meanings assigned to them therein,
with the term "instrument" being that defined under Article 9 of the
Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Revolving Credit Loan Maturity Date upon
notice by the Borrower to the Agent given in accordance with Section 2.6,
such sums as are requested by the Borrower up to a maximum aggregate amount
Outstanding (after giving effect to all amounts requested) at any one time
equal to such Bank's Revolving Credit Commitment PROVIDED the Outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested), PLUS the Maximum Drawing Amount, PLUS all Unpaid Reimbursement
Obligations shall not at any time exceed the Total Revolving Credit
Commitment. The Revolving Credit Loans shall be made PRO RATA in accordance
with each Bank's Revolving Credit Commitment Percentage. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in Section 12 and
Section 13, in the case of the initial Revolving Credit Loans to be made on
the Closing Date, and Section 13, in the case of all other Revolving Credit
Loans, have been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Revolving Credit
Commitment Percentages a commitment fee at an annual rate equal to one-half
of one percent (0.50%) on the average daily amount during each calendar
quarter or portion thereof from the Closing Date to the Revolving Credit Loan
Maturity Date by which the Total Revolving Credit Commitment exceeds the SUM
of (a) the Outstanding amount of Revolving Credit Loans PLUS (b) the Maximum
Drawing Amount, PLUS (c) all Unpaid Reimbursement Obligations during such
calendar quarter. The commitment fee shall be payable quarterly in arrears
on the last day of each calendar quarter for the calendar quarter then
ending, commencing on March 31, 1998, with a final payment on the Revolving
Credit Loan Maturity Date or any earlier date on which the Revolving Credit
Commitments shall terminate.
2.3. REDUCTION OF TOTAL REVOLVING CREDIT COMMITMENT. Subject to Section
6.10, the Borrower shall have the right at any time and from time to time
upon five (5) Business Days prior written notice to the Agent to reduce by
$1,000,000 or integral multiples of $250,000 in excess thereof, or terminate
entirely the Total Revolving Credit Commitment, whereupon the Revolving
Credit Commitments of the Banks shall be reduced PRO RATA in accordance with
their respective Revolving Credit Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this Section 2.3,
the Agent will notify the Banks of the substance thereof. Upon the effective
date of any such reduction or termination, the Borrower shall pay to the
Agent for the respective accounts of the Banks, in accordance with their
Revolving Credit Commitment Percentages, the full amount of any commitment
fee then accrued on the amount of the reduction. No reduction or termination
of the Revolving Credit Commitments may be reinstated.
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2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of EXHIBIT A hereto (each a "Revolving Credit Note"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Revolving Credit Commitment or, if less, the Outstanding amount of all Revolving
Credit Loans made by such Bank, plus interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal on such Bank's Revolving
Credit Note, an appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the case may be) the
receipt of such payment. The Outstanding amount of the Revolving Credit Loans
set forth on such Bank's Revolving Credit Note Record shall be PRIMA FACIE
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Revolving Credit Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
in Section 6.11,
(a) Each Revolving Credit Loan that is a Base Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at an
annual rate equal to the sum of (i) the Base Rate PLUS (ii) the Applicable
Margin with respect to Revolving Credit Loans which are Base Rate Loans, as
in effect from time to time while such Base Rate Loan is Outstanding.
(b) Each Revolving Credit Loan that is a Eurodollar Rate Loan shall
bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at an
annual rate equal to the sum of (i) the Eurodollar Rate PLUS (ii) the
Applicable Margin with respect to Revolving Credit Loans which are
Eurodollar Rate Loans, as in effect from time to time while such Eurodollar
Rate Loan is Outstanding.
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto,
commencing, with respect to Base Rate Loans, on March 31, 1998.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to
the Agent written notice in the form of EXHIBIT B hereto (or telephonic
notice confirmed in a writing in the form of EXHIBIT B hereto) of each
Revolving Credit Loan requested hereunder (a "Revolving Credit Loan Request")
(a) prior to 12:00 Noon (Boston time) on the proposed Drawdown Date of any
Base Rate Loan and (b) prior to 12:00 Noon (Boston time) on the second
Eurodollar Business Day prior to the proposed Drawdown Date of any Eurodollar
Rate Loan. Each such notice shall specify (w) the principal amount of the
Revolving Credit Loan requested, (x) the proposed Drawdown Date of such
Revolving Credit Loan, (y) if a Eurodollar Rate Loan, the Interest Period for
such Revolving Credit Loan and (z) the Type of such Revolving Credit Loan.
Upon receipt of any such notice, the Agent shall promptly notify each of the
Banks thereof. Each Revolving Credit Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the
Revolving Credit Loan requested from the Banks on the proposed Drawdown Date.
Each Revolving Credit Loan Request shall be in a minimum aggregate amount of
$250,000 or an integral multiple thereof.
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2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN.
The Borrower may elect from time to time to convert any Outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type, PROVIDED
that (a) with respect to any such conversion of a Revolving Credit Loan to
a Base Rate Loan, the Borrower shall give the Agent at least one (1)
Business Day prior written notice of such election; (b) with respect to any
such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent at least two (2) Eurodollar Business Days prior
written notice of such election; (c) with respect to any such conversion of
a Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only be
made on the last day of the Interest Period with respect thereto and (d) no
Loan may be converted into a Eurodollar Rate Loan when any Default or Event
of Default has occurred and is continuing. On the date on which such
conversion is being made each Bank shall take such action as is necessary
to transfer its Revolving Credit Commitment Percentage of such Revolving
Credit Loans to its Domestic Lending Office or its Eurodollar Lending
Office, as the case may be. All or any part of Outstanding Revolving
Credit Loans of any Type may be converted into a Revolving Credit Loan of
another Type as provided herein, PROVIDED that any partial conversion shall
be in an aggregate principal amount of $500,000 or a whole multiple of
$250,000 in excess thereof. Each Conversion Request relating to the
conversion of a Revolving Credit Loan to a Eurodollar Rate Loan shall be
irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN.
Any Revolving Credit Loan of any Type may be continued as a Revolving
Credit Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice provisions
contained in Section 2.7.1; PROVIDED that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto. The Agent shall notify
the Banks promptly when any such automatic conversion contemplated by this
Section 2.7.2 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Revolving
Credit Loans that are Eurodollar Rate Loans shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of all Revolving Credit Loans that are
Eurodollar Rate Loans having the same Interest Period shall not be less
than $500,000 or a whole multiple of $250,000 in excess thereof. At no
time shall there be more than four (4) Revolving Credit Loans that are
Eurodollar Rate Loans having different Interest Periods.
2.8. FUNDS FOR REVOLVING CREDIT LOANS.
2.8.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston time)
on the proposed Drawdown Date of any Revolving Credit Loans, each of the
Banks will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Revolving Credit
Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Bank of such amount, and upon receipt of the
documents required by Sections 12 and 13 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Revolving Credit
Loans made available to
<PAGE>
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the Agent by the Banks. The failure or refusal of any Bank to make
available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Revolving Credit Commitment Percentage of the
requested Revolving Credit Loans shall not relieve any other Bank
from its several obligation hereunder to make available to the Agent the
amount of such other Bank's Revolving Credit Commitment Percentage of any
requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Revolving Credit Commitment Percentage of the Revolving Credit Loans to be
made on such Drawdown Date, and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, TIMES (b) the amount of such Bank's Revolving
Credit Commitment Percentage of such Revolving Credit Loans, TIMES (c) a
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
Revolving Credit Commitment Percentage of such Revolving Credit Loans shall
become immediately available to the Agent, and the denominator of which
is 360. A statement of the Agent submitted to such Bank with respect to any
amounts owing under this paragraph shall be PRIMA FACIE evidence of the
amount due and owing to the Agent by such Bank. If the amount of such
Bank's Revolving Credit Commitment Percentage of such Revolving Credit
Loans is not made available to the Agent by such Bank within three (3)
Business Days following such Drawdown Date, the Agent shall be entitled to
recover such amount from the Borrower on demand, with interest thereon at
the rate per annum applicable to the Revolving Credit Loans made on such
Drawdown Date.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
Outstanding on such date, together with any and all accrued and unpaid
interest thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
sum of the Outstanding amount of the Revolving Credit Loans, PLUS the Maximum
Drawing Amount, PLUS all Unpaid Reimbursement Obligations exceeds the Total
Revolving Credit Commitment, then the Borrower shall immediately pay the
amount of such excess to the Agent for the respective accounts of the Banks
for application to the Revolving Credit Loans. Each prepayment of Revolving
Credit Loans shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior payments or repayments not exactly in proportion. Each prepayment
pursuant to this Section 3.2 shall be made in accordance with the provisions
of Section 6.10.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. Subject to Section
6.10, the Borrower shall have the right, at its election, to repay the
Outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium. The Borrower shall give the Agent, no
later than 12:00 Noon, Boston time, on the date of any proposed prepayment
prior written notice (or telephonic notice confirmed in writing) of any
proposed prepayment pursuant to this Section 3.3 of Base Rate Loans, and no
later than 12:00 Noon, Boston
<PAGE>
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time, two (2) Eurodollar Business Days prior to the date of any proposed
repayment, prior written notice (or telephonic notice confirmed in writing)
of any proposed prepayment pursuant to this Section 3.3 of Eurodollar Rate
Loans, in each case specifying the proposed date of prepayment of Revolving
Credit Loans and the principal amount to be prepaid. Each such partial
prepayment of the Revolving Credit Loans shall be in a minimum amount of
$250,000 or an integral multiple thereof and shall be applied, in the absence
of instruction by the Borrower, first to the principal of Base Rate Loans and
then to the principal of Eurodollar Rate Loans. Each partial prepayment
shall be allocated among the Banks, in proportion, as nearly as practicable,
to the respective unpaid principal amount of each Bank's Revolving Credit
Note, with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion.
4. [INTENTIONALLY OMITTED].
5. LETTERS OF CREDIT.
5.1. LETTER OF CREDIT COMMITMENT.
5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on BKB's customary form (a "Letter of Credit
Application"), BKB on behalf of the Banks and in reliance upon the
agreement of the Banks set forth in Section 5.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees,
in its individual capacity, to issue, extend and renew for the account of
the Borrower one or more standby letters of credit (individually, a
"Letter of Credit"), in such form as may be requested from time to time by
the Borrower and agreed to by BKB; PROVIDED, HOWEVER, that, after giving
effect to such request, (a) the sum of the aggregate Maximum Drawing Amount
and all Unpaid Reimbursement Obligations shall not exceed $5,000,000 at any
one time and (b) the sum of the aggregate Maximum Drawing Amount and all
Unpaid Reimbursement Obligations PLUS the Outstanding amount of the
Revolving Credit Loans shall not, at any time, exceed the Total Revolving
Credit Commitment. The letters of credit issued by BKB under the Existing
Credit Agreement, a list of which is attached hereto as SCHEDULE 5.1.1,
shall be Letters of Credit under this Credit Agreement.
5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of BKB. In the event
that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiry date no later than the date which
is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or otherwise provides for one or more nominated persons,
forty-five (45) days) prior to the Revolving Credit Loan Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject to
the Uniform Customs.
5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Revolving Credit Commitment Percentage, to
reimburse BKB on demand for the amount of each draft paid by BKB under each
Letter of Credit to the extent that such
<PAGE>
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amount is not reimbursed by the Borrower pursuant to Section 5.2 (such
agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall
be treated as the purchase by such Bank of participating interest in the
Borrower's Reimbursement Obligation under Section 5.2 in an amount equal to
such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to Section 5.2.
5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce BKB to
issue, extend and renew each Letter of Credit the Borrower hereby agrees to
reimburse or pay to BKB, with respect to each Letter of Credit issued,
extended or renewed by BKB hereunder,
(a) on each date that any draft presented under such Letter of Credit
is honored by BKB, or BKB otherwise makes a payment with respect thereto,
(i) the amount paid by BKB under or with respect to such Letter of Credit,
and (ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by BKB in connection with any payment made by BKB
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Revolving
Credit Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by BKB for the
benefit of the Banks (including BKB) as cash collateral for all
Reimbursement Obligations, and
(c) upon the acceleration of the Reimbursement Obligations with
respect to all Letters of Credit in accordance with Section 14, an amount
equal to the then Maximum Drawing Amount on all Letters of Credit, which
amount shall be held by BKB as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to BKB at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining
unpaid by the Borrower under this Section 5.2 at any time from the date such
amounts become due and payable (whether as stated in this Section 5.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to BKB on demand at the rate specified in Section
6.11 for overdue principal on the Loans.
5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, BKB shall notify
the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor
such demand for payment. If the Borrower fails to reimburse BKB as provided
in Section 5.2 on or before the date that such draft is paid or other payment
is made by BKB, BKB may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each
Bank shall make available to BKB, at the Agent's Head Office, in immediately
available funds, such Bank's Revolving Credit Commitment Percentage of such
Unpaid Reimbursement Obligation, together with an amount equal to the product
of (i) the average, computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by BKB for federal funds
acquired by BKB during each day included in such period, TIMES (ii) the
amount equal to such Bank's Revolving Credit Commitment Percentage of such
Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the numerator of
which is the number of days that elapse from and including the date BKB paid
the draft presented for honor or otherwise made payment to the date on which
such Bank's Revolving Credit Commitment Percentage of such Unpaid
Reimbursement obligation shall become immediately available to BKB, and the
denominator of which is 360. The responsibility of BKB to the Borrower and
the Banks shall be only to determine that the documents (including
<PAGE>
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each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter
of Credit.
5.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 5 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to
payment which the Borrower may have or have had against BKB, any other Bank
or any beneficiary of a Letter of Credit, other than claims arising due to
the gross negligence or willful misconduct of BKB. The Borrower further
agrees with BKB and the Banks that neither BKB nor any Bank shall be
responsible for, and the Borrower's Reimbursement Obligations under
Section 5.2 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or other
party to which any Letter of Credit may be transferred or any claims or
defenses whatsoever of the Borrower against the beneficiary of any Letter of
Credit or any such transferee. BKB and the Banks shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter
of Credit, other than any of the foregoing resulting from the gross
negligence or willful misconduct of BKB. The Borrower agrees that any action
taken or omitted by BKB or any Bank under or in connection with each Letter
of Credit and the related drafts and documents, if done in good faith and
without gross negligence, shall be binding upon the Borrower and shall not
result in any liability on the part of BKB or any Bank to the Borrower.
5.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 5.4, BKB shall be entitled to rely, and shall be fully protected in
relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel,
independent accountants and other experts selected by BKB. BKB shall be
fully justified in failing or refusing to take any action under this Credit
Agreement unless it shall first have received such advice or concurrence of
the Majority Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. BKB shall in all cases be fully
protected in acting, or in refraining from acting, under this Credit
Agreement in accordance with a request of the Majority Banks, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
5.6. LETTER OF CREDIT FEE. With respect to each Letter of Credit issued
hereunder, the Borrower shall pay to the Agent a fee (the "Letter of Credit
Fee") for each Letter of Credit issued or renewed by BKB at a rate per annum
equal to the Applicable Margin with respect to Revolving Credit Loans which
are Eurodollar Rate Loans in effect from time to time, on the Maximum Drawing
Amount of such Letter of Credit for the period such Letter of Credit is
outstanding. The Agent shall, in turn, remit to each Bank (including BKB)
such Bank's Revolving Credit Commitment Percentage of the Letter of Credit
Fee. In addition, the Borrower will pay BKB, for its own account, a Fronting
Fee (the "Fronting Fee") equal to one-eighth of one percent (0.125%) per
annum on the Maximum Drawing Amount of such Letter of Credit for the period
such Letter of Credit is outstanding. The Letter of Credit Fee and the
Fronting Fee shall be payable quarterly in arrears on the last day of each
calendar quarter for the calendar quarter then ending. In respect of each
Letter of Credit, the Borrower shall also pay to BKB, for its own account, at
such time or times as such charges are customarily made by BKB, BKB's
customary issuance, amendment, negotiation or document examination and other
administrative fees as in effect from time to time.
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6. CERTAIN GENERAL PROVISIONS.
6.1. FEES. The Borrower agrees to pay to the Agent the fees in
accordance with the Fee Letter.
6.2. [Intentionally Omitted].
6.3. FUNDS FOR PAYMENTS.
6.3.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the
Agent, at the Agent's Head Office or at such other location in the
Boston, Massachusetts, area that the Agent may from time to time designate,
in each case in immediately available funds.
6.3.2. NO OFFSET, ETC. (a) All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
(b) On or before the date it becomes a party to this Credit Agreement
and from time to time thereafter upon any change in status rendering any
certificate or document previously delivered pursuant to this Section 6.3.2
invalid or inaccurate, each Bank that is organized under the laws of a
jurisdiction outside the United States of America shall (if legally able to
do so) deliver to the Borrower such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulation
Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof
or subsequent version thereto, properly completed and duly executed by such
Bank establishing that such payment is (a) not subject to United States of
America Federal withholding tax under the Code because such payment is
effectively connected with conduct by such Bank of a trade or business in
the United States of America or (b) totally exempt from United States of
America Federal withholding tax or, if due to a change in law occurring
after the date such Bank became a party hereto, subject to a reduced rate
of such tax under a provision of an applicable tax treaty. The Borrower
shall not be required to pay any additional amounts to any Bank pursuant to
this Section 6.3.2 to the extent that the obligation to pay such additional
amounts would not have arisen but for a failure by such Bank to comply with
the provisions of the preceding sentence.
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6.4. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of
the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a
payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue
during such extension. The Outstanding amount of the Loans as reflected on
the Revolving Credit Note Records from time to time shall be considered
correct and binding on the Borrower unless within five (5) Business Days
after receipt of any notice by the Agent or any of the Banks of such
Outstanding amount, the Borrower shall notify the Agent or such Bank to the
contrary.
6.5. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that
would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Agent shall forthwith
give notice of such determination (which shall be conclusive and binding on
the Borrower and the Banks) to the Borrower and the Banks. In such event (a)
any Revolving Credit Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (b) each Eurodollar Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of the Banks to
make Eurodollar Rate Loans shall be suspended until the Agent or the Majority
Banks determine that the circumstances giving rise to such suspension no
longer exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Borrower and the other Banks and thereupon (a)
the commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b)
such Bank's Loans then Outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period
as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank
in making any conversion in accordance with this Section 6.6, including any
interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its Eurodollar Rate Loans hereunder. The Borrower
may take the actions permitted by Section 6.12 to replace any Bank requiring
the Borrower to pay additional costs incurred under this Section 6.6.
6.7. ADDITIONAL COSTS, ETC. If any change to any present law or any
future applicable law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged
with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Revolving Credit Commitment or
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the Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Revolving Credit
Commitment or any class of loans, letters of credit or commitments of which
any of the Loans or such Bank's Revolving Credit Commitment forms a part,
and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans, such
Bank's Revolving Credit Commitment, or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Revolving Credit Commitment, any Letter of
Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest or Reimbursement Obligation or other sum
payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum. The Borrower may take the actions permitted by Section
6.12 to replace any Bank requiring the Borrower to pay additional costs incurred
under this Section 6.7.
6.8. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law) regarding capital requirements for banks or bank holding companies or
any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (b) compliance by
such Bank or the Agent or any corporation controlling such Bank or the Agent
with any law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such entity regarding capital
adequacy, has the effect of reducing the return on such Bank's or the Agent's
commitment with respect to any Loans to a level below that which such Bank or
the Agent could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's or the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such
entity's capital) by any amount deemed by such Bank or
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(as the case may be) the Agent to be material, then such Bank or the Agent
may notify the Borrower of such fact. To the extent that the amount of such
reduction in the return on capital is not reflected in the Base Rate, the
Borrower and such Bank shall thereafter attempt to negotiate in good faith,
within thirty (30) days of the day on which the Borrower receives such
notice, an adjustment payable hereunder that will adequately compensate such
Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on
which the Borrower receives such notice, then commencing on the date of such
notice (but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that
will, in such Bank's reasonable determination, provide adequate compensation;
PROVIDED, HOWEVER, that the Borrower may take the actions permitted by
Section 6.12 to replace such Bank. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
6.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 6.7 or 6.8 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower,
shall be PRIMA FACIE evidence that such amounts are due and owing.
6.10. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss
of anticipated profits) that such Bank may sustain or incur as a consequence
of (a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Bank
to lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (b) default by the Borrower in making a borrowing or conversion after
the Borrower has given (or is deemed to have given) a Revolving Credit Loan
Request or a Conversion Request relating thereto in accordance with Section
2.6 or Section 2.7 or (c) the making of any payment of a Eurodollar Rate Loan
or the making of any conversion of any such Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain any such Loans.
6.11. INTEREST AFTER DEFAULT.
6.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per
annum equal to the Base Rate PLUS the Applicable Margin for Base Rate
Loans then in effect with respect to Revolving Credit Loans, PLUS three
percent (3%) per annum until such amount shall be paid in full (after as
well as before judgment).
6.11.2. AMOUNTS NOT OVERDUE. During the continuance of an Event of
Default the principal of the Loans not overdue shall, until such Event of
Default has been cured or remedied or such Event of Default has been waived
by the Banks pursuant to Section 28, bear interest at a rate per annum
equal to the Base Rate PLUS the Applicable Margin for Base Rate Loans then
in effect with respect to Revolving Credit Loans, PLUS three percent (3%)
per annum.
6.11.3. LETTERS OF CREDIT. The Unpaid Reimbursement Obligations and
(to the extent permitted by law) unpaid interest thereon (as provided in
this sentence) shall bear interest compounded monthly and payable on demand
at a rate per annum equal to the Base Rate PLUS the Applicable Margin for
Base Rate Loans then in effect with respect to Revolving Credit Loans PLUS
three percent (3%) per annum until such amount shall be paid in full (after
as well as before judgment).
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6.12. REPLACEMENT OF INDIVIDUAL BANKS. Upon the occurrence of any of the
events referenced in Section 6.6, Section 6.7 and Section 6.8 giving rise to
the Borrower's rights to replace a Bank, the Borrower may (PROVIDED that at
the time no Default or Event of Default exists or would result after giving
effect to the Borrower's action) require such Bank (the "Substituted Bank")
to assign all of its Loans and its Revolving Credit Commitment (i) to another
Bank hereunder which has committed to purchase such Loans and such Revolving
Credit Commitment pursuant to the provisions of Section 21, (ii) to an
Eligible Assignee approved by the Agent (such approval not to be unreasonably
withheld) which has committed to purchase such Loans and such Revolving
Credit Commitment pursuant to the provisions of Section 21 (such Bank
referred to herein as the "Replacement Bank")
7. COLLATERAL SECURITY AND GUARANTIES.
7.1. SECURITY OF BORROWER. The Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the
Borrower (including, without limitation, accounts and notes receivable,
inventory, equipment, real property, stock of subsidiaries, intangible
property, and intellectual property), whether now owned or hereafter
acquired, pursuant to the terms of the Security Documents to which the
Borrower is a party; PROVIDED that the Borrower shall only be required to
grant a mortgage on its leasehold interests in the Real Estate and on any fee
owned Real Estate located in Florida pursuant to Section 9.13 hereof.
7.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. The Obligations shall be
guaranteed by TRC, PRI, PMC and each wholly-owned Subsidiary of the Borrower
(now existing or hereafter formed or acquired) pursuant to the terms of the
Guaranty, PROVIDED that the guaranties by TRC, PRI and PMC shall be limited
in recourse to the pledge by such Guarantors of the Equity Interests in the
Borrower or the Guarantors owned by such Guarantors. The obligations under
the Guaranty shall be in turn secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under
applicable law) in (a) with respect to TRC, PRI and PMC, the Equity Interests
of the Borrower owned by each such Guarantor and (b) with respect to each
other Guarantor, all of the assets of each such Person (including, without
limitation, accounts and notes receivable, inventory, equipment, real
property, stock of subsidiaries, intangible property, and intellectual
property), whether now owned or hereafter acquired, pursuant to the terms of
the Security Documents to which such Person is a party.
7.3. COLLATERAL NOTES. In addition to the Revolving Credit Notes, the
Borrower agrees that with respect to any of the Real Estate to be mortgaged
by it or any of its Subsidiaries hereunder, it will execute and deliver or
cause such Subsidiary to execute and deliver to the Agent such collateral
notes (the "Collateral Notes") in such form as the Agent and the Borrower may
from time to time agree. The parties hereto hereby agree that (a) the
aggregate amount of the Outstanding Obligations shall not be increased by the
issuance of the Collateral Notes and (b) any payment or recovery on the
Collateral Notes shall be applied to the Obligations pursuant to Section
14.4. All Collateral Notes shall be payable to the order of the Agent, on
demand; PROVIDED that the Agent hereby agrees that it shall not demand
payment on any Collateral Note unless the Obligations shall have become
immediately due and payable pursuant to Section 14.1.
8. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as
follows:
8.1. CORPORATE AUTHORITY.
8.1.1. EXISTENCE; GOOD STANDING. Each member of the Perkins Group
(a) is duly organized, validly existing and in good standing under the
laws of its jurisdiction of
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organization, (b) has all requisite power to own its property and conduct
its business as now conducted and as presently contemplated, and (c) is in
good standing as a foreign corporation or partnership, as applicable, and
is duly authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so qualified would
not have a materially adverse effect on the business, assets or financial
condition of such Person.
8.1.2. AUTHORIZATION. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which any member of the
Perkins Group is or is to become a party and the transactions contemplated
hereby and thereby and the Repurchase (a) are within the corporate or
partnership authority (as applicable) of such Person, (b) have been duly
authorized by all necessary corporate or partnership proceedings (as
applicable), (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
such Person is subject or any judgment, order, writ, injunction, license or
permit applicable to such Person and (d) do not conflict with any provision
of the corporate charter or bylaws of, or of the certificate of limited
partnership or partnership agreement of, or any agreement or other
instrument binding upon, such Person.
8.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which any member of the Perkins
Group is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be
brought.
8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
each of the members of the Perkins Group of this Credit Agreement and the
other Loan Documents to which each such Person is or is to become a party and
the transactions contemplated hereby and thereby and the Repurchase do not
require the approval or consent of, or filing with, any governmental agency
or authority other than those already obtained, the filing of UCC financing
statements and the recording of the Mortgages.
8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3
hereto, the Borrower and its Subsidiaries lease (to the extent so described
in such consolidated balance sheet or the notes thereto) or own all of the
assets reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
8.4. FINANCIAL STATEMENTS AND PROJECTIONS.
8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the
Banks a consolidated balance sheet of the Borrower and its Subsidiaries as
at the Balance Sheet Date, and consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by a report and unqualified opinion of Arthur Andersen LLP.
There has also been furnished to each of the Banks a consolidated balance
sheet of the Borrower and its Subsidiaries as at September 30, 1997, and
the consolidated statements of income and cash flows of the Borrower and
its Subsidiaries for the portion of the fiscal year then ended. Such
balance sheets and statements of income and cash flows have been
prepared in accordance with generally
<PAGE>
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accepted accounting principles and fairly present the financial
condition of the Borrower and its Subsidiaries as at the close of business
on the dates thereof and the results of operations for the fiscal year or
portion thereof then ended. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving material
amounts, known to the officers of the Borrower, which were not disclosed in
such balance sheets and the notes related thereto.
8.4.2. PROJECTIONS. The projections of the annual operating budgets of
the Borrower and its Subsidiaries on a consolidated basis, balance sheets
and cash flow statements for the 1997 through 2002 fiscal years, copies of
which have been delivered to each Bank, disclose all assumptions made with
respect to general economic, financial and market conditions used in
formulating such projections. To the knowledge of the Borrower or any of
its Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The
projections are based upon reasonable estimates and assumptions, have been
prepared on the basis of the assumptions stated therein and reflect the
reasonable estimates of the Borrower and its Subsidiaries of the results of
operations and other information projected therein, it being understood
that the projections are not guaranties of results and that actual results
will vary from the projections.
8.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date, other than
the Repurchase, there has occurred no materially adverse change in the
financial condition or business of the Borrower and its Subsidiaries as shown
on or reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, or the consolidated statements of
income and cash flows for the fiscal year then ended, other than changes in
the ordinary course of business that have not had any materially adverse
effect either individually or in the aggregate on the business or financial
condition of the Borrower or any of its Subsidiaries. Since the Balance
Sheet Date, neither the Borrower nor any of its Subsidiaries has made any
Distribution not permitted under the terms of this Credit Agreement, other
than the regular quarterly Distributions during 1997 to the holders of the
Borrower's Equity Interests.
8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and each of its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending or
threatened against the Borrower or any of its Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect
the properties, assets, financial condition or business of the Borrower and
its Subsidiaries, taken as a whole, or materially impair the right of the
Borrower and its Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any
of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto, or which might impair the ability of the Borrower, the
Guarantors and their Subsidiaries to effect the Repurchase.
<PAGE>
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8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or
is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Borrower and its Subsidiaries.
Neither the Borrower nor any of its Subsidiaries is a party to any contract
or agreement that has or is expected, in the judgment of the officers of the
Borrower, to have any materially adverse effect on the business of the
Borrower and its Subsidiaries.
8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. No member of the
Perkins Group is in violation of any provision of its charter documents,
bylaws, or any agreement or instrument to which it may be subject or by which
it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a
manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or
business of the Borrower and its Subsidiaries, taken as a whole.
8.10. TAX STATUS. Each member of the Perkins Group (a) has made or filed
all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (b) has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) has set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of
the Borrower know of no basis for any such claim.
8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. No member of the
Perkins Group is a "holding company", or a "subsidiary company" of a "holding
company", or an affiliate" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is any of them an
"investment company", or a company controlled by an "investment company", as
such term is defined in the Investment Company Act of 1940.
8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover,
affect or give notice of any present or possible future lien on, or security
interest in, any assets or property of the Borrower or any of its
Subsidiaries or any rights relating thereto.
8.14. EMPLOYEE BENEFIT PLANS.
8.14.1. IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions. The Borrower
has heretofore delivered to the Agent the most recently completed annual
report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under Section 103(d) of ERISA, with respect to
each Guaranteed Pension Plan.
8.14.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs
<PAGE>
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prior to plan termination (except as required by Title I, Part 6 of
ERISA). The Borrower or an ERISA Affiliate, as appropriate, may terminate
each such Plan at any time (or at any time subsequent to the expiration of
any applicable bargaining agreement) in the discretion of the Borrower or
such ERISA Affiliate without liability to any Person.
8.14.3. GUARANTEED PENSION PLANS. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan. No
liability to the PBGC (other than required insurance premiums, all of which
have been paid when due) has been incurred by the Borrower or any ERISA
Affiliate with respect to any Guaranteed Pension Plan and there has not
been any ERISA Reportable Event with respect to any Guaranteed Pension
Plan, or any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans within
the meaning of Section 4001 of ERISA did not exceed the aggregate value of
the assets of all such Guaranteed Pension Plans, disregarding for this
purpose the benefit liabilities and assets of any Guaranteed Pension Plan
with assets in excess of benefit liabilities, by more than $250,000.
8.14.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under Section 4041A of ERISA.
8.15. USE OF PROCEEDS.
8.15.1. GENERAL. The proceeds of the Loans shall be used (i) to fund a
portion of the purchase price of the Repurchase and to pay related fees and
expenses, (ii) to repay existing Indebtedness of the Borrower and to pay
related fees and expenses and (iii) for working capital and general
corporate and partnership purposes. The Borrower will obtain Letters of
Credit solely for working capital and general corporate and partnership
purposes.
8.15.2. REGULATIONS U AND X. No portion of any Loan is to be used, and
no portion of any Letter of Credit is to be obtained, for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224 in a manner which would
violate said Regulation U or X.
8.15.3. INELIGIBLE SECURITIES. No portion of the proceeds of any Loans
is to be used, and no portion of any Letter of Credit is to be obtained,
for the purpose of (a) knowingly purchasing, or providing credit support
for the purchase of, Ineligible Securities from a Section 20 Subsidiary
during any period in which such Section 20 Subsidiary makes a market in
such Ineligible Securities, (b) knowingly purchasing, or providing credit
support for the purchase of, during the underwriting or placement period,
any Ineligible Securities being underwritten or privately placed by a
Section 20
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Subsidiary, or (c) making, or providing credit support for the
making of, payments of principal or interest on Ineligible Securities
underwritten or privately placed by a Section 20 Subsidiary and issued by
or for the benefit of the Borrower or any Subsidiary or other Affiliate of
the Borrower.
8.16. CHIEF EXECUTIVE OFFICES. The chief executive offices of the
Borrower and each Subsidiary of the Borrower are located at 6075 Poplar
Avenue, Suite 800, Memphis, Tennessee 38119.
8.17. DISCLOSURE. No representation or warranty made by any Guarantor or
the Borrower in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Agent or the Banks, by or
on behalf of any such Person in connection with any of the transactions
contemplated by any of the Loan Documents or in any of the Repurchase
Documents contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained therein
not misleading in light of the circumstances in which they are made. There
is no fact known to the Borrower which materially adversely affects, or which
would, in the reasonable judgment of the Borrower, materially adversely
affect in the reasonable foreseeable future the financial position, business,
operations or affairs of the Borrower.
8.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all reasonable
steps to investigate the past and present condition and usage of the Real
Estate and the operations conducted thereon and, based upon such reasonable
investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of the
Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those
arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which violation
individually or in the aggregate would have a material adverse effect on
the environment or the business, assets or financial condition of the
Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal,
state or local governmental authority, (i) that any one of them has been
identified by the United States of America Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any
hazardous substances as defined by 42 U.S.C. Section 9601(14), any
pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any
toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Borrower or any of its
Subsidiaries conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages
of any kind whatsoever in connection with the release of Hazardous
Substances;
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(c) except as set forth on SCHEDULE 8.18 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of
the Real Estate; (ii) in the course of any activities conducted by the
Borrower, its Subsidiaries or operators of its properties, no Hazardous
Substances have been generated or are being used on the Real Estate except
in accordance with applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or
from the properties of the Borrower or its Subsidiaries, which releases
would have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters
and facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental
Laws; and
(d) None of the Borrower and its Subsidiaries, any Mortgaged Property
or any of the other Real Estate is subject to any applicable environmental
law requiring the performance of Hazardous Substances site assessments, or
the removal or remediation of Hazardous Substances, or the giving of notice
to any governmental agency or the recording or delivery to other Persons of
an environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the recording of any Mortgage or to the effectiveness of any other
transactions contemplated hereby.
8.19. SUBSIDIARIES, ETC.
(a) SCHEDULE 8.19 hereto sets forth all of the Subsidiaries of the
Borrower and, except as set forth on such Schedule, the Borrower has no
Subsidiaries. Except as set forth on SCHEDULE 8.19 hereto, neither the
Borrower nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person. All Subsidiaries of the Borrower are
parties to the Guaranty.
(b) On and as of the Closing Date, except as permitted by Section
10.3(i) hereof, the Borrower does not own or hold of record and/or
beneficially (whether directly or indirectly) any shares of any class in
the capital of any other corporations or any legal and/or beneficial
interests in any partnership, business trust or joint venture or in any
other unincorporated trade or business enterprise. Except for its general
partnership interests in the Borrower, the General Partner does not own or
hold of record and/or beneficially (whether directly or indirectly) any
shares of any class in the capital of any corporations and no legal and/or
beneficial interests in any partnership, business trust or joint venture or
in any other unincorporated trade or business enterprise.
(c) On and as of the Closing Date and after giving effect to the
Repurchase, no Person has any partnership or other equity ownership
interest in the Borrower, or any right to acquire such interest, except for
the General Partner and PRI who collectively own and hold all of the
partnership interests in the Borrower.
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(d) On and as of the Closing Date, the General Partner owns no assets
and conducts no business, other than acting as general partner of, and
holding 1% general partnership interests in, the Borrower.
8.20. FISCAL YEAR. The Borrower has a fiscal year ending December 31 of
each year.
8.21. SOLVENCY. The Borrower and its Subsidiaries, taken as a whole
(both before and after giving effect to the Repurchase and the other
transactions contemplated by this Credit Agreement and the other Loan
Documents) (i) are solvent, (ii) have assets having a fair value in excess of
their liabilities, (iii) have assets having a fair value in excess of the
amount required to pay their liabilities on their debts as they become due
and matured, and (iv) have, and expect to continue to have, access to
adequate capital for the conduct of their business and the ability to pay
their debts as they mature. In computing the amount of contingent and
unliquidated liabilities at any time, such liabilities will be computed as
the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that is probable to become an absolute and
matured liability.
9. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligation to issue,
extend or renew any Letters of Credit:
9.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the fees
provided in the Fee Letter and all other fees and other amounts provided for
in this Credit Agreement and the other Loan Documents to which the Borrower
or any of its Subsidiaries is a party, all in accordance with the terms of
this Credit Agreement and such other Loan Documents.
9.2. MAINTENANCE OF OFFICE. The Borrower and each of its Subsidiaries
will maintain their chief executive offices at the location indicated in
Section 8.16, or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Agent, where notices,
presentations and demands to or upon any such Person in respect of the Loan
Documents to which such Person is a party may be given or made.
9.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts
and reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves.
9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety-five (95) days after the end of each fiscal year of the Borrower,
the consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such year, and the related consolidated and
consolidating statement of income and consolidated statement of cash flow
for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification by Arthur
Andersen LLP or by other independent certified public accountants of
nationally recognized standing, selected by the General Partner, together
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with a written statement from such accountants to the effect that they have
read a copy of this Credit Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default; PROVIDED
that such accountants shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than fifty
(50) days after the end of each of the fiscal quarters of the Borrower,
copies of the unaudited consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter, and the
related consolidated or consolidating statement of income and consolidated
statement of cash flow for the portion of the fiscal year then elapsed, all
in reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof (subject
to year-end adjustments);
(c) promptly upon request therefor by the Agent, copies of all
management letters of substance and other material reports of substance
which are submitted to the Borrower by its independent accountants in
connection with any annual or interim audit of the books of the Borrower or
its Subsidiaries made by such accountants;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the General Partner in
substantially the form of EXHIBIT C hereto and setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
Section 11 and (if applicable) reconciliations to reflect changes in
generally accepted accounting principles since the Balance Sheet Date as
well as calculations for the purpose for determining the Applicable Margin;
(e) as soon as practicable and in any event not later than five (5)
days after the filing or mailing thereof, copies of all material of a
financial nature filed with the Securities and Exchange Commission by the
Perkins Group; and;
(f) from time to time such other financial data and information as
the Agent or any Bank may reasonably request.
9.5. NOTICES.
9.5.1. DEFAULTS. The Borrower will, and will cause each of its
Subsidiaries to, promptly notify the Agent in writing of the occurrence of
any Default or Event of Default. If any Person shall give any notice or
take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other
note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, in each
case, in respect of Indebtedness in excess of $1,000,000, the Borrower
shall forthwith give written notice thereof to the Agent and each of the
Banks, describing the notice or action and the nature of the claimed
default.
9.5.2. ENVIRONMENTAL EVENTS. The Borrower will, and will cause each
of its Subsidiaries to, promptly give notice to the Agent (a) of any
violation of any Environmental Law that the Borrower or any of its
Subsidiaries reports in writing or is
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reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (b) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any federal, state or
local environmental agency or board, that has the potential to materially
affect the assets, liabilities, financial conditions or operations of the
Borrower and its Subsidiaries, taken as a whole.
9.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower will,
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the Collateral with a fair market value in excess of $100,000, or the
Agent's rights with respect to any such Collateral, are subject.
9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and
will cause each of its Subsidiaries to, give notice to the Agent in writing
within fifteen (15) days of becoming aware of any litigation or proceedings
threatened in writing or any pending litigation and proceedings affecting
the Borrower or any of its Subsidiaries or to which the Borrower or any of
its Subsidiaries is or becomes a party involving an uninsured claim against
the Borrower or any of its Subsidiaries that could reasonably be expected
to have a materially adverse effect on the Borrower and its Subsidiaries,
taken as a whole, and stating the nature and status of such litigation or
proceedings. The Borrower will, and will cause each of its Subsidiaries to,
give notice to the Agent, in writing, in form and detail satisfactory to
the Agent, within ten (10) days of any judgment not covered by insurance,
final or otherwise, against the Borrower or any of its Subsidiaries in an
amount in excess of $500,000.
9.6. EXISTENCE; MAINTENANCE OF PROPERTIES.
9.6.1. EXISTENCE. Each of the Borrower and its Subsidiaries will do or
cause to be done all things necessary to preserve and keep in full force
and effect its existence, rights and franchises and the corporate existence
and rights and franchises (as applicable), of its Subsidiaries, other than
in connection with mergers permitted under Section 10.5 hereof, and will
not, and will not cause or permit any of its Subsidiaries to, convert to a
limited liability company or limited liability partnership.
9.6.2. MAINTENANCE OF PROPERTIES. Each of the Borrower and its
Subsidiaries (a) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (b) will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) will, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now conducted by them and in related businesses; PROVIDED that
nothing in this Section 9.6 shall prevent the Borrower or any of its
Subsidiaries from discontinuing the operation and maintenance of any of its
properties or any of those of its Subsidiaries if such discontinuance is,
in the judgment of the Borrower, desirable in the conduct of its or their
business and that do not in the aggregate materially adversely affect the
business of the Borrower and its Subsidiaries on a consolidated basis.
9.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and
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business against such casualties and contingencies as shall be in accordance
with the general practices of businesses engaged in similar activities in
similar geographic areas and in amounts, containing such terms, in such forms
and for such periods as may be reasonable and prudent and in accordance with
the terms of the Security Documents.
9.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the
same shall become overdue, all taxes, assessments and other governmental
charges imposed upon it and its real properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims
for labor, materials, or supplies that if unpaid might by law become a lien
or charge upon any of its property; PROVIDED that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof
shall currently be contested in good faith by appropriate proceedings and if
the Borrower or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and PROVIDED FURTHER that the Borrower and
each Subsidiary of the Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
9.9.1. GENERAL. The Borrower shall permit the Banks, through the Agent
or any of the Agent's designated representatives, to visit and inspect any
of the properties of the Borrower or any of its Subsidiaries, to examine
the books of account of the Borrower and its Subsidiaries (and to make
copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times and intervals as the Agent or any Bank may reasonably request.
9.9.2. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default
shall have occurred, the Agent may, from time to time, in its reasonable
discretion for the purpose of assessing and ensuring the value of any
Mortgaged Property, obtain one or more environmental assessments or audits
of such Mortgaged Property prepared by a hydrogeologist, an independent
engineer or other qualified consultant or expert approved by the Agent to
evaluate or confirm (i) whether any Hazardous Materials are present in the
soil or water at such Mortgaged Property and (ii) whether the use and
operation of such Mortgaged Property complies with all Environmental Laws.
Environmental assessments may include without limitation detailed visual
inspections of such Mortgaged Property including any and all storage areas,
storage tanks, drains, dry wells and leaching areas, and the taking of soil
samples, surface water samples and ground water samples, as well as such
other investigations or analyses as the Agent deems appropriate. All such
environmental assessments shall be conducted and made at the expense of the
Borrower.
9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (b) the provisions
of its charter documents and by-laws, (c) all agreements and instruments by
which it or any of its properties may be bound and (d) all applicable
decrees, orders, and judgments. If any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower or
any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Subsidiary is a
party, the Borrower will, or (as the case may be) will cause such Subsidiary
to, immediately take or cause to be taken all reasonable steps within the
power of or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
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9.11. EMPLOYEE BENEFIT PLANS. The Borrower will, upon the request of the
Agent, (a) promptly upon filing the same with the Department of Labor or
Internal Revenue Service furnish to the Agent a copy of the most recent
actuarial statement required to be submitted under Section 103(d) of ERISA
and Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan and (b) promptly upon receipt or dispatch,
furnish to the Agent any notice, report or demand sent or received in respect
of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063,
4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under
Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
9.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
and the Letters of Credit for the purposes described in Section 8.15, and
none other.
9.13. ADDITIONAL MORTGAGED PROPERTY.
(a) At the request of the Agent at any time after the Closing Date, the
Borrower shall, as soon as practicable, and in any event not later than sixty
(60) days after such request, (i) take all steps that may be requested by the
Agent in order to grant to the Agent, for the benefit of the Banks and the
Agent, a first priority perfected leasehold mortgage on the leasehold
interests of the Borrower and its Subsidiaries in the Real Estate and
(ii) deliver to the Agent such supporting and additional documentation,
including, without limitation, corporate authority documentation, legal
opinions, and landlord consents as may be reasonably requested by the Agent
in connection with such leasehold mortgages.
(b) If, after the Closing Date, the Borrower or any of its Subsidiaries
acquires or leases for a term in excess of ten (10) years real estate used as
a restaurant facility, the Borrower shall, within 10 Business Days of such
acquisition or such lease, notify the Agent of such acquisition or such lease
and, if requested by the Agent, the Borrower shall, or shall cause such
Subsidiary to, forthwith, and in any event not later than sixty (60) days
after such request, deliver to the Agent a fully executed mortgage or deed of
trust over such real estate, in form and substance satisfactory to the Agent,
together with title insurance policies, evidences of insurances with the
Agent named as loss payee and additional insured, legal opinions and other
documents and certificates with respect to such real estate as was required
for Real Estate of the Borrower or such Subsidiary as of the Closing Date.
The Borrower further agrees that, following the taking of such actions with
respect to such real estate, the Agent shall have for the benefit of the
Banks and the Agent a valid and enforceable first priority mortgage or deed
of trust over such real estate, free and clear of all defects and
encumbrances except for Permitted Liens.
(c) The parties hereto agree that the Borrower shall not be required to
deliver to the Agent on the Closing Date mortgages or deeds of trust with
respect to the Real Estate located in Florida. The Borrower agrees that,
upon the request of the Agent, it shall forthwith, and in any event not later
than sixty (60) days after such request, deliver to the Agent a fully
executed mortgage or deed of trust over such real estate, in form and
substance satisfactory to the Agent, together with title insurance policies,
evidences of insurances with the Agent named as loss payee and additional
insured, legal opinions and other documents and certificates with respect to
such real estate in the same manner as was required for the Real Estate which
was the subject of a Mortgage granted in favor of the Agent on the Closing
Date; PROVIDED that the Agent and the Banks agree that the Agent shall not
request that the Borrower deliver such mortgages or deeds of trust until
either (i) the occurrence and continuance of a Default or Event of Default,
(ii) the Borrower and its Subsidiaries have sold or otherwise disposed of
Real Estate with a value such that the Agent, in its reasonable discretion,
believes that the amount of Collateral securing the Obligations has been
materially diminished or (iii) the Credit Agreement has been amended to
include $20,000,000 or more of term loans as a portion of the Obligations.
The Borrower further agrees that, following the taking of such actions with
respect to such real estate, the Agent shall have for the benefit of the
Banks and the Agent a valid and
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enforceable first priority mortgage or deed of trust over such real estate,
free and clear of all defects and encumbrances except for Permitted Liens.
9.14. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by
this Credit Agreement and the other Loan Documents, including, without
limitation, the syndication of the credit facilities evidenced hereby.
9.15. CONDUCT OF BUSINESS. The Borrower will, and will cause its
Subsidiaries to, continue to engage only in the business of operating
restaurants and in businesses and activities closely related thereto.
9.16. INTEREST RATE PROTECTION ARRANGEMENTS. The Borrower shall maintain
interest rate protection arrangements as shall be satisfactory in form and
substance to the Agent (including, without limitation, with respect to
notional amount and tenor thereof and interest rates with respect thereto).
9.17. CASH MANAGEMENT. At all times after the occurrence and during the
continuance of an Event of Default, and from time to time at such times as
may be requested by the Agent, the Borrower will, and will cause each of its
Subsidiaries to, together with the employees, agents and other Persons acting
on behalf of the Borrower or such Subsidiary, cause all cash receipts and all
payments constituting proceeds of accounts receivable or other Collateral to
be paid, in the form received, with any appropriate endorsements, into an
account maintained with the Agent or such other accounts maintained with a
Bank or another bank as shall be subject to agency agreements in form and
substance satisfactory to the Agent.
10. CERTAIN NEGATIVE COVENANTS.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligations to issue,
extend or renew any Letters of Credit:
10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness
other than, so long as no Default or Event of Default shall then exist or
would result therefrom:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) Unsecured current liabilities of the Borrower or such Subsidiary
incurred in the ordinary course of business not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an
open account basis customarily extended and in fact extended in connection
with normal purchases of goods and services; PROVIDED, that each account
payable shall be paid or discharged in accordance with the Borrower's past
customary practice within the appropriate time period after the same shall
have become due and payable, unless the same shall currently be contested
by the Borrower or such Subsidiary in good faith by appropriate proceedings
or other appropriate action, and the Borrower or such Subsidiary, as the
case may be, shall have set aside such reserves, if any, with respect
thereto as are required by generally accepted accounting principles and
deemed adequate by the Borrower;
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(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 9.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower or
such Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) Other unsecured Indebtedness of the Borrower, provided that (i)
after the incurrence of such Indebtedness and after giving effect thereto,
no Default or Event of Default shall then exist and (ii) the aggregate
outstanding principal amount of all such Indebtedness shall not, at any
time, exceed $10,000,000;
(f) Indebtedness of the Borrower and its Subsidiaries in respect of
rental obligations (net of subleases) under leases (other than Capitalized
Leases) incurred in the ordinary course of business, provided that the
aggregate amount of such obligations required to be paid in any fiscal year
shall not exceed $15,000,000;
(g) Indebtedness of the Borrower in respect of Capitalized Leases
(net of subleases), provided that the aggregate Outstanding amount of all
future principal payments owing under (i) Capitalized Leases existing on
the date hereof and (ii) additional Capitalized Leases entered into
pursuant to this subsection (g) after the date hereof (as reflected in the
notes to the Borrower's audited financial statements in accordance with
generally accepted accounting principles) shall not at any time exceed
$20,000,000;
(h) Indebtedness existing on the Closing Date and listed and
described on SCHEDULE 10.1 hereto;
(i) Indebtedness consisting of the Senior Notes and the Additional
Senior Notes;
(j) purchase money Indebtedness incurred in connection with the
acquisition after the date hereof of any real or personal property by the
Borrower or any of its Subsidiaries; PROVIDED that (i) the amount of such
Indebtedness does not exceed the lesser of the fair market value or the
purchase price of the property so acquired, (ii) any lien securing such
Indebtedness covers only the property so acquired, and (iii) the aggregate
principal amount of such Indebtedness shall not, at any time, exceed
$10,000,000;
(k) Indebtedness in respect of interest rate protection arrangements
and currency exchange protection arrangements; PROVIDED that the aggregate
amount of such Indebtedness shall not, at any time, exceed $5,000,000;
(l) Indebtedness (i) of JA Joint Venture LLC owing to the Borrower;
PROVIDED that the Investment corresponding to such Indebtedness is
permitted pursuant to Section 10.3(l), (ii) of any non-Guarantor Subsidiary
of the Borrower owing to the Borrower; PROVIDED that the Investment
corresponding to such Indebtedness is permitted pursuant to Section
10.3(m)(i), and (iii) of any Subsidiary which is a Guarantor owing to the
Borrower or another Subsidiary which is a Guarantor; PROVIDED that the
Investment corresponding to such Indebtedness is permitted pursuant to
Section 10.3(m)(ii);
(m) Indebtedness of any Person acquired by the Borrower in a
Permitted Acquisition, PROVIDED that (i) after such Permitted Acquisition
and after giving effect
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thereto on a Pro Forma Basis, no Default or Event of Default shall then
exist, (ii) such Indebtedness was in existence prior to such Permitted
Acquisition and was not incurred in contemplation thereof, and
(iii) the aggregate amount of all such Indebtedness shall not, at any
time, exceed $10,000,000;
(n) Indebtedness of the Borrower and its Subsidiaries issued to
refinance or replace Indebtedness otherwise permitted under clauses (h),
(j), or (m) of this Section 10.1, PROVIDED that (i) the aggregate amount of
such Indebtedness does not exceed the principal amount of the Indebtedness
so refinanced or replaced, (ii) such Indebtedness has a tenor no shorter
than the Indebtedness so refinanced or replaced, (iii) such Indebtedness is
on terms and conditions (including, without limitation, terms relating to
interest rate, defaults, and mandatory prepayments) no more onerous to the
Borrower or such Subsidiary than the Indebtedness so refinanced or
replaced, and (iv) if secured, such Indebtedness is not secured by liens on
any assets of the Borrower or such Subsidiary which were not previously
subject to liens securing the Indebtedness so refinanced or replaced; and
(o) prior to June 30, 2001 and from and after the merger of the
Borrower and TRC, contingent liabilities arising from the indemnity
contained in that certain tax disaffiliation agreement between TRC and
Friendly Ice Cream Corporation not to exceed in the aggregate $10,500,000.
10.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, (i) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property
or assets of any character whether now owned or hereafter acquired, or upon
the income or profits therefrom; (ii) transfer any of such property or assets
or the income or profits therefrom for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have
an option to acquire, any property or assets upon conditional sale or other
title retention or purchase money security agreement, device or arrangement;
(iv) suffer to exist for a period of more than thirty (30) days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise,
be given any priority whatsoever over its general creditors; or (v) sell,
assign, pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse; PROVIDED
that the Borrower and any Subsidiary of the Borrower may create or incur or
suffer to be created or incurred or to exist:
(a) liens to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties to secure
claims for labor, material or supplies in respect of obligations not
overdue;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(c) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 10.1(d);
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(e) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the
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title thereto, landlord's or lessor's liens under leases to which the
Borrower or a Subsidiary of the Borrower is a party, and other minor liens
or encumbrances none of which in the opinion of the Borrower interferes
materially with the use of the property affected in the ordinary conduct
of the business of the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on the
business of the Borrower individually or of the Borrower and its
Subsidiaries on a consolidated basis;
(f) liens existing on the date hereof and listed on SCHEDULE 10.2
hereto;
(g) liens and encumbrances on each Mortgaged Property as and to the
extent permitted by the Mortgage applicable thereto;
(h) liens securing Indebtedness permitted pursuant to
Sections 10.1(g), (j), (m) or (n); and
(i) liens in favor of the Agent for the benefit of the Banks securing
the Obligations.
10.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
Outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States of America banks having total assets in
excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by Standard and
Poor's;
(d) repurchase agreements secured by any one or more of the
Investments permitted by paragraphs (a), (b) or (c) above;
(e) shares of any so-called "money market fund" provided that such
fund is registered under the Investment Company Act of 1940, has net assets
of at least $100,000,000 and has an investment portfolio with an average
maturity of 365 days or less;
(f) existing Investments described on SCHEDULE 10.3 hereto;
(g) Investments made in the ordinary course of business in connection
with the Borrower's (i) conversion to Investments of franchisee
obligations, (ii) making of loans and advances to franchisees; PROVIDED
that the aggregate amount of all such Investments shall not, at any time,
exceed $2,500,000, and (iii) acceptance of notes from franchisees in
payment of goods and services provided by the Borrower to such franchisees;
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(h) the acquisition of one or more notes, leases or other evidences
of indebtedness of franchisees or guaranties of franchisee obligations in
accordance with franchisee leasing or loan programs not to exceed in the
aggregate $10,000,000;
(i) up to ten (10) shares (at the time of acquisition) of any
publicly traded stock of any competitor of the Borrower with an original
purchase price not to exceed $5,000 in the aggregate for all of such
shares;
(j) the acceptance of notes or other evidences of obligations to pay
the deferred purchase price of assets sold by the Borrower as otherwise
permitted under this Agreement, PROVIDED, that such assets have been sold
for fair market value in the reasonable judgment of the Borrower, in arms
length transactions, and such notes or evidences of indebtedness are
secured by a first priority lien and security interest in the assets sold;
(k) Investments in Permitted Acquisitions;
(l) Investments in JA Joint Venture LLC; PROVIDED that (i) the
aggregate amount of such Investments made during any one fiscal year shall
not exceed $5,000,000 and (ii) the aggregate amount of all such Investments
shall not, at any time, exceed $10,000,000;
(m) Investments (i) in Subsidiaries which are not Guarantors;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $2,500,000 and (ii) in Subsidiaries which are Guarantors;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $5,000,000; and
(n) Investments by the Borrower consisting of loans made to TRC;
PROVIDED that the aggregate amount of such Investments shall not, at any
time, exceed $1,000,000;
PROVIDED that, with respect to each Investment permitted pursuant to
Sections 10.3(g), (h), (j), (m) or (n), the Borrower shall have taken, or shall
have caused such Subsidiary to take, all steps necessary or reasonably desirable
in order to grant to the Agent, for the benefit of the Banks and the Agent, a
first priority perfected security interest in such Investment.
10.4. DISTRIBUTIONS. The Borrower will not and will not permit any of
its Subsidiaries to make any Distributions, except that (i) if no Default or
Event of Default exists under this Credit Agreement, and none would result
from the making of any such Distributions, Subsidiaries of the Borrower may
make Distributions to the Borrower and PRO RATA to each other holder of such
Subsidiary's Equity Interests, if any, (ii) the Borrower may make
Distributions to each holder of its Equity Interests in an aggregate amount
in any one fiscal year not to exceed an amount sufficient to pay such
holder's estimated federal, state and local income taxes on such holder's
respective share of the taxable income of the Borrower for such fiscal year
and for any prior fiscal year that is the subject of an adjustment as a
result of an audit by tax authorities, and (iii) if no Default or Event of
Default exists under this Credit Agreement, and none would result from the
making of any such Distribution, and so long as the Leverage Ratio,
determined on a Pro Forma Basis as of the end of the most recently ended
fiscal quarter of the Borrower (giving effect to any borrowings made to fund
such Distribution), is less than or equal to 3.00:1, the Borrower may make
Distributions in an aggregate amount for all such Distributions after the
Closing Date not to exceed $5,000,000. The Borrower shall not permit any of
its Subsidiaries to enter into or become bound by any agreement or instrument
which limits or restricts the ability of such Subsidiary to make
Distributions to the Borrower.
10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. None of the
Guarantors or the Borrower will at any time, and the Borrower will not cause
or permit any of its Subsidiaries at any time to:
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(a) become a party to any merger or consolidation except, so long as
no Default or Event of Default shall exist or shall occur immediately after
such merger or consolidation and after giving effect thereto, (i) the
merger or consolidation of a Subsidiary of the Borrower with and into the
Borrower or a Subsidiary of the Borrower which is a Guarantor, with the
Borrower or such Guarantor to be the survivor of such merger or
consolidation, (ii) the merger or consolidation of a non-Guarantor
Subsidiary with and into another non-Guarantor Subsidiary, (iii) the merger
or consolidation of TRC, PRI or PMC with and into each other, (iv) the
merger or consolidation of TRC, PRI, PMC with and into the Borrower, with
the Borrower to be the survivor of such merger or consolidation; PROVIDED
THAT prior to such merger or consolidation, the Borrower has delivered to
the Agent Compliance Certificates (such Compliance Certificates to be
promptly distributed to the Banks by the Agent) demonstrating, both
immediately prior to and immediately after such merger or consolidation,
compliance on a PRO FORMA Basis with the covenants set forth in Section 11
of this Credit Agreement on a Pro Forma Basis (treating such merger or
consolidation as a "Permitted Acquisition" for purposes of the definition
of Pro Forma Basis), or (v) the merger of the Borrower with and into TRC,
PRI or PMC, with TRC, PRI or PMC to be the survivor of such merger or
consolidation; PROVIDED that (A) the survivor is a corporation duly
organized and validly existing under the laws of a state of the United
States of America with full corporate power to perform and observe the
obligations of the Borrower under the Loan Documents; (B) the charter
documents and capital structure of the survivor, and all documentation
relating to such merger or consolidation, are provided to the Banks and the
Agent not less than thirty (30) days prior to the effective date of such
merger or consolidation and are reasonably satisfactory to the Banks and
the Agent; (C) such survivor shall enter into such documents and shall
deliver such instruments, reasonably satisfactory in form and substance to
the Banks and the Agent, expressly assuming the obligations of the Borrower
under the Loan Documents, including, without limitation, such documents and
instruments as may be requested by the Agent in order to grant to the
Agent, for the benefit of the Banks and the Agent, a first priority
perfected security interest in all of such survivor's assets; (D) such
survivor shall deliver to the Banks and the Agent legal opinions, from
counsel reasonably satisfactory to the Banks and the Agent and in form and
substance reasonably satisfactory to the Banks and the Agent, as to the
assumption of the obligations of the Borrower under the Loan Documents
after such merger or consolidation and the grant of such security
interests; and (E) prior to such merger or consolidation, the Borrower has
delivered to the Agent Compliance Certificates (such Compliance
Certificates to be promptly distributed to the Banks by the Agent)
demonstrating, both immediately prior to and immediately after such merger
or consolidation, compliance on a PRO FORMA Basis with the covenants set
forth in Section 11 of this Credit Agreement on a Pro Forma Basis (treating
such merger or consolidation as a "Permitted Acquisition" for purposes of
the definition of Pro Forma Basis);
(b) become a party to or agree to or effect the disposition of any
substantial assets, other than sales of inventory in the ordinary course of
business, consistent with past practices; PROVIDED, HOWEVER, that if there
is no Default or Event of Default in existence at the time and none would
be created as a result of such action, such Persons may dispose of
additional assets in the ordinary course of business with an aggregate book
value not to exceed, on a cumulative basis from the Closing Date, the
greater of (i) ten percent (10%) of the sum of (A) net book value of the
Borrower's assets as of December 31, 1997 PLUS (B) the cost of all assets
acquired by the Borrower and its Subsidiaries after the Closing Date or
(ii) $20,000,000; or
(c) become a party to any acquisition other than the Repurchase and
the acquisition by the Borrower or a Subsidiary of the Borrower which is a
Guarantor (whether of stock or of substantially all of the assets of a
business or business division as a going concern or by means of a merger or
consolidation) of a 100% interest in any other
<PAGE>
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Person (a "Permitted Acquisition") PROVIDED that (i) such other Person is
a Perkins Group restaurant franchisee or operates a similar business to
the Borrower, (ii) no Default or Event of Default has occurred and is
continuing or would exist after giving effect thereto, (iii) if the
Borrower or the acquiring Subsidiary merges with such other Person, the
Borrower or such Subsidiary, as the case may be, is the surviving party,
(iv) if such Person becomes a Subsidiary of the Borrower or any of its
Subsidiaries, it shall deliver a guaranty as provided in Section 29.9
hereof, and (v) with respect to acquisitions that exceed $5,000,000, the
Borrower has delivered to the Agent Compliance Certificates (such
Compliance Certificates to be promptly distributed to the Banks by the
Agent) demonstrating, both immediately prior to and immediately after such
acquisition, compliance on a PRO FORMA Basis with the covenants set forth
in Section 11 of this Credit Agreement and (vi) the aggregate amount
expended by the Borrower and its Subsidiaries for all Permitted
Acquisitions during any fiscal year shall not exceed the sum of (A) the
amount of New Site Capital Expenditures permitted to be made by the
Borrower and its Subsidiaries during such fiscal year pursuant to
Section 11.5 (which amount shall be considered New Site Capital
Expenditures for purposes of the covenants set forth herein) PLUS (B)
$10,000,000.
10.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property
or lease other property that the Borrower or any Subsidiary of the Borrower
intends to use for substantially the same purpose as the property being sold
or transferred, unless such transaction would be a permitted disposition of
assets under Section 10.5 and the obligations of the Borrower or such
Subsidiary as lessee would constitute permitted Indebtedness under Section
10.1.
10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and
will not permit any of its Subsidiaries to, (a) use any of the Real Estate or
any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the
Real Estate, (d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (e) otherwise conduct any
activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law.
10.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to Section 302(f) or Section
4068 of ERISA; or
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(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, by
more than $250,000.
10.9. CHANGE IN FISCAL YEAR. The Borrower shall not effect or permit any
change in its fiscal year without the prior written consent of the Agent
(such consent not to be unreasonably withheld); PROVIDED that the Borrower
may change its fiscal year to one consisting of thirteen 28-day fiscal
accounting periods ending in December or January.
10.10. CHANGES IN TERMS OF PARTNERSHIP DOCUMENTS. The Borrower shall not
effect or permit any change in or amendment to the Partnership Documents
which would materially adversely affect the interests of the Agent and the
Banks under the Loan Documents.
10.11. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any transaction with any
Affiliate (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
Affiliate or, to the knowledge of the Borrower, any corporation, partnership,
trust or other entity in which any such Affiliate has a substantial interest
or is an officer, director, trustee or partner, on terms more favorable to
such Person than would have been obtainable on an arm's-length basis in the
ordinary course of business.
10.12. PREPAYMENT OF OTHER INDEBTEDNESS. The Borrower shall not, without
the prior written consent of the Agent, optionally prepay, redeem, repurchase
or retire any Indebtedness (other than the Obligations) prior to the
originally scheduled maturity thereof.
10.13. RESTRICTIONS ON NEGATIVE PLEDGES. The Borrower will not, and will
not permit any of its Subsidiaries to, become bound by any agreement (other
than this Credit Agreement, the other Loan Documents and the Senior
Indenture) which limits or restricts the ability of such Person to grant
liens and security interests on its property.
10.14. CONCERNING PFC.
The Borrower shall not permit PFC to have any material assets or conduct
any material operations.
11. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is Outstanding or any Bank
has any obligation to make any Loans or BKB has any obligation to issue,
extend or renew any Letters of Credit:
11.1. LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio,
determined at the end of each fiscal quarter of the Borrower ending during a
Period set forth in the table below, to be greater than the Ratio set forth
opposite such Period in such table:
PERIOD RATIO
Closing Date - 6/29/98 4.75:1
6/30/98 - 12/30/98 4.50:1
12/31/98 - 12/30/99 4.25:1
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12/31/99 - 12/30/00 3.75:1
12/31/00 - 12/30/01 3.25:1
thereafter 3.00:1
11.2. NET WORTH. The Borrower will not permit Consolidated Net Worth, at
any time, to be less than the sum of (a) the remainder of (i) the greater of
(A) actual Consolidated Net Worth as at December 31, 1997 and (B) $25,561,000
MINUS (ii) $5,000,000, PLUS (b) fifty percent (50%) of positive Consolidated
Net Income after Tax Distributions for each fiscal year of the Borrower
ending after December 31, 1997, PLUS (c) one hundred percent (100%) of the
Net Cash Proceeds received by the Borrower and its Subsidiaries from the
issuance of equity securities after the Closing Date.
11.3. CASH FLOW RATIO. The Borrower will not permit the Cash Flow Ratio,
determined at the end of each fiscal quarter of the Borrower, to be less than
1.25:1.
11.4. INTEREST COVERAGE RATIO. The Borrower will not permit the Interest
Coverage Ratio, determined at the end of each fiscal quarter of the Borrower
ending during a Period listed in the table below, to be less than the amount
set forth opposite such Period in such table:
PERIOD RATIO
Closing Date - 12/31/97 2.25:1
1/1/98 - 12/30/98 2.50:1
12/31/98 - 12/30/99 2.60:1
12/31/99 - 12/30/00 3.00:1
12/31/00 - 12/30/01 3.25:1
thereafter 3.50:1
11.5. CAPITAL EXPENDITURES. The Borrower will not make, and will not
permit any of its Subsidiaries to make, Maintenance Capital Expenditures,
Improvement Capital Expenditures, New Site Capital Expenditures, or
Remodeling Capital Expenditures in any fiscal year set forth in the table
below, that exceed, for all such Persons, the aggregate amount set forth
opposite such fiscal year in the columns titled, respectively, "Maintenance
Capital Expenditures", "Improvement Capital Expenditures", "New Site Capital
Expenditures", and "Remodeling Capital Expenditures":
MAINTENANCE REMODELING IMPROVEMENT NEW SITE
CAPITAL CAPITAL CAPITAL CAPITAL
FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES EXPENDITURES
1997 $4,300,000 $4,600,000 $5,470,000 $6,200,000
1998 $4,500,000 $4,700,000 $2,950,000 $10,400,000
1999 $4,800,000 $4,800,000 $2,200,000 $12,400,000
2000 $4,900,000 $5,000,000 $2,450,000 $14,600,000
2001 $5,200,000 $5,100,000 $2,290,000 $17,000,000
2002 $5,500,000 $5,300,000 $2,280,000 $17,500,000
PROVIDED, however, that (i) if, during any fiscal year, the amount of
Maintenance Capital Expenditures, Improvement Capital Expenditures, New Site
Capital Expenditures, or Remodeling Capital Expenditures permitted for such
fiscal year is not so utilized, such unutilized amount of Maintenance Capital
Expenditures, Improvement Capital Expenditures, New Site Capital Expenditures
or, as the case may be, Remodeling Capital Expenditures may be used in the
next succeeding fiscal year but not in any subsequent fiscal year as,
respectively,
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Maintenance Capital Expenditures, Improvement Capital Expenditures, New Site
Capital Expenditures or Remodeling Capital Expenditures (it being understood
that the amount of Maintenance Capital Expenditures, Improvement Capital
Expenditures, New Site Capital Expenditures and Remodeling Capital
Expenditures made during any fiscal year will be applied first to the limit
of such Maintenance Capital Expenditures, Improvement Capital Expenditures,
New Site Capital Expenditures, or Remodeling Capital Expenditures permitted
for such year and second to any Maintenance Capital Expenditures, Improvement
Capital Expenditures, New Site Capital Expenditures or Remodeling Capital
Expenditures carried over from a preceding fiscal year) and (ii) if, during
any fiscal year, the amount of Maintenance Capital Expenditures and/or
Remodeling Capital Expenditures permitted for such fiscal year is not so
utilized, such unutilized amount of Maintenance Capital Expenditures and/or
Remodeling Capital Expenditures may be used in such fiscal year as
Maintenance Capital Expenditures, Remodeling Capital Expenditures,
Improvement Capital Expenditures or New Site Capital Expenditures. New Site
Capital Expenditure limits contained in this Section 11.5 shall not further
limit the amount the Borrower and its Subsidiaries may expend on Permitted
Acquisitions otherwise permitted under Section 10.5(c).
12. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Loans and of BKB to
issue any initial Letters of Credit shall be subject to the satisfaction of
the following conditions precedent on or before December 31, 1997:
12.1. LOAN DOCUMENTS. Each of the Loan Documents, the Repurchase
Documents and the Merger Agreement shall have been duly executed and
delivered by the respective parties thereto, shall be in full force and
effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from each of the Perkins Group a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing
Date, of each of (a) its charter or other incorporation or partnership
documents as in effect on such date of certification, and (b) its by-laws or
partnership agreement as in effect on such date.
12.3. CORPORATE AND PARTNERSHIP ACTION. All corporate and partnership
action necessary for the valid execution, delivery and performance by each
member of the Perkins Group of this Credit Agreement and the other Loan
Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Banks shall have
been provided to each of the Banks.
12.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
each member of the Perkins Group an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of such Person, and giving
the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of each member of the
Perkins Group, each of the Loan Documents to which such member of the Perkins
Group is or is to become a party; (b) in the case of the Borrower, to make
Revolving Credit Loan Requests and Conversion Requests and to apply for
Letters of Credit; and (c) to give notices and to take other action on its
behalf under the Loan Documents.
12.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest
in and lien upon the Collateral. All filings, recordings, deliveries of
instruments and other actions necessary or desirable in the opinion of the
Agent to protect and preserve such security interests shall have been duly
effected. The Agent shall have received evidence thereof in form and
substance satisfactory to the Agent.
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12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall
have received from each of the Borrower and its Subsidiaries a completed and
fully executed Perfection Certificate (as such term is defined in the
Security Agreements) and the results of UCC searches with respect to the
Collateral, indicating no liens other than Permitted Liens and otherwise in
form and substance satisfactory to the Agent.
12.7. TAXES. The Agent shall have received evidence of payment of real
estate taxes and municipal charges on all Real Estate not delinquent on or
before the Closing Date.
12.8. TITLE INSURANCE. The Agent shall have received a Title Policy
covering each Mortgaged Property (or commitments to issue such policies, with
all conditions to issuance of the Title Policy deleted by an authorized agent
of the Title Insurance Company) together with proof of payment of all fees
and premiums for such policies, from the Title Insurance Company and in
amounts satisfactory to the Agent, insuring the interest of the Agent and
each of the Banks as mortgagee under the Mortgages.
12.9. LANDLORD CONSENTS. The Borrower and its Subsidiaries shall have
delivered to the Agent all consents required for the Agent to receive, as
part of the Security Documents, a collateral assignment of each material
leasehold of personal property, and a mortgage of each material leasehold of
real property, together in each case with such estoppel certificates as the
Agent may request.
12.10. HAZARDOUS WASTE ASSESSMENTS. The Agent shall have received
hazardous waste site assessments from environmental engineers and in form and
substance satisfactory to the Agent, covering each Mortgaged Property and all
other real property in respect of which the Borrower or any of its
Subsidiaries may have material liability, whether contingent or otherwise,
for dumping or disposal of Hazardous Substances.
12.11. CERTIFICATES OF INSURANCE. The Agent shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance
with the provisions of the Security Agreements and (ii) certified copies of
all policies evidencing such insurance (or certificates therefore signed by
the insurer or an agent authorized to bind the insurer); provided that the
requirements of this Section 12.11(ii) may be satisfied by the delivery of
such certified copies on or before January 31, 1998.
12.12. SOLVENCY OPINION. If requested by the Agent, each of the Banks
shall have received an opinion of Valuation Research Inc., or such other firm
as shall be reasonably satisfactory to the Agent, dated as of the Closing
Date, as to the solvency of the Borrower and its Subsidiaries following the
consummation of the transactions contemplated herein and in form and
substance satisfactory to the Banks.
12.13. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinions addressed to the Banks and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the Banks
and the Agent, from (i) Donald F. Wiseman, Esq., counsel to the Borrower and
its Subsidiaries, (ii) Mayer, Brown & Platt, special counsel to the Borrower
and its Subsidiaries, (iii) Davis, Graham & Stubbs LLP, special Colorado
counsel to the Agent, (iv) Dorsey & Whitney LLP, special Minnesota counsel to
the Agent, (v) Cline, Williams, Wright, Johnson & Oldfather, special Nebraska
counsel to the Agent, (vi) Quarles & Brady, special Wisconsin counsel to the
Agent, (vii) Lord, Bissell & Brook, special Illinois counsel to the Agent,
(viii) Stinson, Mag & Fizzell, P.C., special Missouri counsel to the Agent,
(ix) Stinson, Mag & Fizzell, P.C., special Kansas counsel to the Agent, and
(x) Dykema Gossett, special Michigan counsel to the Agent.
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12.14. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
Agent, as appropriate, all fees due hereunder.
12.15. EXISTING INDEBTEDNESS. The Agent shall have received a payoff
letter in a form satisfactory to the Agent with respect to the Existing
Credit Agreement and evidence of the repayment of all Indebtedness of the
Borrower and its Subsidiaries (other than Indebtedness permitted under
Section 10.1 hereof).
12.16. CAPITAL STRUCTURE. The Agent shall be satisfied with the capital
structure of the Borrower (including, without limitation, senior unsecured or
subordinated Indebtedness of the Borrower).
12.17. REPURCHASE; MERGER, ETC. The Repurchase shall have been
consummated in accordance with the Preliminary Offering Memorandum relating
to the Senior Notes, dated December 3, 1997, and otherwise on terms and
conditions satisfactory to the Agent, for a purchase price not to exceed $14
per partnership unit of the Borrower and $76,500,000 in the aggregate. The
total transaction costs and expenses associated with the Repurchase and the
other transactions contemplated hereby (including, without limitation, tender
offer expenses and expenses relating to redeeming existing indebtedness and
issuing new indebtedness) shall not exceed an amount approved by the Agent.
The Merger shall have been consummated in accordance with the terms of the
Merger Agreement. Perkins Restaurants Operating Company, L.P. shall have
been merged with and into the Borrower, with the Borrower the surviving
partnership of such merger, and the Agent shall have received evidence
thereof in form and substance satisfactory to it.
12.18. NO MATERIAL ADVERSE CHANGE. The Agent shall be satisfied that
there shall have occurred no material adverse change in the business,
operations, assets, properties, condition income or prospects of the Borrower
or its Subsidiaries since the Balance Sheet Date or the ability of any Person
to consummate the Repurchase. The parties hereto acknowledge that the
failure of Mr. Donald N. Smith to be the chairman of the board of directors
of PMC on the Closing Date shall constitute such a material adverse change.
The Agent shall be satisfied that the financial statements delivered to it
fairly present the business and financial condition of the Guarantors, the
Borrower and its Subsidiaries.
12.19. BALANCE SHEETS. The Borrower shall have delivered to the Agent,
in each case, in form and substance satisfactory to the Agent, (a) the
consolidated balance sheet of the Borrower and its Subsidiaries, dated as of
September 30, 1997, and (b) the PRO FORMA consolidated closing balance sheet
of the Borrower and its Subsidiaries, based on the consolidated balance sheet
of the Borrower and its Subsidiaries dated as of September 30, 1997 and
giving effect to the Repurchase and the financing contemplated hereby, dated
as of the Closing Date; PROVIDED, that the requirements of this Section
12.19(b) may be satisfied by the delivery of such balance sheet on or before
January 31, 1998.
12.20. NO LITIGATION. No litigation, inquiry, injunction or restraining
order shall be pending, entered or threatened that, in the reasonable opinion
of the Agent, could reasonably be expected to have a material adverse effect
on (i) the transactions contemplated hereby or the Repurchase, (ii) the
business, assets, liabilities (actual or contingent) operations, condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, (iii) the ability of the Borrower and its Subsidiaries to perform
their obligations under the Loan Documents, (iv) the rights and remedies of
the Agent and the Banks under the Loan Documents, or (v) the perfection or
priority of any security interests granted to the Agent under the Loan
Documents.
12.21. CONSENTS AND APPROVALS. All governmental and third-party
approvals (including landlords' and other consents) necessary or advisable in
connection with the Repurchase, this Credit Agreement and the continuing
operations of the Borrower and its
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Subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent
or otherwise impose materially adverse conditions on the Borrower and its
Subsidiaries or the Repurchase.
12.22. OTHER DOCUMENTATION. All other documentation, including any tax
sharing agreements or other financing arrangements of the Borrower and its
Subsidiaries, shall be reasonably satisfactory in form and substance to the
Agent.
12.23. COMMERCIAL FINANCE EXAMINATION. The Agent shall have received and
be satisfied with the results of a commercial finance examination with
respect to the Borrower and its Subsidiaries (including, without limitation)
the Agent's environmental review of the Mortgaged Property and such
environmental consultant reports as shall be desired by the Agent.
12.24. COLLATERAL VALUATION. The Agent shall have received and be
satisfied with appraisals with respect to the Collateral including, without
limitation, third-party market value appraisals with respect to the Mortgaged
Property.
13. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, and of BKB to issue,
extend or renew any Letter of Credit, in each case whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties made by or on behalf of each member of this
Perkins Group contained in this Credit Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with
this Credit Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Letter of Credit, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank would make it illegal for such Bank to make such Loan or
to participate in the issuance, extension or renewal of such Letter of Credit
or in the reasonable opinion of the Agent would make it illegal for the Agent
to issue, extend or renew such Letter of Credit.
13.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents
and all other documents incident thereto shall be satisfactory in substance
and in form to the Banks and to the Agent and the Agent's Special Counsel,
and the Banks, the Agent and such counsel shall have received all information
and such counterpart originals or certified or other copies of such documents
as the Agent may reasonably request.
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14. EVENTS OF DEFAULT; ACCELERATION; ETC.
14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both
is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans, the
commitment fee, any Letter of Credit Fee, the Agent's fee, or other sums
due hereunder or under any of the other Loan Documents, when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in Sections 9.1, 9.4, 9.6, 9.12, 9.14, 10.1 through 10.6, 10.9
through 10.13, 11 and 29 hereof;
(d) the Borrower shall fail to perform any term, covenant or
agreement contained herein (other than those specified in subsections (a),
(b) and (c), above) and such failure shall continue for 30 days;
(e) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this Section 14.1) for
fifteen (15) days after written notice of such failure has been given to
the Borrower by the Agent;
(f) any representation or warranty of the Borrower in this Credit
Agreement or any of the other Loan Documents or in any other document or
instrument delivered pursuant to or in connection with this Credit
Agreement shall prove to have been false in any material respect upon the
date when made or deemed to have been made or repeated;
(g) any of the Borrower, its Subsidiaries, or the General Partner
shall fail to pay at maturity, or within any applicable period of grace,
any obligation for borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount greater than $500,000, or fail to
observe or perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing borrowed money
or credit received or in respect of any Capitalized Leases in an aggregate
amount greater than $500,000 for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof;
(h) any of the Borrower, its Subsidiaries, or the General Partner
shall make an assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of such Person(s) or of any
substantial part of the assets of such Person's or shall commence any case
or other proceeding relating to under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in effect, or shall
take any action to authorize or in furtherance of any of the foregoing, or
if any such petition or application shall be filed or any such case or
other proceeding shall be commenced against such Person(s) and such
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Person(s) shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within sixty (60) days following the filing thereof;
(i) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower, or any of
its Subsidiaries, or the General Partner bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of such Person(s) in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(j) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower, any of its Subsidiaries, or the General
Partner that, with other outstanding final judgments, undischarged, against
such Person(s) exceeds in the aggregate $1,000,000;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in the Collateral shall cease to be perfected or shall cease to have the
priority contemplated by the Security Documents, in each case otherwise
than in accordance with the terms thereof or with the prior written consent
of the Banks, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of the Perkins Group party thereto or any of
their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Banks shall have determined in
their reasonable discretion that such event reasonably could be expected to
result in liability of the Borrower or any of its Subsidiaries to the PBGC
or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000
and such event in the circumstances occurring would be reasonably likely to
constitute grounds for the termination of such Guaranteed Pension Plan by
the PBGC or for the appointment by the appropriate United States of America
District Court of a trustee to administer such Guaranteed Pension Plan; or
a trustee shall have been appointed by such District Court to administer
such Plan; or the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(m) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty
(30) days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation or other casualty, which in
any such case causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment or revenue producing activities at any
facility or facilities of the Borrower or any of its Subsidiaries if such
event or circumstance would have a material adverse effect on the business,
assets or condition (financial or otherwise) of the Borrower or such
Subsidiary;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a
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material adverse effect on the business or financial condition of the
Borrower or such Subsidiary;
(p) any of the Perkins Group shall be indicted for a state or federal
crime, or any civil or criminal action shall otherwise have been brought or
threatened against the Borrower or any of its Subsidiaries, a punishment
for which in any such case could include the forfeiture of any assets of
the Borrower or such Subsidiary having a fair market value in excess of
$250,000;
(q) a "Change of Control" under, and as defined in the Senior
Indenture shall have occurred; or
(r) if the Borrower shall, at any time, own or control less than one
hundred percent (100%) of the equity or ownership interests of each of its
Subsidiaries which is a Guarantor;
then, and in any such event, so long as the same may be continuing, (x) the
Agent may, and upon the request of the Majority Banks shall, by notice in
writing to the Borrower declare all amounts owing with respect to this Credit
Agreement, the Notes and the other Loan Documents, and (y) BKB may by notice in
writing to the Borrower declare all amounts owing with respect to the
Reimbursement Obligations to be, and in either case they shall thereupon
forthwith become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower; PROVIDED that in the event of any Event of Default specified in
Sections 14.1(h) or 14.1(i), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from the Agent or
any Bank.
14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 14.1(h) or Section 14.1(i) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of
the Banks shall be relieved of all further obligations to make Loans to the
Borrower and the Agent shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have
occurred and be continuing, the Agent may and, upon the request of the
Majority Banks, shall, by notice to the Borrower, terminate the unused
portion of the credit hereunder, and upon such notice being given such unused
portion of the credit hereunder shall terminate immediately and each of the
Banks shall be relieved of all further obligations to make Loans and the
Agent shall be relieved of all further obligations to issue, extend or renew
Letters of Credit. No termination of the credit hereunder shall relieve the
Borrower or any of its Subsidiaries of any of the Obligations.
14.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 14.1, each Bank, if
owed any amount with respect to the Loans may, with the consent of the
Majority Banks but not otherwise, or BKB, if owed any amount with respect to
the Reimbursement Obligations, may, proceed to protect and enforce its rights
by suit in equity, action at law or other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in this
Credit Agreement and the other Loan Documents or any instrument pursuant to
which the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the EX PARTE appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such
Bank. No remedy herein conferred upon any Bank or the Agent or the holder of
any Note or purchaser of any Letter of Credit Participation is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision
of law.
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14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the occurrence or during the continuance of any Default or Event of Default,
the Agent or any Bank, as the case may be, receives any monies in connection
with the enforcement of any the Security Documents, or otherwise with respect
to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; PROVIDED, HOWEVER, that (i) distributions
shall be made (A) PARI PASSU among Obligations with respect to the Agent's
fee payable pursuant to Section 6.2 and all other Obligations and (B) with
respect to each type of Obligation owing to the Banks, such as interest,
principal, fees and expenses, among the Banks PRO RATA, and (ii) the Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth
of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
15. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any
of the Banks to the Borrower and any securities or other property of the
Borrower in the possession of such Bank may be applied to or set off by such
Bank against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower to such Bank. Each of the
Banks agrees with each other Bank that (a) if an amount to be set off is to
be applied to Indebtedness of the Borrower to such Bank, other than
Indebtedness evidenced by the Notes held by such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced
by all such Notes held by such Bank, and (b) if such Bank shall receive from
the Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes
held by, such Bank by proceedings against the Borrower at law or in equity or
by proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment
of the Note or Notes held by such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the
Notes held by all of the Banks, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either by way
of distribution, PRO TANTO assignment of claims, subrogation or otherwise as
shall result in each Bank receiving in respect of the Notes held by it or its
proportionate payment as contemplated by this Credit Agreement; PROVIDED that
if all or any part of such excess payment is thereafter
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recovered from such Bank, such disposition and arrangements shall be
rescinded and the amount restored to the extent of such recovery, but without
interest.
16. THE AGENT.
16.1. AUTHORIZATION.
(a) The Agent and its affiliates are authorized to take such action
on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related
documents delegated to the Agent and its affiliates, together with such
powers as are reasonably incident thereto, PROVIDED that no duties or
responsibilities not expressly assumed herein or therein shall be implied
to have been assumed by the Agent and its affiliates.
(b) The relationship among the Agent, its affiliates and each of the
Banks is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention, the
independent contractual relationship among the Agent, its affiliates and
each of the Banks. Nothing contained in this Credit Agreement nor the
other Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship among the Agent, its affiliates and any of the
Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, each of the Agent and its affiliates is
nevertheless a "representative" of the Banks, as that term is defined in
Article 1 of the Uniform Commercial Code, for purposes of actions for the
benefit of the Banks and the Agent with respect to all collateral security
and guaranties contemplated by the Loan Documents. Such actions include
the designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust in
collateral security intended to secure the payment or performance of any of
the Obligations, all for the benefit of the Banks and the Agent.
16.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through affiliates, employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Credit Agreement and the other
Loan Documents. The Agent may utilize the services of such Persons as the
Agent in its sole discretion may reasonably determine, and all reasonable
fees and expenses of any such Persons shall be paid by the Borrower.
16.3. NO LIABILITY. Neither the Agent nor any of its affiliates nor any
of their shareholders, directors, officers or employees nor any other Person
assisting them in their duties nor any agent or employee thereof, shall be
liable for any waiver, consent or approval given or any action taken, or
omitted to be taken, in good faith by it or them hereunder or under any of
the other Loan Documents, or in connection herewith or therewith, or be
responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Agent or such other Person, as the case may be,
may be liable for losses due to its willful misconduct or gross negligence.
16.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
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for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to
the Notes, or for any recitals or statements, warranties or representations
made herein or in any of the other Loan Documents or in any certificate or
instrument hereafter furnished to it by or on behalf of the Borrower or any
of its Subsidiaries, or be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or intended
to constitute, collateral security for the Notes or to inspect any of the
properties, books or records of the Borrower or any of its Subsidiaries. The
Agent shall not be bound to ascertain whether any notice, consent, waiver or
request delivered to it by the Borrower or any holder of any of the Notes
shall have been duly authorized or is true, accurate and complete. The Agent
has not made nor does it now make any representations or warranties, express
or implied, nor does it assume any liability to the Banks, with respect to
the credit worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
16.5. PAYMENTS.
16.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's PRO RATA share of payments received by
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
16.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
16.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (a) to make available to the Agent its PRO RATA share of
any Loan or (b) to comply with the provisions of Section 15 with respect to
making dispositions and arrangements with the other Banks, where such
Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its PRO RATA share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the
provisions of this Credit Agreement, shall be deemed delinquent (a
"Delinquent Bank") and shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on
account of Outstanding Loans, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
PRO RATA shares of all Outstanding Loans. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent Banks
in proportion to their respective PRO RATA shares of all Outstanding Loans.
A Delinquent Bank shall be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
Outstanding Loans of the nondelinquent Banks, the Banks' respective PRO
RATA shares of all Outstanding Loans have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
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16.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note as the absolute owner or purchaser thereof for all purposes hereof until
it shall have been furnished in writing with a different name by such payee
or by a subsequent holder, assignee or transferee.
16.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been reimbursed
by the Borrower as required by Section 19), and liabilities of every nature
and character arising out of or related to this Credit Agreement, the Notes,
or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly
caused by the Agent's willful misconduct or gross negligence.
16.8. AGENT AS BANK; SYNDICATION AGENT. In its individual capacity, BKB
shall have the same obligations and the same rights, powers and privileges in
respect to its Revolving Credit Commitment and the Loans made by it, and as
the holder of any of the Notes, as it would have were it not also the Agent.
The Syndication Agent shall not have any obligation, liability,
responsibility or duty under this Credit Agreement other than as applicable
to all Banks as such.
16.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a
successor Agent, such successor Agent being reasonably acceptable to the
Borrower unless a Default or Event of Default shall have occurred and be
continuing. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty (30)
days after the removal of the Agent, then any Bank shall have the right to
petition a court of competent jurisdiction for the appointment of a successor
Agent. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the
provisions of this Credit Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Agent.
16.10. REMOVAL OF AGENT. The Borrower may, but shall have no obligation
to, remove the Agent from its capacity as Agent upon the merger or
consolidation of the Agent with or into any Person or upon the appointment of
the Federal Deposit Insurance Corporation as receiver for the Agent as a
result of the Agent's insolvency, by giving sixty (60) days prior written
notice thereof to the Agent and the Banks. Upon any such removal, the
Majority Banks shall have the right to appoint a successor Agent, such
successor Agent being reasonably acceptable to the Borrower unless a Default
or Event of Default shall have occurred and be continuing. If no successor
Agent shall have been so appointed by the Majority Banks and shall have
accepted such appointment within thirty (30) days after the removal of the
Agent, then any Bank shall have the right to petition a court of competent
jurisdiction for the appointment of a successor Agent. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the removed Agent, and the removed Agent
shall be discharged from its duties and obligations hereunder. After any
removal of the Agent, the provisions of this Credit Agreement and the other
Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
16.11. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 16.11 or
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Section 9.5.1 it shall promptly notify the other Banks of the existence of
such Default or Event of Default.
16.12. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (i)
so requested by the Majority Banks and (ii) the Banks have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in
respect of such Collateral. The Majority Banks may direct the Agent in
writing as to the method and the extent of any such sale or other
disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, PROVIDED that the Agent need not
comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
acknowledges that from time to time financial advisory, investment banking
and other services may be offered or provided to the Borrower or one or more
of its Subsidiaries, in connection with this Credit Agreement or otherwise,
by a Section 20 Subsidiary. The Borrower, for itself and each of its
Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with
the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Borrower or any of its Subsidiaries, and (b) the Agent and
each Bank to share with such Section 20 Subsidiary any information delivered
to the Agent or such Bank by the Borrower or any of its Subsidiaries pursuant
to this Credit Agreement, or in connection with the decision of such Bank to
enter into this Credit Agreement; it being understood, in each case, that any
such Section 20 Subsidiary receiving such information shall be bound by the
confidentiality provisions of this Credit Agreement. Such authorization
shall survive the payment and satisfaction in full of all of Obligations.
17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential
information of the same nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower or any
of its Subsidiaries pursuant to this Credit Agreement that is identified by
such Person as being confidential at the time the same is delivered to the
Banks or the Agent, PROVIDED that nothing herein shall limit the disclosure
of any such information (a) after such information shall have become public
other than through a violation of this Section 17, (b) to the extent required
by statute, rule, regulation or judicial process, (c) to counsel for any of
the Banks or the Agent, (d) to bank examiners or any other regulatory
authority having jurisdiction over any Bank or the Agent, or to auditors or
accountants, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in
connection with any litigation to which any one or more of the Banks, the
Agent or any Section 20 Subsidiary is a party, or in connection with the
enforcement of rights or remedies hereunder or under any other Loan Document,
(g) to a Subsidiary or affiliate of such Bank as provided in Section 17.1 or
(h) to any assignee or participant (or prospective assignee or participant)
so long as such assignee or participant agrees to be bound by the provisions
of Section 21.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable
law or court order, each of the Banks and the Agent shall, prior to
disclosure thereof, notify the Borrower of any request for disclosure of any
such non-public information by any governmental agency or
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representative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental
agency) or pursuant to legal process.
17.4. OTHER. In no event shall any Bank or the Agent be obligated or
required to return any materials furnished to it or any Section 20 Subsidiary
by the Borrower or any of its Subsidiaries. The obligations of each Bank
under this Section 17 shall supersede and replace the obligations of such
Bank under any confidentiality letter in respect of this financing signed and
delivered by such Bank to the Borrower prior to the date hereof and shall be
binding upon any assignee of, or purchaser of any participation in, any
interest in any of the Loans or Reimbursement Obligations from any Bank.
18. EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Agent or any of the
Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement
(the Borrower hereby agreeing to indemnify the Agent and each Bank with
respect thereto), (c) the reasonable fees, expenses and disbursements of the
Agent's Special Counsel and any local counsel to the Agent incurred in
connection with the preparation, syndication, administration, interpretation
or recordation of the Loan Documents and the other instruments mentioned
herein, each closing hereunder, and amendments, modifications, approvals,
consents or waivers hereto or hereunder, (d) the fees, expenses and
disbursements of the Agent, the Arranger and their affiliates incurred in
connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and surveyor, engineering and
appraisal charges, the fees and expenses relating to collateral examinations,
and the fees and expenses of environmental consultants (e) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys'
fees and costs, which attorneys may be employees of any Bank or the Agent,
and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and charges) incurred by any Bank or the Agent in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's, the Agent's or the Arranger's
relationship with the Borrower or any of its Subsidiaries and (f) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred
in connection with UCC searches, UCC filings or mortgage recordings. The
covenants of this Section 18 shall survive payment or satisfaction of all
other Obligations.
19. INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent, the
Arranger and their affiliates, and the Banks and their affiliates from and
against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement
or any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the Borrower
or any of its Subsidiaries of the proceeds of any of the Loans or Letters of
Credit, (b) the Borrower or any of its Subsidiaries entering into or
performing this Credit Agreement or any of the other Loan Documents or (c)
with respect to the Borrower and its Subsidiaries and their respective
properties and assets, the violation of any Environmental Law, the presence,
disposal, escape, seepage, leakage, spillage, discharge, emission, release or
threatened release of any hazardous
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substances or any action, suit, proceeding or investigation brought or
threatened with respect to any hazardous substances (including, but not
limited to, claims with respect to wrongful death, personal injury or damage
to property), in each case including, without limitation, the reasonable fees
and disbursements of counsel and allocated costs of internal counsel incurred
in connection with any such investigation, litigation or other proceeding;
PROVIDED, HOWEVER, (i) so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower shall not be required to pay the
fees and expenses of more than one counsel for the Agent and the Banks,
unless the Agent or a Bank shall have delivered to the Borrower an opinion of
counsel to the Agent or such Bank stating that the interests of the Agent and
such Bank are sufficiently divergent from the interests of the other Banks
or, as the case may be, the Agent, such that it would be inappropriate for
such Persons to be represented by the same counsel and (ii) the Borrower
shall not be obligated to indemnify any Person under this Section 19 for any
claims, proceedings, liabilities, losses, damages, settlement payments,
obligations, and expenses to the extent that the same result from the willful
misconduct or gross negligence of such Person. In litigation, or the
preparation therefor, the Banks and the Agent shall be entitled to select
their own counsel and, in addition to the foregoing indemnity, the Borrower
agrees to pay promptly the reasonable fees and expenses of such counsel. If,
and to the extent that the obligations of the Borrower under this Section 19
are unenforceable for any reason, the Borrower hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which
is permissible under applicable law. The covenants contained in this Section
19 shall survive payment or satisfaction in full of all other Obligations.
20. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any
of them, and shall survive the making by the Banks of any of the Loans and
the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes
or any of the other Loan Documents remains Outstanding or any Bank has any
obligation to make any Loans or the Agent has any obligation to issue, extend
or renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in
any certificate or other paper delivered to any Bank or the Agent at any time
by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or
in connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary hereunder.
21. ASSIGNMENT AND PARTICIPATION.
CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all
or a portion of its Revolving Credit Commitment Percentage and Revolving
Credit Commitment and the same portion of the Loans at the time owing to it,
the Revolving Credit Notes held by it and its participating interest in the
risk relating to any Letters of Credit; PROVIDED that (a) unless such
assignment is to an affiliate of a Bank which is owned by the same holding
company owning such Bank, the Agent shall have given its prior written
consent to such assignment (such consent not to be unreasonably withheld),
(b) unless such assignment is to an affiliate of a Bank which is owned by the
same holding company owning such Bank and so long as no Default or Event of
Default has occurred and is continuing, the Borrower shall have given its
prior written consent to such assignment (such consent not to be unreasonably
withheld), (c) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Bank's rights and obligations under
this Credit Agreement, (d) each assignment shall be in an amount that is a
minimum of $5,000,000 (or if less, such Bank's entire Loans and Revolving
Credit Commitment) and (e) the
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parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of EXHIBIT D hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall
be at least five (5) Business Days after the execution thereof, (x) the
assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder, and (y) the assigning Bank shall, to the extent provided in such
assignment and upon payment to the Agent of the registration fee referred to
in Section 21.3, be released from its obligations under this Credit
Agreement.
21.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or
observance by the Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations of any
of their obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in Section 8.4 and Section 9.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
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(i) such assignee confirms that it has made satisfactory arrangements
with the assigning Bank with respect to Letter of Credit Fees.
21.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register")
for the recordation of the names and addresses of the Banks and the Revolving
Credit Commitment Percentage of, and principal amount of the Loans owing to
the Banks from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Agent and the Banks
may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrower and the Banks at any reasonable time
and from time to time upon reasonable prior notice. Upon each such
recordation, the assigning Bank agrees to pay to the Agent a registration fee
in the sum of $3,500.
21.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject
to such assignment, the Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrower
and the Banks (other than the assigning Bank). Within five (5) Business Days
after receipt of such notice, the Borrower, at its own expense, shall execute
and deliver to the Agent, in exchange for each surrendered Note, a new Note
to the order of such Eligible Assignee in an amount equal to the amount
assumed by such Eligible Assignee pursuant to such Assignment and Acceptance
and, if the assigning Bank has retained some portion of its obligations
hereunder, a new Note to the order of the assigning Bank in an amount equal
to the amount retained by it hereunder. Such new Notes shall provide that
they are replacements for the surrendered Notes, shall be in an aggregate
principal amount equal to the aggregate principal amount of the surrendered
Notes, shall be dated the effective date of such Assignment and Acceptance
and shall otherwise be substantially the form of the assigned Notes. Within
five (5) days of issuance of any new Notes pursuant to this Section 21.4, the
Borrower shall, upon the request of the Agent, deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and
binding effect thereof, in form and substance satisfactory to the Banks. The
surrendered Notes shall be cancelled and returned to the Borrower.
21.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents;
PROVIDED that (a) each such participation shall be in an amount of not less
than $5,000,000, (b) any such sale or participation shall not affect the
rights and duties of the selling Bank hereunder to the Borrower and (c) the
only rights granted to the participant pursuant to such participation
arrangements with respect to waivers, amendments or modifications of the Loan
Documents shall be the rights to approve waivers, amendments or modifications
that would reduce the principal of or the interest rate on any Loans, extend
the term or increase the amount of the Revolving Credit Commitment of such
Bank as it relates to such participant, reduce the amount of any commitment
fees to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest.
21.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement
to assignees or participants and potential assignees or participants
hereunder; PROVIDED that such assignees or participants or potential
assignees or participants shall agree (a) to treat in confidence such
information unless such information otherwise becomes public knowledge, (b)
not to disclose such information to a third party, except as required by law
or legal process and (c) not to make use of such information for purposes of
transactions unrelated to such contemplated assignment or participation.
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21.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank
shall have no right to vote as a Bank hereunder or under any of the other
Loan Documents for purposes of granting consents or waivers or for purposes
of agreeing to amendments or other modifications to any of the Loan Documents
or for purposes of making requests to the Agent pursuant to Section 14.1 or
Section 14.2, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without
regard to such assignee Bank's interest in any of the Loans. If any Bank
sells a participating interest in any of the Loans to a participant, and such
participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 14.1 or Section 14.2 to the extent that such
participation is beneficially owned by the Borrower or any Affiliate of the
Borrower, and the determination of the Majority Banks shall for all purposes
of this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
21.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 19 with respect to
any claims or actions arising prior to the date of such assignment. If any
assignee Bank is not incorporated under the laws of the United States of
America or any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States of America federal income taxes. Anything contained in this Section 21
to the contrary notwithstanding, any Bank may at any time pledge all or any
portion of its interest and rights under this Credit Agreement (including all
or any portion of its Notes) to any of the twelve Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
No such pledge or the enforcement thereof shall release the pledgor Bank from
its obligations hereunder or under any of the other Loan Documents.
21.9. ASSIGNMENT BY BORROWER AND GUARANTORS. Neither the Borrower nor
any Guarantor shall assign or transfer any of their rights or obligations
under any of the Loan Documents without the prior written consent of each of
the Banks.
22. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to
this Credit Agreement or the Notes or any Letter of Credit Applications shall
be in writing and shall be delivered in hand, mailed by United States of
America registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower or any Guarantor, at 6075 Poplar Avenue, Suite
800, Memphis, Tennessee 38119, Attention: Chief Financial Officer, with a
copy sent to the attention of the General Counsel of the Borrower at the
same address or at such other address for notice as the Borrower shall last
have furnished in writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Christopher M. Holtz, Vice President, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
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(c) if to any Bank, at such Bank's address set forth on SCHEDULE 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (x) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(y) if sent by registered or certified first-class mail, postage prepaid, on the
third Business Day following the mailing thereof.
23. GOVERNING LAW.
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AND EACH GUARANTOR AGREE THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER
AND EACH GUARANTOR BY MAIL AT THE ADDRESS SPECIFIED IN Section 22. THE
BORROWER AND EACH GUARANTOR HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.
24. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
25. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
26. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in Section 28.
27. WAIVER OF JURY TRIAL.
The Borrower and each Guarantor hereby waive their rights to a jury
trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law,
the Borrower and
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each Guarantor hereby waive any right they may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition
to, actual damages. The Borrower and each Guarantor (a) certify that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event
of litigation, seek to enforce the foregoing waivers and (b) acknowledges
that the Agent and the Banks have been induced to enter into this Credit
Agreement, the other Loan Documents to which it is a party and the
Subordination Documents to which it is a party by, among other things, the
waivers and certifications contained herein.
28. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Credit Agreement, any
consent or approval required or permitted by this Credit Agreement to be
given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by the Borrower or
any of its Subsidiaries of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event
of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written
consent of the Borrower, the Guarantors and the written consent of the
Majority Banks. Notwithstanding the foregoing, the rate of interest on the
Notes may not be decreased (other than interest accruing pursuant to Section
6.11.2 following the effective date of any waiver by the Majority Banks of
the Default or Event of Default relating thereto), the term of the Notes, the
timing or amount of any required payments of principal and interest
hereunder, the amount of the Revolving Credit Commitments of the Banks, the
release of any material portion of the Collateral or any Guarantor from its
obligations under the Guaranty, the amount of commitment fee hereunder, the
definition of Majority Banks and this Section 28 may not be changed without
the written consent of the Borrower and the written consent of each of the
Banks affected thereby; and the amount of the Agent's Fee payable for the
Agent's account or any Letter of Credit Fees payable for BKB's account, and
Section 5 or Section 17 may not be amended without the written consent of BKB
and the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Agent or any Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
29. GUARANTY.
29.1. GUARANTY. The Obligations of the Borrower to the Banks hereunder
shall be guaranteed by the Guarantors pursuant to this Section 29 (the
"Guaranty").
29.2. GUARANTEED OBLIGATIONS. Each of the Guarantors acknowledges that
it is a member of a group of related companies with the Borrower, that it
expects to derive substantial direct and indirect benefits from the
extensions of credit by the Agent and the Banks to the Borrower pursuant
hereto (which benefits are hereby acknowledged), and that the execution and
delivery of this Guaranty is a condition precedent to the Agent and the Banks
entering into this Agreement and the other Loan Documents. For value
received and hereby acknowledged and as an inducement to the Banks to make
the Loans available to the Borrower and for BKB to issue the Letters of
Credit for the account of the Borrower, each of the Guarantors hereby
unconditionally and irrevocably, jointly and severally guarantees: (a) the
full punctual payment when due, whether at stated maturity, by acceleration
or otherwise, of all obligations of the Borrower now or hereafter existing
hereunder and under the Notes or the other Loan Documents, whether for
principal, interest, fees, expenses, or otherwise, and (b) the strict
performance and observance by the Borrower of its obligations under this
Agreement and the
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other Loan Documents and of all agreements, warranties and covenants
applicable to the Borrower in this Agreement and the other Loan Documents
(such obligations collectively being the "Guaranteed Obligations").
29.3. GUARANTY ABSOLUTE. The Guarantors guarantee that the Guaranteed
Obligations will be paid strictly in accordance with the terms hereof and of
the Notes, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Banks with respect thereto to the extent permitted by law. The guaranty
provided by each Guarantor hereunder is a guaranty of payment and not merely
of collection. Each Guarantor's Guaranteed Obligations are independent of,
and separate from, the Obligations of the Borrower and the Guaranteed
Obligations of the other Guarantors, and shall not be released by, but shall
survive as if the same have not been made, any and all payments by any
obligor of the Obligations or Guaranteed Obligations or the application of
any proceeds from or collateral security for the Obligations or Guaranteed
Obligations until all of such obligations are fully paid and finally
discharged. The liability of each Guarantor under this Guaranty with regard
to the Guaranteed Obligations of the Borrower shall, to the extent permitted
by law, be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of this Credit Agreement
with respect to the Borrower (with regard to such Guaranteed Obligations),
the Notes of the Borrower, or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or in any
other term, of, all or any of the Guaranteed Obligations or any other
amendment or waiver of or any consent to departure from any of the terms of
the Loan Documents;
(c) any exchange, release or nonperfection of a lien on any
collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations of the Borrower;
(d) any change in ownership of the Borrower;
(e) any acceptance of any partial payment(s) from the Borrower; or
(f) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower in respect of the Guaranteed
Obligations.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Banks upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such
payment had not been made.
29.4. AUTHORIZED ACTIONS. Each Guarantor authorizes the Agent and the
Banks in their discretion, without notice to such Guarantor, irrespective of
any change in the financial condition of the Borrower, such Guarantor or any
other Guarantor since the date hereof, and without affecting or impairing in
any way the liability of such Guarantor hereunder, from time to time to (a)
create new Guaranteed Obligations and, either before or after receipt of
notice of revocation, renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or otherwise change the terms
of the Guaranteed Obligations or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold security for the
payment or performance of the Guaranteed Obligations and exchange, enforce,
waive or release any such security; (c) apply such security and direct the
order or manner of sale thereof; (d) purchase such security at public or
private sale; (e) otherwise exercise any right or remedy it may have against
the Borrower, such Guarantor, any other Guarantor or any security, including,
without limitation, the right to foreclose upon any such security by judicial
or non-
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judicial sale; (f) settle, compromise with, release or substitute any
one or more makers, endorsers or guarantors of the Guaranteed Obligations;
and (g) subject to Section 21, assign the Guaranteed Obligations, the
provisions of this Section 29, or any of the Loan Documents in whole or in
part.
29.5. EFFECTIVENESS; ENFORCEMENT. The Guaranty herein of the Guarantors
shall be effective and shall be deemed to be made with respect to each Loan
made to the Borrower as of the time it is made and with respect to each
Letter of Credit issued as of the time of issuance. No invalidity,
irregularity or unenforceability by reason of any bankruptcy or similar law,
or any law or order of any government or agency thereof purporting to reduce,
amend or otherwise affect any liability of the Borrower, and no defect in or
insufficiency or want of powers of the Borrower or irregular or improperly
recorded exercise thereof, shall impair, affect, be a defense to or claim
against this Guaranty. This Guaranty is a continuing guaranty and shall (a)
survive any termination of this Agreement and (b) remain in full force and
effect until payment in full of, and performance of all Guaranteed
Obligations and all other amounts payable under these guaranties. This
Guaranty is made for the benefit of the Agent and the Banks and their
successors and assigns, and may be enforced from time to time as often as
occasion therefor may arise and without requirement on the part of the Banks
first to exercise any rights against the Borrower or to exhaust any remedies
available to them against the Borrower or to resort to any other source or
means of obtaining payment of any of the Obligations or to elect any other
remedy.
29.6. WAIVER. Each Guarantor to the extent permitted by law hereby
waives promptness, diligence, protest, notice of protest, all suretyship
defenses, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this guaranty and any requirement that the
Banks protect, secure, perfect or otherwise take action to ensure any
security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other Person or any
collateral. Each Guarantor also irrevocably waives, to the fullest extent
permitted by law, all defenses which at any time may be available to it in
respect of the Guaranteed Obligations by virtue of any statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect. Further, each Guarantor expressly waives the right to
require the Agent or any Bank first to (a) pursue the Borrower or any other
Guarantor or any other Person, (b) proceed against or exhaust any collateral,
or any other security or guaranty that may be held for the Obligations or the
Guaranteed Obligations, or to apply any such security or guaranty to the
Obligations or Guaranteed Obligations or (c) pursue any other remedy in the
Agent's or any Bank's power whatsoever, before seeking from such Guarantor
payment in full of its Guaranteed Obligations or proceeding against such
Guarantor for same.
29.7. SUBORDINATION; SUBROGATION RIGHTS. Until the payment and
performance in full of all Obligations, no Guarantor shall exercise any
rights against the Borrower arising as a result of payment by such Guarantor
hereunder, and no Guarantor will prove any claim in competition with the
Banks or any affiliate of any Banks in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; no Guarantor will claim
any set-off or counterclaim against the Borrower in respect of any liability
of such Guarantor to the Borrower; and each Guarantor waives any benefit of
and any right to participate in any collateral which may be held by the Banks
or any affiliate of any Banks. The payment of any amounts due with respect to
any Indebtedness of the Borrower now or hereafter held by any Guarantor is
hereby subordinated to the prior payment in full of the Obligations. Each
Guarantor agrees that after the occurrence of any default in the payment or
performance of the Obligations, such Guarantor will not demand, sue for, or
otherwise attempt to collect any such Indebtedness of the Borrower to such
Guarantor until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, any Guarantor shall collect or
receive any amounts in respect of such indebtedness, such amounts shall be
collected and received by such Guarantor as trustee for the Agent Banks and
be paid over to the Agent for the benefit of the Agent and the Banks on
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account of the Obligations without affecting in any manner the liability of
such Guarantor under the other provisions of its Guaranty. Notwithstanding
any other provision of this Section 29, each Guarantor hereby waives all
rights of subrogation against the Borrower until the Obligations have been
fully satisfied and discharged. Each Guarantor hereby acknowledges that the
waiver contained in the preceding sentence (the "Subrogation Waiver") is
given as an inducement to the Agent and the Banks to consummate the
transactions contemplated by this Credit Agreement, the other Loan Documents
and any other agreement referred to herein and, in consideration of the
willingness of the Agent and the Banks to consummate said transactions, each
Guarantor agrees that it shall not in any way amend or modify the Subrogation
Waiver without the prior written consent of the Banks. Each Guarantor
further acknowledges that the Subrogation Waiver is made for the benefit of
the Banks and the Agent, whether a party hereto on the date hereof or
becoming a party hereto thereafter, whether the claim of any such Bank or the
Agent against the Borrower is direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise. The
Subrogation Waiver and the provisions of this section shall survive the
expiration or termination of the Credit Agreement and the other Loan
Documents.
29.8. CONCERNING JOINT AND SEVERAL LIABILITY OF THE GUARANTORS.
(a) Each of the Guarantors is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Banks under
this Credit Agreement, for the mutual benefit, directly and indirectly, of
each of the Guarantors and in consideration of the undertakings of each
other Guarantor to accept joint and several liability for the Guaranteed
Obligations.
(b) Each of the Guarantors, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the Borrower and the other
Guarantors, with respect to the payment and performance of all of the
Guaranteed Obligations (including, without limitation, any Guaranteed
Obligations arising under this Section 29), it being the intention of the
parties hereto that all the Guaranteed Obligations shall be the joint and
several obligations of each of the Borrower and the Guarantors without
preferences or distinction among them.
(c) If and to the extent that the Borrower or any Guarantor shall
fail to make any payment with respect to any of the Guaranteed Obligations
as and when due or to perform any of the Guaranteed Obligations in
accordance with the terms thereof, then in each such event the other
Guarantors will make such payment with respect to, or perform, such
Guaranteed Obligation.
(d) The Guaranteed Obligations of TRC, PRI and PMC shall be limited
in recourse to the Equity Interests in the Borrower owned by each such
Person. The Guaranteed Obligations of each of the other Guarantors under
the provisions of this Section 29 constitute full recourse obligations of
each of such Guarantors enforceable against each such Person to the full
extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other circumstance
whatsoever.
(e) Except as otherwise expressly provided in this Credit Agreement,
each of the Guarantors hereby waives notice of acceptance of its joint and
several liability, notice of any Loans made or Letters of Credit issued
under this Agreement, notice of any action at any time taken or omitted by
the Agent or the Banks under or in respect of any of the Guaranteed
Obligations, and, generally, to the extent permitted by applicable law, all
demands, notices and other formalities of every kind in connection with
this Credit Agreement. Each of the Guarantors hereby assents to, and
waives notice of, any
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extension or postponement of the time for the payment of any of the
Guaranteed Obligations, the acceptance of any payment of any
of the Guaranteed Obligations, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by the Agent
or the Banks at any time or times in respect of any default by any of the
Borrower or the Guarantors in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by the Agent or the Banks in respect of any of the
Guaranteed Obligations, and the taking, addition, substitution or release,
in whole or in part, at any time or times, of any security for any of the
Guaranteed Obligations or the addition, substitution or release, in whole
or in part, of any of the Borrower or the Guarantors. Without limiting the
generality of the foregoing, each of the Guarantors assents to any other
action or delay in acting or failure to act on the part of the Banks or the
Agent with respect to the failure by any of the Borrower or the Guarantors
to comply with any of its respective Guaranteed Obligations, including,
without limitation, any failure strictly or diligently to assert any right
or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this Section
29, afford grounds for terminating, discharging or relieving any of the
Borrower or the Guarantors, in whole or in part, from any of its Guaranteed
Obligations hereunder, it being the intention of each of the Guarantors
that, so long as any of the Obligations hereunder remain unsatisfied, the
Guaranteed Obligations of such Guarantors under this Section 29 shall not
be discharged except by performance and then only to the extent of such
performance. The Guaranteed Obligations of each of the Guarantors under
this Section 29 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any of the Borrower or the Guarantors or
the Banks or the Agent. The joint and several liability of the Guarantors
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, consolidation, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of
the Borrower or any of the Guarantors or any of the Banks or the Agent.
(f) Each Guarantor shall be liable under this Credit Agreement only
for the maximum amount of such liabilities that can be incurred under
applicable law without rendering this Credit Agreement, as it relates to
such Guarantor, voidable under applicable law relating to fraudulent
conveyance and fraudulent transfer, and not for any greater amount.
Accordingly, if any provisions of this Credit Agreement creating any
obligation of any Guarantor in favor of any Bank or the Agent shall be
declared to be invalid or unenforceable in any respect or to any extent, it
is the stated intention and agreement of the Guarantors, the Agent, and the
Banks that any balance of the obligation created by such provision and all
other obligations of the Guarantors to the Banks or the Agent created by
other provisions of this Credit Agreement shall remain valid and
enforceable, and that all sums not in excess of those permitted under
applicable law shall remain fully collectible by the Banks and the Agent
from the Guarantors.
(g) The provisions of this Section 29 are made for the benefit of the
Agent and the Banks and their successors and assigns, and may be enforced
in good faith by them from time to time against any or all of the
Guarantors as often as occasion therefor may arise and without requirement
on the part of the Agent or the Banks first to marshal any of their claims
or to exercise any of their rights against the Borrower or any other
Guarantors or to exhaust any remedies available to them against the
Borrower or any other Guarantors or to resort to any other source or means
of obtaining payment of any of the obligations hereunder or to elect any
other remedy. The provisions of this Section 29 shall remain in effect
until all of the Guaranteed Obligations shall have been paid in full or
otherwise fully satisfied and the Commitments have expired. If at any
time, any payment, or any part thereof, made in respect of any of the
Guaranteed Obligations, is
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rescinded or must otherwise be restored or returned by the Banks, or the
Agent upon the insolvency, bankruptcy or reorganization of the Borrower or
any of the Guarantors, or otherwise, the provisions of this Section 29 will
forthwith be reinstated in effect, as though such payment had not been
made.
29.9. NEW GUARANTORS. In the event that, after the Closing Date, the
Borrower or any Guarantor acquires or initiates the incorporation of a new
wholly-owned Subsidiary of the Borrower, such Subsidiary shall concurrently
with such event or as soon as practicable thereafter execute and deliver to
the Agent an instrument of joinder and accession, in form and substance
satisfactory to the Agent and the Banks, pursuant to which such newly-created
or acquired wholly-owned Subsidiary shall join this Credit Agreement, and
shall accede to all of the rights and obligations of a Guarantor hereunder
and thereunder, and, pursuant thereto shall, among other things, guaranty the
complete payment and performance of the Guaranteed Obligations, make the
waivers set forth herein (including, without limitation, those set forth in
Section 29.6 hereof). Further, such Subsidiary shall execute and/or deliver
to the Agent such other documentation as the Agent may reasonably request in
furtherance of the intent of this Section 29.9, including, without
limitation, documentation of the type required to be supplied by the initial
Guarantors as a condition precedent to the initial Loans made hereunder
pursuant to Section 12 hereof.
29.10. LIMITATION ON LIABILITY. Notwithstanding anything to the contrary
set forth herein, the liability of TRC, PRI and PMC under this Guaranty shall
be limited in recourse to the Equity Interests of the Borrower owned by such
Person.
30. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Credit Agreement in
any jurisdiction.
31. RIGHT TO PUBLICIZE.
The Borrower and each of the Guarantors hereby acknowledges that the
Agent will have the right to publicize the transactions contemplated hereby
by means of a tombstone advertisement or other customary advertisement in
newspapers and other periodicals. The Agent agrees to provide the Borrower
and each of the Guarantors with the opportunity to review any such tombstone
advertisement prior to publication thereof and to provide reasonable comments
as to the accuracy and contents thereof.
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
PERKINS FAMILY RESTAURANTS, L.P.
By: Perkins Management Company, Inc., its
General Partner
By:____________________________________
Name:
Title:
THE RESTAURANT COMPANY, as Guarantor
By:____________________________________
Name:
Title:
PERKINS RESTAURANTS, INC., as Guarantor
By:____________________________________
Name:
Title:
PERKINS MANAGEMENT COMPANY, INC., as
Guarantor
By:____________________________________
Name:
Title:
PERKINS FINANCE CORP., as Guarantor
By:____________________________________
Name:
Title:
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BANKBOSTON, N.A., individually and as
Agent
By:____________________________________
Rodney L. Guinn
Division Executive
NATIONSBANK, N.A., individually and as
Syndication Agent
By:____________________________________
Name:
Title:
BANK OF AMERICA, FSB
By:____________________________________
Name:
Title:
FIRST AMERICAN NATIONAL BANK
By:____________________________________
Name:
Title:
SANWA BUSINESS CREDIT CORPORATION
By:____________________________________
Name:
Title:
BARNETT BANK, N.A.
By:____________________________________
Name:
Title:
<PAGE>
EXECUTION COPY
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A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of December 22, 1997
by and among
Perkins Family Restaurants, L.P.
Perkins Finance Corp.
and
Salomon Brothers In
BancBoston Securities Inc.
NationsBanc Montgomery Securities, Inc.
Societe Generale Securities Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of December 22, 1997, by and among Perkins Family Restaurants, L.P.,
a Delaware limited partnership (the "COMPANY"), Perkins Finance Corp.
("FINANCE CORP." and, together with the Company, the "ISSUERS"), and Salomon
Brothers Inc, BancBoston Securities Inc., NationsBanc Montgomery Securities,
Inc. and Societe Generale Securities Corporation (each an "INITIAL PURCHASER"
and, collectively, the "INITIAL PURCHASERS"), each of whom has agreed to
purchase the Issuers' 10 1/8% Series A Senior Notes due 2007 (the "SERIES A
NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
17, 1997, (the "PURCHASE AGREEMENT"), by and among the Issuers and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Notes, the Issuers have agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 8 of the Purchase Agreement. Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to them in the
Indenture, dated December 22, 1997, between the Issuers and State Street Bank
and Trust Company of Connecticut, N.A. as Trustee, relating to the Series A
Notes and the Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness
under the Act of the Exchange Offer Registration Statement relating to the
Series B Notes to be issued in the Exchange Offer, (b) the maintenance of
such Exchange Offer Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Issuers
to the Registrar under the Indenture of
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Series B Notes in the same aggregate principal amount as the aggregate
principal amount of Series A Notes tendered by Holders thereof pursuant to
the Exchange Offer.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Issuers of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act or pursuant to Regulation S
under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments
thereto, including any post-effective amendments, and all material
incorporated by reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Issuers
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant
to the Shelf Registration Statement, in each case, (i) that is filed pursuant
to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including any
post-effective amendments) and all exhibits thereto and material incorporated
by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RESTRICTED BROKER-DEALER: Any Broker-Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Issuers or any of their affiliates).
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<PAGE>
RULE 144: Rule 144 promulgated under the Act.
SERIES B NOTES: The Issuers' 10 1/8% Series B Senior Notes due 2007 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which
such Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained
therein) or (d) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have
been complied with), the Issuers shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date (the "EXCHANGE OFFER FILING DATE"), but in no event
later than 45 days after the Closing Date (such 45th day being the "FILING
DEADLINE"), (ii) use all commercially reasonable efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 120 days after the Closing Date
(such 120th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with
the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration
and qualification of the Series B Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting registration of the Series B
Notes to be offered in exchange for the Series A Notes that are Transfer
Restricted Securities and to permit resales of Series B Notes by
Broker-Dealers that tendered into the Exchange Offer for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other
3
<PAGE>
trading activities (other than Series A Notes acquired directly from the
Issuers or any of their Affiliates) as contemplated by Section 3(c) below.
(b) The Issuers shall use all commercially reasonable efforts to cause
the Exchange Offer Registration Statement to be effective continuously, and
shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to
Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such
period be less than 20 Business Days. The Issuers shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. No
securities other than the Series B Notes shall be included in the Exchange
Offer Registration Statement. The Issuers shall use all commercially
reasonable efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter.
(c) The Issuers shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Issuers or any
Affiliate of the Issuers), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to
be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with
their initial sale of any Series B Notes received by such Broker-Dealer in
the Exchange Offer and that the Prospectus contained in the Exchange Offer
Registration Statement may be used to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all
other information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement. See the
SHEARMAN & STERLING no-action letter (available July 2, 1993).
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Issuers agree to use all commercially reasonable efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended
as required by the provisions of Section 6(c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
180 days from the date on which the Exchange Offer is Consummated, or such
shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Issuers shall promptly provide sufficient copies of the latest version of
such Prospectus to such Broker-Dealers promptly upon request, and in no event
later than two Business Days after such request, at any time during such
period.
SECTION 4. SHELF REGISTRATION
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(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law (after the Issuers have complied with the procedures set forth
in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted
Securities shall notify the Issuers within 20 Business Days following the
Consummation of the Exchange Offer that (A) such Holder was prohibited by law
or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the Prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and holds
Series A Notes acquired directly from the Issuers or any of their Affiliates,
then the Issuers shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Issuers determine that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the
date on which the Issuers receive the notice specified in clause (a) (ii)
above, (such earlier date, the "FILING DEADLINE"), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to
the Exchange Offer Registration Statement (the "SHELF REGISTRATION
STATEMENT")), relating to all Transfer Restricted Securities the Holders of
which shall have provided the information required pursuant to Section 4(b)
hereof, and
(y) use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "EFFECTIVENESS DEADLINE").
If, after the Issuers have filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Issuers are
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law,
then the filing of the Exchange Offer Registration Statement shall be deemed
to satisfy the requirements of clause (x) above; PROVIDED that, in such
event, the Issuers shall remain obligated to meet the Effectiveness Deadline
set forth in clause (y).
The Issuers shall use all commercially reasonable efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a), and to ensure
that it conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years (as extended pursuant to Section
6(c)(i)) following the date on which such Shelf Registration Statement first
becomes effective under the Act, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Issuers in writing, within 20 days after receipt of a
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request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each selling Holder agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Issuers by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any
such Registration Statement has not been declared effective by the Commission
on or prior to the applicable Effectiveness Deadline, (iii) the Exchange
Offer has not been Consummated within 30 Business Days after the Exchange
Offer Registration Statement is first declared effective by the Commission or
(iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately (but in
any event within three Business Days thereafter) by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within such three Business Day period (each such
event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"),
then the Issuers hereby agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.50 per week per $1,000 in principal amount of
Transfer Restricted Securities; PROVIDED that the Issuers shall in no event
be required to pay liquidated damages for more than one Registration Default
at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above,
(2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of
(ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the
Registration Statement or an additional Registration Statement that causes
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable in the
case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture,
on each Interest Payment Date, as more fully set forth in the Indenture and
the Notes. All obligations of the Issuers set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted
Security at the
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time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall
have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Issuers shall comply with all applicable provisions of
Section 6(c) below, shall use all commercially reasonable efforts to effect
such exchange and to permit the resale of Series B Notes by Broker-Dealers
that tendered in the Exchange Offer Series A Notes that such Broker-Dealer
acquired for its own account as a result of its market making activities or
other trading activities (other than Series A Notes acquired directly from
the Issuers or any of their Affiliates) being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all
of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Issuers
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Issuers hereby agree to seek a
no-action letter or other favorable decision from the Commission
allowing the Issuers to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Issuers hereby agree to pursue the issuance
of such a decision to the Commission staff level. In connection with
the foregoing, the Issuers hereby agree to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Issuers setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker- Dealer) shall furnish, upon the
request of the Issuers, prior to the Consummation of the Exchange Offer,
a written representation to the Issuers (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Issuers,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Notes in its ordinary course of
business. Each Holder using the Exchange Offer to participate in a
distribution of the Series B Notes hereby acknowledges and agrees that,
if the resales are of Series B Notes obtained by such Holder in exchange
for Series A Notes acquired directly from the Issuers or an Affiliate
thereof, it (1) could not, under Commission policy as in effect on the
date of this Agreement, rely on the position of the Commission
enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Commission's letter to SHEARMAN & STERLING dated July
2, 1993, and similar no-action letters (including, if applicable, any
no-action letter obtained
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pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Issuers
shall provide a supplemental letter to the Commission (A) stating that
the Issuers are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) as interpreted in the Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that the Issuers have not entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Issuers'
information and belief, each Holder participating in the Exchange Offer
is acquiring the Series B Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in
the distribution of the Series B Notes received in the Exchange Offer
and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Issuers shall comply with all the provisions of
Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution
thereof (as indicated in the information furnished to the Issuers pursuant to
Section 4(b) hereof), and pursuant thereto the Issuers will prepare and file
with the Commission a Registration Statement relating to the registration on
any appropriate form under the Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof within the time periods and
otherwise in accordance with the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Issuers shall:
(i) use all commercially reasonable efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to
be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Issuers shall file
promptly an appropriate amendment to such Registration Statement curing
such defect, and, if Commission review is required, use all commercially
reasonable efforts to cause such amendment to be declared effective as
soon as practicable. Notwithstanding the foregoing, if (A) the Board of
Directors of the general partner of the Company
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determines in good faith that it is in the best interests of the Issuers
not to disclose the existence of or facts surrounding any proposed or
pending material transaction involving either of the Issuers or their
subsidiaries and (B) the Issuers notify the Holders within two Business
Days after the Board of Directors makes such determination, the Issuers
may allow the Shelf Registration Statement to fail to be effective and
usable as a result of such nondisclosure for up to 60 days during the
two-year period of effectiveness required by Section 4 hereof, but in no
event for any period in excess of 30 consecutive days; PROVIDED,
HOWEVER, that the two-year period referred to in Section 4 hereof during
which the Shelf Registration Statement is required to be effective and
usable shall be extended by the number of days during which such
registration statement was not effective or usable pursuant to the
foregoing provision.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed,
and, with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to
make the statements therein not misleading, or that requires the making
of any additions to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (such notice to also include a statement that
the indemnity provisions contained in Section 8 shall be limited as set
forth in Section 8(a)(C) in the event of continued use of such
Registration Statement or Prospectus). If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities
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or Blue Sky laws, the Issuers shall use all commercially reasonable
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(v) furnish to the Initial Purchasers and each selling Holder
named in any Shelf Registration Statement or Prospectus in connection
with such sale, if any, before filing with the Commission, copies of any
Shelf Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Shelf Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Shelf Registration Statement), which documents
will be subject to the review and comment of such Holders in connection
with such sale, if any, for a period of at least five Business Days, and
the Issuers will not file any such Shelf Registration Statement or
Prospectus or any amendment or supplement to any such Shelf Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which the selling Holders of the Transfer Restricted
Securities covered by such Shelf Registration Statement in connection
with such sale, if any, shall reasonably object within five Business
Days after the receipt thereof. A selling Holder shall be deemed to
have reasonably objected to such filing if such Shelf Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Shelf Registration Statement or
Prospectus, provide copies of such document to the selling Holders in
connection with such sale, if any, make the Issuer's representatives
available for discussion of such document and other customary due
diligence matters, and include such information in such document prior
to the filing thereof as such selling Holders may reasonably request;
(vii) subject to execution of confidentiality agreements that
are reasonably satisfactory to the Issuers as to the disclosure of any
non-public information obtained pursuant to this Section 6(c)(vii) and
upon reasonable notice and at reasonable times, make available for
inspection at the Company's offices located in Memphis, Tennessee by the
selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders, all financial and other records, pertinent corporate
documents of the Issuers and cause the Issuers' officers, directors and
employees to supply all information reasonably requested by any such
selling Holder, attorney or accountant in connection with such
Registration Statement or any
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post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness.
(viii) in the case of any Shelf Registration Statement, if
requested by any selling Holders in connection with such sale, if any,
promptly include in any Shelf Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Issuers are
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) in the case of any Shelf Registration Statement, furnish
to each selling Holder in connection with such sale, if any, without
charge, at least one copy of the Shelf Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request;
the Issuers hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
customary agreements (including customary underwriting agreements) and
make such customary representations and warranties and take all such
other customary actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any applicable Registration Statement contemplated by this
Agreement as may be reasonably requested by any Holder of Transfer
Restricted Securities in connection with any sale or resale pursuant to
any applicable Registration Statement and in such connection, the
Issuers shall:
(A) upon request of any selling Holder, furnish (or in
the case of paragraphs (2) and (3), use their best efforts to cause
to be furnished) to each selling Holder, upon the effectiveness of
the Shelf Registration Statement or upon Consummation of the
Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on
behalf of the Issuers by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
paragraphs (a), (b), (g) and (h) of Section 8 of the Purchase
Agreement and such other similar matters as the selling Holders may
reasonably request;
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(2) an opinion, dated the date of Consummation of
the Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of the respective
counsel for the Issuers covering matters similar to those set
forth in paragraphs (c) and (d) of Section 8 of the Purchase
Agreement and such other matter as the selling Holders may
reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences
with officers and other representatives of the Issuers,
representatives of the independent public accountants for the
Issuers and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing, no facts
came to such counsel's attention that caused such counsel to
believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective
amendment thereto became effective and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and,
in the case of the opinion dated the date of Consummation of
the Exchange Offer, as of the date of Consummation, contained
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial and
statistical data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Issuers' independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 8(f) of the
Purchase Agreement, and
(B) deliver such other documents and certificates
as may be reasonably requested by the selling Holders to
evidence compliance with clause (A) above and with any customary
conditions contained in the any agreement entered into by the
Issuers pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or
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things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that the Issuers
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would
subject them to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where they are not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Issuers by such Holder in exchange therefor or being sold by such
Holder; such Series B Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Series B Notes, as the case
may be; in return, the Series A Notes held by such Holder shall be
surrendered to the Issuers for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations and such names as the selling Holders may request
at least two Business Days prior to such sale of Transfer Restricted
Securities;
(xv) use all commercially reasonable efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee
under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) otherwise use all commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in
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connection therewith, cooperate with the Trustee and the Holders to
effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use all commercially reasonable efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner; and
(xix) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Issuers of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such
Holder is advised in writing by the Issuers that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case,
the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than permanent
file copies, then in such Holder's possession which have been replaced by the
Issuers with more recently dated Prospectuses or (ii) deliver to the Issuers
(at the Issuers' expense) all copies, other than permanent file copies, then
in such Holder's possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the
Suspension Notice. The time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the
period from and including the date of delivery of the Suspension Notice to
the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuers' performance of or compliance
with this Agreement will be borne by the Issuers, regardless of whether a
Registration Statement becomes effective, including without limitation: (i)
all registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all
reasonable fees and disbursements of counsel for the Issuers and, in
accordance with Section 7(b) hereof, the Holders of Transfer Restricted
Securities and (v) all reasonable fees and disbursements of independent
certified public accountants of the Issuers (including the expenses of any
special audit and comfort letters required by or incident to such
performance).
The Issuers will, in any event, bear their internal expenses (including,
without limitation, all salaries and expenses of their officers and employees
performing legal or accounting duties),
14
<PAGE>
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Issuers.
(b) In connection with any Shelf Registration Statement required by
this Agreement, the Issuers will reimburse the Holders of Transfer Restricted
Securities for the reasonable fees and disbursements of not more than one
counsel, who shall be Latham & Watkins, unless another firm shall be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Shelf Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) any
Holder (any of the persons referred to in this clause (ii) being hereinafter
referred to as a "controlling person") and (iii) the respective officers,
directors, partners, employees, representatives and agents of any Holder or
any controlling person (any person referred to in clause (i), (ii) or (iii)
may hereinafter be referred to as an "INDEMNIFIED HOLDER"), from and against
any and all losses, claims, damages, liabilities, judgments, (including
without limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, preliminary prospectus or Prospectus (or any
amendment or supplement thereto) provided by the Issuers to any holder or any
prospective purchaser of Series B Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments (A) are caused by an
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Issuers by any of the Holders, (B) with respect to the preliminary
prospectus, result from the fact that the Holder sold Transfer Restricted
Notes to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the prospectus, as amended or
supplemented, if the Issuers shall have previously furnished copies thereof
to the Holder in accordance with this Agreement, and the Issuers prove that
the prospectus, as amended or supplemented, would have corrected such untrue
statement or omission or (C) are a result of the use by the Indemnified
Holder of any prospectus, when, upon receipt of a notice from the Issuers of
the existence of any fact of the kind described in Section 6 hereof as
contemplated pursuant to Section 6(d) hereof, the Indemnified Holder was not
permitted to do so.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Issuers and their
directors and officers (or, in the case of the Company, the directors and
officers of its general partner), and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act) either Issuer, to the same extent as the foregoing indemnity from the
Issuers to each of the Indemnified Holders, but only with reference to
information relating to such Indemnified Holder furnished in writing to the
Issuers by such Indemnified Holder expressly for use in any Registration
Statement. In no event shall any Indemnified Holder be liable or responsible
for any amount in excess of the
15
<PAGE>
amount received by such Indemnified Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), an
Indemnified Holder shall not be required to assume the defense of such action
pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of the Indemnified
Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantiall similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of
the Indemnified Holders, in the case of the parties indemnified pursuant to
Section 8(a), and by the Issuers, in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed to comply with such reimbursement request in respect of any
such fees and expenses that are not being contested in good faith. No
indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect
any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability on claims that are or could have been
the subject matter of such action and (ii)
16
<PAGE>
does not include a statement as to or an admission of fault, culpabiity or a
failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Issuers, on the one hand,
and of the Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Issuers, on the one hand, and of
the Indemnified Holder, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers, on the one hand, or by the
Indemnified Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include, subject to the limitations set forth in the
second paragraph of Section 8(a), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Issuers and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder or its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities
PLUS (B) the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each of the
Holders hereunder and not joint.
17
<PAGE>
SECTION 9. RULE 144A
The Issuers hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Issuers are not subject to Section 13 or 15(d) of the Securities Exchange
Act, to make available, upon request of any Holder of Transfer Restricted
Securities, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser
of such Transfer Restricted Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act
in order to permit resales of such Transfer Restricted Securities pursuant to
Rule 144A.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Issuers acknowledge and agree that any failure by
the Issuers to comply with their obligations under Sections 3 and 4 hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the
event of any such failure, the Initial Purchasers or any Holder may obtain
such relief as may be required to specifically enforce the Issuers'
obligations under Sections 3 and 4 hereof. The Issuers further agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Issuers nor any future
Guarantor (as defined in the Indenture) will, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Issuers have not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Issuers' securities under any agreement
in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case
of Section 5 hereof and this Section 10(c)(i), the Issuers have obtained the
written consent of Holders of all outstanding Transfer Restricted Securities
and (ii) in the case of all other provisions hereof, the Issuers have
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Issuers or their Affiliates).
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
18
<PAGE>
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuers, on the
one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on
the records of the Registrar under the Indenture, with a
copy to the Registrar under the Indenture; and
(ii) if to the Issuers:
c/o Perkins Family Restaurants, L.P.
6075 Poplar Avenue
Suite 800
Memphis, Tennessee 38119
Telecopier No.: 901-766-6482
Attention: Donald F. Wiseman
with a copy to:
Mayer, Brown & Platt
120 South LaSalle Street
Chicago, IL 60603
Telecopier No.: 312-701-8164
Attention: James T. Lidbury
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Salomon Brothers
Inc, on behalf of the Initial Purchasers (in the form attached hereto as
Exhibit A) and shall be addressed to: Salomon Brothers Inc, Seven World Trade
Center, New York, New York 10048 Attention: (Compliance Department), New
York, New York 10048
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and
19
<PAGE>
without the need for an express assignment, subsequent Holders of Transfer
Restricted Securities; PROVIDED, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Transfer
Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all
of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PERKINS FAMILY RESTAURANTS, L.P.
By: PERKINS MANAGEMENT COMPANY, INC.
its general partner
---------------------------------------
By:
Name:
Title:
PERKINS FINANCE CORP.
---------------------------------------
By:
Name:
Title:
SALOMON BROTHERS INC
By:
---------------------------------
Name:
Title:
BANCBOSTON SECURITIES CORP.
By:
---------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES, INC.
By:
---------------------------------
Name:
Title:
SOCIETE GENERALE SECURITIES CORPORATION
By:
---------------------------------
Name:
Title:
S-1
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Attention: (Compliance Department)
Fax: (212) 783-7400
From: Perkins Family Restaurants, L.P.
Perkins Finance Corp.
Re: 10 1/8% Senior Notes due 2007
Date:___, 199_
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an A/B Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission.
We currently expect this registration statement to be declared effective
within __ business days of the date hereof.
A-1
<PAGE>
IN WITNEES WHEREOF, the parties have executed this Agreement as of the
date first written above.
By: PERKINS MANAGEMENT COMPANY, INC.
its general partner
By: /s/ Steven R. McClellan
-------------------------------
Name: Steven R. McClellan
Title: Executive Vice President & Chief
Financial Officer
PERKINS FINANCE CORP.
By: /s/ Steven R. McClellan
-------------------------------
Name: Steven R. McClellan
Title: President
SOLOMON BROTHERS INC
BANCBOSTON SECURITES INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
SOCIETE GENERALE SECURITIES CORPORATION
By: SOLOMON BROTHERS INC
By: /s/ Michael A. Eck
------------------------------------
Name: Michael A. Eck
Title: Managing Director
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE
REGISTRANT
-------------------
Perkins Finance Corp.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports on Perkins Family Restaurants, L.P., Perkins Finance Corp. and Perkins
Management Company, Inc. (and to all references to our Firm) included in or made
a part of this registration statement.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
January 28, 1998
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)__
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
________________
(PERKINS FAMILY RESTAURANTS, L.P.)
PERKINS FINANCE CORP.)
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1283091, 62-1720081
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6075 POPLAR AVENUE
SUITE 800
Memphis, TN 38119
(10 1/8% SERIES A SENIOR NOTES DUE 2007)
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
hereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commission of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as
Exhibit 2 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR
IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of
the Act is annexed hereto as Exhibit 6 and made a part
hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustees disclaims responsibility for
the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the {January 22, 1998}.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
-----------------------------------
NAME: Steven Cimalore
TITLE: Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirement of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by {PERKINS
FAMILY RESTAURANTS, L.P./PERKINS FINANCE CORP.}. of it {10 1/8% SERIES A
SENIOR NOTES DUE 2007}, we hereby consent that reports of examination by
Federal, State, Territorial or district authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefore.
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Steven Cimalore
-----------------------------------
NAME: Steven Cimalore
TITLE: Vice President
DATED: JANUARY 22, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business March 31, 1997, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner of
Banks under General Laws, Chapter 172, Section 22(a).
THOUSANDS OF
ASSETS DOLLARS
- ------ -------------
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........ 1,665,142
Interest-bearing balances................................. 8,193,292
Securities................................................... 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary....................... 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income..... 4,936,454
Allowance for loan and lease losses.......... 70,307
Allocated transfer risk reserve.............. 0
Loans and leases, net of unearned income and allowances.... 4,866,147
Assets held in trading accounts............................... 957,478
Premises and fixed assets..................................... 380,117
Other real estate owned....................................... 884
Investments in unconsolidated subsidiaries.................... 25,835
Customers' liabilities to this bank on acceptances
outstanding................................................ 45,548
Intangible assets............................................. 158,080
Other assets.................................................. 1,066,957
-------------
Total assets.................................................. 33,450,737
=============
LIABILITIES
Deposits:
In domestic offices........................................ 8,270,845
Noninterest-bearing............... 6,318,360
Interest-bearing.................. 1,952,485
In foreign offices and Edge subsidiary..................... 12,760,086
Noninterest-bearing............... 53,052
Interest-bearing.................. 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary........................ 8,216,641
Demand notes issued to the U.S. Treasury and Trading
Liabilities................................................ 926,821
Other borrowed money.......................................... 671,164
Subordinated notes and debentures.............................. 0
Bank's liability on acceptances executed and outstanding...... 46,137
Other liabilities............................................. 745,529
Total liabilities.............................................. 31,637,223
-------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................. 0
Common stock.................................................. 29,931
Surplus....................................................... 360,717
Undivided profits and capital reserves/Net unrealized
holding gains (losses)..................................... 1,426,881
Cumulative foreign currency translation adjustments........... (4,015)
Total equity capital.......................................... 1,813,514
-------------
Total liabilities and equity capital.......................... 33,450,737
=============
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE>
LETTER OF TRANSMITTAL
FOR TENDERS OF
$130,000,000 AGGREGATE PRINCIPAL AMOUNT OF
10 1/8% SERIES A SENIOR NOTES DUE 2007
PERKINS FAMILY RESTAURANTS, L.P.
PERKINS FINANCE CORP.
PURSUANT TO THE PROSPECTUS
DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1998 (UNLESS EXTENDED) (THE "EXPIRATION DATE"). TENDERED OLD
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE
OF THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
DELIVER TO: State Street Bank and Trust Company, EXCHANGE AGENT:
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED BY OVERNIGHT COURIER OR HAND:
MAIL:
State Street Bank State Street Bank *State Street Bank
and Trust Company and Trust Company and Trust Company
P.O. Box 778 Two International Place or 61 Broadway, Concourse Level
Boston, MA 02102-0078 Boston, MA 02110 Corporate Trust Window
Attn: Kelly Mullen Attn: Kelly Mullen New York, New York 10006
*ONLY DURING BUSINESS HOURS
BY FACSIMILE FOR ELIGIBLE
INSTITUTIONS:
(617) 664-5395
FOR CONFIRMATION CALL:
(617) 664-5587
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1998 (the "Prospectus"), of Perkins Family Restaurants, L.P., a
Delaware limited partnership (the "Company") and Perkins Finance Corp., a
Delaware corporation and a wholly-owned subsidiary of the Company ("Finance
Corp. and, together with the Company, the "Issuers"), and this Letter of
Transmittal, which may be amended from time to time (this "Letter"), which
together constitute the Company's offer (the "Exchange Offer") to exchange up to
$130 million aggregate principal amount of 10 1/8% Series B Senior Notes due
2007 (the "New Notes") of the Company for a like principal amount of the
Company's issued and outstanding 10 1/8% Series A Senior Notes due 2007 (the
"Old Notes" and together with the New Notes, the "Notes"), with the holders
(each holder of Old Notes, a "Holder") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will accrue interest from the most recent date to which
interest has accrued on the Old Notes. Old Notes accepted for exchange will
cease to accrete interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Notes are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2. Delivery of this
Letter to DTC does not constitute delivery to the Exchange Agent.
<PAGE>
Notwithstanding anything to the contrary in the registration rights
agreement dated December 22, 1997 among the Issuers and the original purchasers
of Old Notes (the "Registration Rights Agreements"), the Issuers will accept for
exchange any and all Old Notes validly tendered on or prior to 5:00 p.m., New
York City time, on , 1998 (unless the Exchange Offer is extended by the
Issuers) (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE ISSUERS.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions. Please see the Prospectus under the section titled "The
Exchange Offer--Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of Old Notes in any jurisdiction in which the making or
acceptance of the Exchange Offer would not be in compliance with the laws of
such jurisdiction.
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and requests for assistance or for additional
copies of the Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent at the address listed above.
2
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Issuers the principal amount of Old
Notes indicated below under "Description of Old Notes," in accordance with and
upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, and in this Letter of Transmittal, for
the purpose of exchanging each $1,000 face amount of Old Notes designated herein
held by the undersigned and tendered hereby for $1,000 face amount of the New
Notes. New Notes will be issued only in integral multiples of $1,000 to each
tendering Holder of Old Notes whose Old Notes are accepted in the Exchange
Offer. Holders may tender all or a portion of their Old Notes pursuant to the
Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Issuers all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Issuers (together with
all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Issuers.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned. Any tender of Old Notes hereunder may
be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter of Transmittal. See Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuers to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered. The
undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuers to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old Notes
to which this Letter of Transmittal relates, together with the principal amount
of such Old Notes that the undersigned wishes to tender, should be indicated in
the appropriate boxes herein under "Description of Old Notes."
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuers and the issuance of New Notes in exchange therefor shall constitute
performance in full by the Issuers of its obligations under the Registration
Rights Agreements and that, upon the issuance of the New Notes the Issuers will
have no further obligations or liabilities to the undersigned thereunder.
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer--Procedures
for Tendering Old Securities" and the Instructions hereto will constitute the
tendering Holder's acceptance of the terms and the conditions of the Exchange
Offer. The undersigned hereby represents and warrants to the Company that the
New Notes to be acquired by such Holder pursuant to the Exchange Offer are being
acquired in the ordinary course of such Holder's business, that such Holder has
no
3
<PAGE>
arrangement or understanding with any person to participate in the distribution
of the New Notes. The Issuers' acceptance for exchange of Old Notes tendered
pursuant to the Exchange Offer will constitute a binding agreement between the
tendering Holder and the Issuers upon the terms and subject to the conditions of
the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission") set forth in no-action letters issued to third parties in
other transactions substantially similar to the Exchange Offer, which lead the
Company to believe that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act, (ii) an Initial Purchaser who acquired the Old Notes directly from the
Issuers solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act, or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities), without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders are
not participating and have no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. If any holder is an affiliate of the Issuers or
is engaged in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange of Old
Notes, it represents that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of Section 2(11) of the Securities Act.
The undersigned understands that the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the New Notes
issued in consideration of Old Notes accepted for exchange, and/or any principal
amount of Old Notes not tendered or not accepted for exchange (and accompanying
documents, as appropriate), to the Holder(s) at the address(es) appearing herein
under "Description of Old Notes." In the event that the Special Delivery
Instructions are completed, please mail the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any Old Notes for any principal amount
not tendered or not accepted for exchange, in the name of the Holder(s)
appearing herein under "Description of Old Notes," and send such New Notes
and/or Old Notes to the address(es) so indicated. Any transfer of Old Notes to a
different holder must be completed, according to the provisions on transfer of
Old Notes contained in the Indenture.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX BELOW.
4
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad-15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
Institution") UNLESS (i) the Old Notes tendered hereby are tendered by the
Holder(s) of the Old Notes who has (have) not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) the Old
Notes are tendered for the account of an Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used: (i) by all
Holders who are not ATOP members, (ii) by Holders who are ATOP members but
choose not to use ATOP or if the Old Notes are to be tendered in accordance with
the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures." To validly tender Old Notes, a
Holder must physically deliver a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
all other required documents to the Exchange Agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date (as defined
below) or the Holder must properly complete and duly execute an ATOP ticket in
accordance with DTC procedures. Otherwise, the Holder must comply with the
guaranteed delivery procedures set forth in the next paragraph. Notwithstanding
anything to the contrary in the Registration Rights Agreements, the term
"Expiration Date" means 5:00 p.m., New York City time, on , 1998 (or
such later date to which the Company may, in its sole discretion, extend the
Exchange Offer). If this Exchange Offer is extended, the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Issuers expressly reserve the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open by giving oral
(confirmed in writing) or written notice of such extension to the Exchange Agent
and by making a public announcement of such extension prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE ISSUERS OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made through
an Eligible Institution; (b) on or prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery (by telegram, facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes and the principal
amount Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the
Expiration Date, any documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date. See "The Exchange Offer--Guaranteed Delivery Procedures" as set forth in
the Prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuers, proper evidence
satisfactory to the Issuers of their authority to so act must be so submitted.
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered Holder to tender on his
behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
5
<PAGE>
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING
HOLDER, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed schedule attached
hereto.
4. WITHDRAWAL OF TENDER. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date: (ii) specify the name
of the person having tendered the Old Notes to be withdrawn; (iii) identify the
Old Notes to be withdrawn; and (iv) be (a) signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or (b)
accompanied by evidence satisfactory to the Company that the Holder withdrawing
such tender has succeeded to beneficial ownership of such Old Notes. If Old
Notes have been tendered pursuant to the ATOP procedure with DTC, any notice of
withdrawal must otherwise comply with the procedures of DTC. Old Notes properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer; PROVIDED, HOWEVER, that withdrawn Old Notes may be retendered by
again following one of the procedures described herein at any time prior to 5:00
p.m., New York City time, on the Expiration Date. All questions as to the
validity, form and eligibility (including time of receipt) of notice of
withdrawal will be determined by the Issuers, whose determinations will be final
and binding on all parties. Neither the Issuers, the Exchange Agent, nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. The Exchange Agent intends to use reasonable efforts
to give notification of such defects and irregularities.
5. PARTIAL TENDERS; PRO RATA EFFECT. Tenders of the Old Notes will be
accepted only in integral multiples of $1,000. If less than the entire principal
amount evidenced by any Old Notes is to be tendered, fill in the principal
amount that is to be tendered in the box entitled "Principal Amount Tendered"
below. The entire principal amount of all Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name as written on the face of the certificate representing such Old Notes
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal and any necessary accompanying documents as there are
different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuers, proper evidence
satisfactory to the Issuers of their authority to so act must be submitted.
7. SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate in the
applicable box the name and address to which New Notes issued in consideration
of Old Notes accepted for exchange, or Old Notes for principal amounts
6
<PAGE>
not exchanged or not tendered, are to be sent, if different from the name and
address of the person signing this Letter of Transmittal.
8. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to waive
any of the specified conditions in the Exchange Offer, in whole at any time or
in part from time to time, in the case of any Old Notes tendered hereby. See
"The Exchange Offer--Conditions to the Exchange Offer" in the Prospectus.
9. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes for principal amounts not
exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange of
Old Notes pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted, the amount of such transfer taxes will be
billed directly to such tendering Holder.
10. IRREGULARITIES. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Issuers, in their sole discretion, whose determination
shall be final and binding. The Issuers reserve the absolute right to reject any
or all tenders of any particular Old Notes that are not in proper form, or the
acceptance of which would, in the opinion of the Issuers or their counsel, be
unlawful. The Issuers also reserves the absolute right to waive any defect,
irregularity or condition of tender with regard to any particular Old Notes. The
Issuers' interpretation of the terms of, and conditions to, the Exchange Offer
(including the instructions herein) will be final and binding. Unless waived,
any defects or irregularities in connection with tenders must be cured within
such time as the Issuers shall determine. Neither the Issuers nor the Exchange
Agent shall be under any duty to give notification of defects in such tenders or
shall incur any liability for failure to give such notification. The Exchange
Agent intends to use reasonable efforts to give notification of such defects and
irregularities. Tenders of Old Notes will not be deemed to have been made until
all defects and irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holder, unless otherwise provided by this Letter of
Transmittal, as soon as practicable following the Expiration Date.
11. INTEREST ON EXCHANGED OLD NOTES. Holders whose Old Notes are accepted
for exchange will not receive accrued interest or dividends thereon on the date
of exchange. Instead, interest accreting from December 22, 1997 through the
Expiration Date will be recognized on the New Notes on June 15, 1998, in
accordance with the terms of the New Notes. See "The Exchange Offer--Acceptance
of Old Notes for Exchange; Delivery of New Notes" and "Description of Notes" as
set forth in the Prospectus.
12. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
7
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 7)
To be completed ONLY if the New Notes issued in consideration of Old Notes
exchanged, or certificates for Old Notes in a principal amount not surrendered
for exchange are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that below.
Mail to:
Name
(Please Print)
Address
(Zip Code)
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES
(SEE INSTRUCTIONS 2, 3, 5 AND 7)
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) CERTIFICATE(S)
(PLEASE FILL IN, IN BLANK) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF OLD
AMOUNT OF OLD NOTES NOTES TENDERED (2)
EVIDENCED BY (MUST BE INTEGRAL
CERTIFICATE NUMBER(S) (1) CERTIFICATE(S) MULTIPLES OF $1,000)
TOTAL
1. NEED NOT BE COMPLETED IF OLD NOTES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER.
2. UNLESS OTHERWISE INDICATED, THE ENTIRE PRINCIPAL AMOUNT OF LIQUIDATION PREFERENCE OF OLD NOTES EVIDENCED BY ANY
CERTIFICATE WILL BE DEEMED TO HAVE BEEN TENDERED.
</TABLE>
8
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ________________________________________________
DTC Account Number ___________________________________________________________
Transaction Code Number ______________________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ______________________________________________
Window Ticket Number (if any) ________________________________________________
Date of Execution of Notice of Guaranteed Delivery ___________________________
Name of Institution which Guaranteed Delivery ________________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution ________________________________________________
DTC Account Number ___________________________________________________________
Transaction Code Number ______________________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name ___________________________________________________________________________
Address ________________________________________________________________________
9
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ______________________________________________________________________________
X ______________________________________________________________________________
Signature(s) of Owner(s) of Authorized Signatory Dated
Area Code and Telephone Number: ________________________________________________
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes hereby tendered or on a
security position listing, or by any person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Letter (including
such opinions of counsel, certifications and other information as may be
required by the Issuers or the Trustee for the Old Notes to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Name(s) ________________________________________________________________________
(Please Print)
________________________________________________________________________________
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(Include Zip Code)
Tax Identification or Social Security Number(s) ________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6 to determine if required)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Name of Firm ___________________________________________________________________
Title __________________________________________________________________________
10
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<C> <S> <C>
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY
NUMBER OF --
<CAPTION>
- ---------------------------------------------------------
- ---------------------------------------------------------
<C> <S> <C>
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYEE
IDENTIFICATION NUMBER OF
--
<CAPTION>
- ---------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined funds,
the first individual on the
account. (4)
3. Custodian account of a The minor (6)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner
account that is not a
legal or valid trust
under State law
5. Sole proprietorship The owner (1)
6. Sole proprietorship The owner (3)
7. A valid trust, estate, Legal entity (5)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER INFORMATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees listed
in items (1) through (13) and a person registered under the Investment Advisors
Act of 1940 who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and collects
payments for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under section 403(b)(7).
(3) The United States or any agencies or instrumentality thereof.
(4) A state, the District of Columbia, a possession of the United States or
any subdivisions or instrumentalities thereof.
(5) A foreign government, a political subdivision of a foreign government,
or an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Interest payments that are generally exempt from back-up withholding include:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding.
<PAGE>
For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of
an under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
