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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 1, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
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Commission file number 1-9573
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UNO RESTAURANT CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 04-2953702
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 CHARLES PARK ROAD, WEST ROXBURY, MA 02132
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 323-9200
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $.01 par
value, held by non-affiliates of the registrant as of November 30, 1995, was
$51,430,177, based on the closing price of $6.875 on that date on the New York
Stock Exchange. As of November 30, 1995, 13,189,306 shares of the registrant's
Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on February 27, 1996 which will be filed within 120
days after the end of the registrant s fiscal year, are incorporated by
reference in Part III of this report. Portions of the registrant's
Registration Statement on Form S-1 (Registration No. 33-13100) (the "1987
Registration Statement"), the registrant's Registration Statement on Form S-2
(Registration No. 33-38944) (the "1991 Registration Statement"), the
registrant's Registration Statement on Form S- 2 (Registration No. 33-59193)
(the "1995 Registration Statement"), the registrant s Annual Report on Form
10-K for the fiscal year ended September 30, 1990, the registrant s Annual
Report on Form 10-K for the fiscal year ended September 29, 1991, the
registrant s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1,
1990, the registrant s Annual Report on Form 10-K for the fiscal year ended
September 27, 1992, the registrant s Annual Report on Form 10-K for the fiscal
year ended October 3, 1993, the registrant s Annual Report on Form 10-K for the
fiscal year ended October 2, 1994, the registrant s Quarterly Report on Form
10-Q for the fiscal quarter ended April 2, 1995, the registrant's Proxy
Statement for the Annual Meeting of Stockholders held on March 2, 1993, the
registrant's Proxy Statement for the Annual Meeting of Stockholders held on
February 22, 1994, the registrant's Proxy Statement for the Annual Meeting of
Stockholders held on February 8, 1995, are incorporated by reference in Part IV
of this Report.
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PART I
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ITEM 1. BUSINESS
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GENERAL AND DEVELOPMENTS DURING FISCAL YEAR 1995
The Company owns and operates or franchises a total of 150 restaurants,
including 80 owned and 60 franchised casual dining, full-service restaurants
under the name "Pizzeria Uno...Chicago Bar & Grill." The Pizzeria Uno
restaurants offer a diverse, high-quality menu at moderate prices in a casual,
friendly atmosphere. The restaurants feature the Company's signature
Chicago-style deep- dish pizza and a selection of entrees, including thin crust
pizza, pasta, fajitas, ribs, steak and chicken, as well as a variety of
appetizers, salads, sandwiches and desserts. The Company's restaurants average
approximately 6,200 square feet with seating for an average of approximately
180 guests. For the fiscal year ended October 1, 1995, Company-owned
restaurants averaged $1,925,000 in sales. Company-owned restaurants are
located predominantly in the Northeast and Mid- Atlantic states, and franchised
restaurants are located throughout the United States.
In fiscal 1993, the Company began implementing strategic initiatives
intended to strengthen its position in casual dining and to distinguish its
restaurants from quick service pizza, pizza and pasta, and full-service Italian
restaurants. As part of this strategy, during fiscal 1994, the Company
invested approximately $2.5 million in new kitchen capabilities, including
saute stations, grills and fryers, for its Company-owned restaurants enabling
the Company to enhance the quality, breadth and appeal of its non-pizza menu
items. To better communicate its concept and broadened menu to consumers, the
Company refined the name of its restaurants to Pizzeria Uno ...Chicago Bar &
Grill and upgraded the design and decor of its restaurants to be consistent
with its casual dining theme. In addition, in fiscal 1993, the Company
increased the size of its deep-dish pizzas to provide greater value and added
additional restaurant managers in many of its higher volume units to improve
overall service. The Company believes these strategic initiatives directly
contributed to an increase in its average guest check and increases in
comparable store sales of 3.3% in fiscal 1995.
The Company recently has been expanding its channels of distribution to
capitalize on the Pizzeria Uno brand name and the appeal of its signature
Chicago- style deep-dish pizza. Currently, the Company is distributing
refrigerated and frozen Chicago-style deep-dish pizza to approximately 900
supermarkets, primarily in New England, for sale in their fresh deli counters
and frozen food sections. Since January 1993, the Company has also been
supplying frozen Pizzeria Uno brand, Chicago-style deep-dish pizza to American
Airlines for service on its flights. Approximately 1.7 million Pizzeria Uno
brand pizzas were served aboard American Airlines flights during fiscal 1995.
The Company is testing a similar pizza product at Pizzeria Uno kiosks in 14
General Cinema theaters. The Company also operates four neighborhood,
limited-seating take-out units under the name "Uno...Pizza Takery." These units
are located in strip centers, occupy approximately 2,000 square feet and offer
limited seating for up to 40 customers.
The Company acquired the rights to the name "Pizzeria Uno" from the
late Ike Sewell, who opened the original Pizzeria Uno restaurant in Chicago,
Illinois in 1943 and is considered the originator of Chicago-style deep-dish
pizza. The Company opened its first Pizzeria Uno restaurant in 1979.
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During the fiscal year ended October 1, 1995, the Company opened 16
full-service Company-owned restaurants, and exchanged ownership of its
restaurant in Fairview Heights, Illinois for a competitor s restaurant in
Orlando, Florida. Five franchised restaurants opened during the fiscal year,
and five closed.
During the fiscal year ending September 29, 1996, the Company
anticipates opening up to 12 Company-owned full-service restaurants and up to
10 franchised restaurants. The timing of these planned openings is subject to
various factors, including locating satisfactory sites and negotiating leases
and franchise agreements.
In December, 1994, the Company purchased three Bay Street Grill
restaurants located in Schaumburg, Illinois; Woodbridge, New Jersey; and
Philadelphia, Pennsylvania. The three full-service, casual dining restaurants,
which specialize in seafood, generated total annual sales of $6.6 million
during fiscal 1995. The Company has no current plans to open additional Bay
Street Grill restaurants.
In December 1994, the Company obtained a $50 million unsecured,
revolving credit and term loan facility through Fleet Bank. The new facility
replaced a $20 million unsecured revolving credit facility. The new revolving
credit facility will convert to a three year term loan in December 1997, and
advances under this agreement will accrue interest at either the bank's prime
rate plus .25%, or alternatively, at 100-150 basis points above LIBOR.
On October 26, 1995, the Company entered into a five year interest rate
swap agreement with Fleet Bank involving the exchange of floating rate interest
payment obligations for fixed rate interest payment obligations. The notional
amount of this interest rate swap agreement was $20 million. The Company
entered into this agreement in order to manage interest costs and risks
associated with fluctuating interest rates.
The Board of Directors of the Company declared a 25% stock split on
November 15, 1994 payable in the form of a stock dividend on February 28, 1995
to the stockholders of record of the Company on February 8, 1995. The stock
split resulted in one additional share of Common Stock being issued for each
four shares of Common Stock issued and outstanding on the record date. Cash
was issued in lieu of fractional shares.
During June 1995, the Company completed a secondary public equity
offering of 2.3 million shares of its Common Stock underwritten by Montgomery
Securities. The Company received $22.6 million in net proceeds from the
offering.
In October 1995, the Board of Directors of the Company authorized the
repurchase of up to a total of 1.5 million shares of the Company s Common Stock
in the market from time to time during the subsequent six months. This
superseded the Board of Directors previous authorization in July 1995 for the
repurchase of up to a total of 500,000 shares of the Company's Common Stock. As
of November 30, 1995, the Company had repurchased a total of 494,100 shares of
its Common Stock at prices between $7.00 and $8.25 per share.
RESTAURANT CONCEPT AND MENU
Pizzeria Uno restaurants are full-service, casual dining restaurants,
featuring the Company's signature Chicago-style deep-dish pizza and a diverse
menu of high quality, moderately-priced menu items. The Company's target market
is middle to upper-middle income individuals in the 17 to 49 year-old age
group. The restaurants are
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generally open from 11:00 a.m. to midnight, seven days per week.
The restaurants feature the Company's signature Chicago-style deep-dish
pizzas and a selection of entrees, including thin crust pizza, pastas, fajitas,
ribs, steak and chicken, as well as a variety of appetizers, salads, sandwiches
and desserts. The Company's signature product, its Chicago-style, deep-dish
pizza, filled with ingredients such as fresh meats, spices, vegetables and real
cheeses, is baked according to proprietary recipes. The Company believes that
its proprietary recipes produce a superior pizza that is difficult to
duplicate. In fiscal 1994, the Company invested approximately $2.5 million in
new kitchen capabilities, including saute stations, grills and fryers, for its
Company-owned restaurants enabling the Company to enhance the quality, breadth
and appeal of its non-pizza items. At the end of fiscal 1995, the Company's
average check per guest for full service Company-owned restaurants was
approximately $9.50. For fiscal 1995, sales of alcoholic beverages accounted
for approximately 18% of total restaurant sales.
RESTAURANT DESIGN AND SITE SELECTION
The Company has recently upgraded the design and decor of its
restaurants to be consistent with its theme as "Pizzeria Uno...Chicago Bar &
Grill." Pizzeria Uno restaurants are designed and decorated to provide a
friendly and comfortable atmosphere expected of full-service, casual dining
restaurants and distinguished from typical pizza restaurants. The decor of each
restaurant emphasizes quality with wood, brick and brass. To ensure quality and
compliance with Company standards, preliminary exterior design and complete
interior and kitchen design for all Company-owned and franchised restaurants
are prepared by the Company. The Company's current prototype free-standing
restaurant occupies approximately 6,400 square feet, with a seating capacity of
approximately 200 customers.
The Company considers the specific location of a restaurant to be
critical to its long-term success and devotes significant effort to the
investigation and evaluation of potential sites. One or more of the Company's
executive officers inspect and approve the site for each Company-owned and
franchised restaurant. Within each target market area, the Company evaluates
population density and demographics, major retail and office concentration and
traffic patterns. In addition, the Company evaluates visibility, accessibility,
proximity to direct competition and various other site specific factors.
Pizzeria Uno restaurants are located in both urban and suburban markets, in
free-standing buildings, strip centers and malls. Restaurant development is
currently targeted at high profile, free-standing locations.
Historically, the Company has leased most of its restaurants to
minimize investment costs. Since fiscal 1992, however, the Company began
selectively purchasing real estate to develop new restaurants where available
and when the expected long-term cost of owning the real estate is less than the
cost of leasing. Of the 88 Company-owned restaurants open as of November 30,
1995, 74 are located in leased facilities and 14 are fee owned properties. See
"Item 2. - Properties."
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<TABLE>
RESTAURANT LOCATIONS
The following tables provide the locations for Company-owned and
franchised restaurants as of November 30, 1995.
COMPANY-OWNED RESTAURANTS (88)
<CAPTION>
<S> <C> <C>
COLORADO (2) Burlington Lynbrook
Denver Cambridge(2) Massapequa
Greenwood Danvers New York City
Dedham Bayside
CONNECTICUT (5) Framingham Bay Ridge
Danbury Hanover Forest Hills
Fairfield Hyannis Manhattan(5)
Manchester Kingston Syracuse
Milford Lynnfield Victor
West Hartford Newton(2)(c) Vestal
Newtonville (d) Yonkers
FLORIDA (5) Revere
Daytona Beach Shrewsbury(d) OHIO (1)
Kissimmee Springfield Columbus
Ormond Beach Waltham (d)
Orlando (2) Woburn PENNSYLVANIA (4)
Philadelphia (3)(e)
ILLINOIS (6) MISSOURI (1) Pittsburgh
Aurora St. Louis Monroeville
Chicago (3)(a) Chesterfield
Schaumburg (2)(e) RHODE ISLAND (1)
NEW HAMPSHIRE(3) Warwick
MAINE (1) Concord
Portland Manchester VIRGINIA (7)
Nashua Balston
MARYLAND (5) Fairfax
Baltimore NEW JERSEY (2) Newport News
Bel Air Paramus Norfolk
Bethesda Woodbridge (b) Potomac Mills
Towson Reston
Waldorf NEW YORK (18) Williamsburg
Albany
MASSACHUSETTS (25) Amherst WASHINGTON, DC(2)
Boston(5) Buffalo Cleveland Park
Braintree Henrietta Union Station
Brockton
<FN>
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See footnotes on next page
</TABLE>
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<TABLE>
FRANCHISED RESTAURANTS (62)
<CAPTION>
<S> <C> <C>
ARIZONA (2) MARYLAND (1) OHIO (6)
Phoenix Deep Creek Cincinnati(2)
Tempe Cleveland(3)
MASSACHUSETTS (4) Dayton
CALIFORNIA (10) Holyoke
Cupertino Marlborough OKLAHOMA (1)
Fremont Springfield(2)(c) Tulsa
Los Angeles
San Diego(2) MICHIGAN (2) PENNSYLVANIA (6)
San Francisco(3) Ann Arbor King of Prussia
Santa Clara Bloomfield Langhorne
West Hollywood Media
MINNESOTA (2) Philadelphia(3)
CANADA (1) Minnetonka
Toronto Edina PUERTO RICO (2)
San Juan
FLORIDA (4) NEVADA (1) San Patricio
Miami Las Vegas
Orlando(3) TEXAS (4)
NEW JERSEY (4) Addison
ILLINOIS (2) Cherry Hill Arlington
Champaign Secaucus Ft. Worth
Chicago(d) South Plainfield Houston
Wayne
INDIANA (2) WASHINGTON, DC(1)
Indianapolis NEW YORK (2) Georgetown
Merrillville Poughkeepsie
White Plains WISCONSIN (4)
KENTUCKY (1) Janesville
Lexington Milwaukee
Madison(2)
<FN>
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(a) Includes one Mexican restaurant.
(b) Bay Street Grill.
(c) Includes one limited seating, take-out restaurant.
(d) Limited seating, take-out restaurant.
(e) Includes one Bay Street Grill.
</TABLE>
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UNIT ECONOMICS
For the fiscal year ended October 1, 1995, the 62 Company-owned
restaurants open for the entire fiscal year generated average restaurant sales
of approximately $1,935,000, average restaurant operating income of
approximately $279,000 (or 14.4% of sales) and average restaurant cash flow of
approximately $410,000 (or 21.2% of sales). The 23 Company-owned restaurants
opened in fiscal 1994 and fiscal 1995 had an average cash investment of
approximately $1,545,000 for building, leasehold improvements, furniture,
fixtures and equipment, but excluding land costs and pre-opening expenses.
The Company expects that the average cash investment required to open a
full-service Pizzeria Uno restaurant will be approximately $1.5 million,
excluding land and pre-operating expenses. In the future, the Company
anticipates that it will continue to purchase a portion of its new restaurant
locations and expects that its total investment for each fee owned unit will be
approximately $2.0 to $2.5 million.
RESTAURANT EXPANSION
The Company intends to continue opening Company-owned restaurants in
two of its primary metropolitan markets, New York and Baltimore/Washington,
D.C. The Company is also engaged in site development efforts in Chicago,
Orlando and Denver. Due to its current concentration of restaurants in New
England, future expansion in this market will be more selective. In fiscal
1995, the Company opened 16 restaurants, and exchanged ownership of one
restaurant in metropolitan St. Louis for a competitor's restaurant in Orlando,
Florida. The Company expects to open approximately 12 restaurants in fiscal
1996.
The Company will continue to grant franchisees the right to expand the
Pizzeria Uno restaurant business throughout the United States and, as
opportunities arise, outside the United States. In fiscal 1995, five
franchised restaurants were opened, and five franchised restaurants were
closed. During fiscal 1996, the Company expects franchisees to open
approximately 10 restaurants. See "-- Franchise Program."
OTHER BUSINESS DEVELOPMENT
The Company has recently been expanding its consumer product business
principally through distribution of its deep-dish pizza in the fresh deli
counters and frozen food sections of approximately 900 supermarkets in New
England, New York, New Jersey, Pennsylvania and Ohio. Currently, Pizzeria Uno
deep-dish pizza is the leading brand of fresh, refrigerated pizza sold in New
England supermarkets. The Company also is currently supplying private-label
thin-crust pizza to selected New England supermarket chains. In addition, in
January 1993, the Company began supplying frozen deep-dish pizzas to American
Airlines for service on its flights. Approximately 1.7 million pizzas were
served aboard American Airlines flights during fiscal 1995. During 1995, the
Company also began distributing frozen deep-dish pizza to two wholesale club
chains. Finally, the Company is testing the sale of frozen pizzas at Pizzeria
Uno kiosks currently located in 14 General Cinema movie theaters. To support
the growth of the Company's consumer product business, a production facility in
Brockton, Massachusetts began operation in January 1993. The Company expanded
the facility later in fiscal 1993 and further expanded the facility in fiscal
1995. See "Item 2 - Properties."
The Company is continuing to test other traditional and
non-traditional distribution channels for its signature, deep-dish pizza
product. The Company is currently operating four limited-seating take-out units
with the name "Uno...Pizza
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Takery." The units are located in strip centers, occupy approximately
2,000 square feet and offer limited seating for up to 40 customers.
In December 1994, the Company purchased three Bay Street Grill
restaurants located in Schaumburg, Illinois; Woodbridge, New Jersey; and
Philadelphia, Pennsylvania. The Bay Street Grill restaurants are
full-service, casual dining restaurants, which specialize in seafood. The
Company has no current plans to open additional Bay Street Grill restaurants.
RESTAURANT MANAGEMENT
The staff for a typical Pizzeria Uno restaurant consists of one general
manager, two assistant managers and approximately 50 to 70 hourly employees,
many of whom are part-time personnel. Managers of Company-owned restaurants
are compensated with a salary plus a performance bonus based on restaurant
sales and profits. The Company believes that turnover among the Company's
restaurant managers is below the industry average.
The Company conducts an initial ten-week training program for all
managers and franchisees focusing on restaurant operations. There is
continuing training of Company-owned restaurant managers through specialized
training programs and regular meetings that emphasize the areas of leadership,
quality of food preparation and service. The Company requires its food
handling personnel and alcohol serving employees to participate in a training
program to ensure the sanitary and responsible service of food and alcohol.
The training program is conducted on an ongoing basis. The Company also holds
quarterly regional meetings and an annual national meeting of franchisees and
Company managers which focus on continuing training in marketing, new products,
site selection and aspects of business management.
Each Company-owned restaurant manager and franchisee is required to
comply with an extensive operations manual which contains detailed standards
and specifications for all elements of operations. The Company generally
visits franchisees on a quarterly basis, but continuing training of franchised
restaurant managers is the responsibility of the franchisees.
The Company employs three operations vice presidents and 13 regional
operations directors. The Company also currently employs three field-service
supervisors to monitor all franchised restaurants. Their duties include
quarterly visits and detailed, annual inspections of quality, service and
sanitation. As additional restaurants are opened, the Company intends to add
qualified supervisors in order to maintain quality control.
PURCHASING
The Company negotiates directly with suppliers for all primary food
ingredients and beverage products to ensure adequate supplies and to obtain
competitive prices. The Company seeks competitive bids from suppliers on many
of its primary food ingredients on a periodic basis no less than annually for
each supplier. The Company approves suppliers of these ingredients and
products and requires its suppliers to adhere to product specifications
established by the Company. Several key ingredients are proprietary. They are
manufactured for the Company under private label and sold to authorized
distributors for resale to Company-owned restaurants and franchisees. The
Company and its franchisees purchase substantially all food and beverage
products from authorized local or national distributors. In some cases,
franchisees find it more economical to purchase most of these products from
the same distributors
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servicing the Company-owned restaurants in order to take advantage of
volume discounts. The Company does not derive any income from suppliers or
distributors on sales to franchisees. All essential food and beverage products
are available, or upon short notice can be made available, from alternative
qualified suppliers.
ADVERTISING AND MARKETING
For fiscal 1995, the Company spent 2.7% of restaurant and consumer
product sales on advertising and marketing. The Company relies primarily on
television, radio, direct mail and print advertising. Through an advertising
cooperative fund, the Company prepares regional and local advertising materials
and also produces menus and promotional programs for both franchised and
Company-owned restaurants.
Franchisees are required to contribute a fee of up to 1.0% of
franchised restaurant sales to the advertising cooperative fund, and the
Company contributes an equal percentage of Company-owned restaurant sales.
Except for the materials prepared and distributed by the Company through the
advertising cooperative fund, franchisees are responsible for the
implementation of advertising and marketing for their respective restaurants,
subject to adherence to Company-established guidelines. In addition, the
Company's franchise agreement requires franchisees to spend at least 2% of
franchised restaurant sales each year on local advertising and public
relations.
FRANCHISE PROGRAM
As of October 1, 1995, the Company had 61 franchised Pizzeria Uno
restaurants operated by 34 franchisees located in 18 states, the District of
Columbia, Puerto Rico and Canada. Historically, franchises were granted on a
unit-by-unit basis, rather than by territory. The Company is currently
pursuing territory development with franchisees for construction of one or more
restaurants over a certain period of time and within a certain geographic area.
For example, the Company recently signed an area franchise agreement with a
Portland, Oregon franchisee covering several counties in Oregon requiring the
franchisee to open four restaurants prior to March 31, 2000. The Company is in
continual discussions with existing and prospective franchisees for the
development of certain geographic areas and expects to grant additional
franchises to qualified applicants with restaurant- related operating
experience and requisite financial resources.
New domestic franchisees are required to pay at the time the
development agreement is signed a nonrefundable fee of $10,000 per restaurant
committed to be developed. The Company's current franchise agreement also
requires franchisees to pay a unit franchise fee of $30,000 per restaurant
before signing a franchise agreement for a specific location and a continuing
monthly royalty of 5% of restaurant sales. Royalties and franchise fees for
international franchises are negotiated on an individual basis. Royalties
received by the Company averaged 4.4% of franchised restaurant sales for the
fiscal year ended October 1, 1995. At the beginning of fiscal 1992, the
Company implemented a variable royalty plan that allows royalty rate reductions
from contractual rates for those franchised restaurants meeting certain
criteria. It is available only to those franchised restaurants that do not
achieve minimum sales levels during their first five years of operation in
relation to their overall capital investment, including capitalized lease
obligations. The minimum royalty rate under the variable royalty plan is 3%
and ranges up to 5%. Seven franchised restaurants currently qualify for some
degree of royalty rate reduction under the variable royalty plan.
The Company receives weekly and monthly sales reports from its
franchisees and,
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in addition, conducts test sales audits of all franchisees on an annual
basis. Based upon these reports, the Company believes that the average
annualized sales for its franchised restaurants in fiscal 1995 was
approximately $1.4 million.
The franchise agreements generally prohibit the Company from granting
competing franchises or opening competing restaurants within three miles of a
franchised restaurant. The franchise agreements have an initial term of 20
years with three successive ten-year renewal periods at the option of the
franchisee, provided that the agreement has not previously been terminated by
either party. Upon each renewal, the Company may require a franchisee to sign
a revised franchise agreement and to make capital expenditures to renovate the
restaurant, but may not increase the continuing monthly royalty or charge a
renewal fee. The Company retains the right to terminate a franchise agreement
for a variety of reasons, including significant and willful understatement of
gross receipts, failure to pay fees, material misrepresentation on an
application for a franchise, or material breach or default under the franchise
agreement, including failure to maintain Company operating standards. Many
state franchise laws limit the ability of a franchisor to terminate or refuse
to renew a franchise. The Company has the right to audit and receive certain
monthly and annual financial and other information from franchisees.
The Company's initial training program for franchisees is similar to
its training program for management trainees and employees in Company-owned
restaurants. See "-- Restaurant Management." In order to ensure uniform quality
standards, the Company requires franchisees to comply with Company
specifications as to space, design and decor, menu items, principal food
ingredients and day-to-day operations, as set forth in the Company's operations
manual. The Company's executives or field-service personnel generally visit
each franchise location at least four times per year.
The Company guarantees certain limited equipment and leasehold
improvement financing to qualified franchisees through an agreement with an
unaffiliated finance company. Under this agreement, the Company guarantees
financing provided by the finance company to qualified franchisees in the
maximum aggregate amount of $2 million for all franchisees combined. The
Company has also guaranteed up to a maximum of $431,000 of future lease
payments in the event of default by specific franchisees.
COMPETITION
The restaurant business is highly competitive with respect to price,
service and food quality, and is often affected by changes in consumer tastes,
economic conditions and population and traffic patterns. There is also intense
competition for real estate sites, personnel and qualified franchisees. The
Company competes within each market with locally-owned restaurants as well as
with national and regional restaurant chains, some of which operate more
restaurants and have greater financial resources and longer operating histories
than the Company.
EMPLOYEES
The Company employed approximately 5,815 persons, 118 of whom were
corporate personnel and 333 of whom were field service or restaurant managers
or trainees. The remaining employees were restaurant personnel, many of whom
were part-time. Of the 118 corporate employees, 62 were in management positions
and 56 were general office employees.
The Company considers its employee relations to be good. None of the
Company's employees is covered by collective bargaining agreements except for
employees of its
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three Restaurants in urban Chicago who are members of the
Hotel Employees and Restaurant Employees International Union of the AFL-CIO,
and who are subject to a collective bargaining agreement with the Company
through November 30, 1996.
TRADEMARKS
The Company regards its many trademarks and service marks as having
significant value and as being an important factor in the marketing of its
products. Its most significant marks include "Uno," "Pizzeria Uno," "Pizzeria
Due" and "Bay Street." The Company's registrations of its significant marks
are subject to renewal at various times from 1998 to 2005. However, the Company
intends to renew its registration of such marks prior to expiration. The
Company has applied for federal registration of the trademark "Pizzeria Uno . .
. Chicago Bar & Grill." The Company's policy is to pursue registration of its
marks whenever possible and to oppose strenuously any infringement of its
marks.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws
affecting its business. Each of the Company's restaurants is subject to
licensing and regulation by a number of governmental authorities, which may
include alcoholic beverage control, health and safety and fire agencies in the
state or municipality in which the restaurant is located. Difficulties or
failures in obtaining the required licenses or approvals could delay or prevent
the development of a new restaurant in a particular area.
Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a state authority and, in certain locations, county and
municipal authorities for a license or permit to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control regulations
relate to numerous aspects of the daily operations of the Company's
restaurants, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control, and handling,
storage and dispensing of alcoholic beverages.
The Company may be subject in certain states to "dram-shop" statutes,
which generally provide a person injured by an intoxicated person the right to
recover damages from an establishment which wrongfully served alcoholic
beverages to such person. The Company carries liquor liability coverage as part
of its existing comprehensive general liability insurance.
The Company is also subject to federal and a substantial number of
state laws regulating the offer and sale of franchises. Such laws impose
registration and disclosure requirements on franchisors in the offer and sale
of franchises. These laws often also apply substantive standards to the
relationship between franchisor and franchisee and limit the ability of a
franchisor to terminate or refuse to renew a franchise.
The Company is subject to the rules and regulations of various federal,
state and local health agencies, including the United States Food and Drug
Administration (the "FDA") and the United States Department of Agriculture. The
FDA specifies standards for nutrition content claims and health claims made in
connection with food items offered in the Company's restaurants. The FDA also
prescribes the format and content of nutrition information required to appear
on labels of certain products,
-12-
<PAGE> 13
including the Company's line of fresh and frozen items sold through
supermarkets.
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages are as follows:
<CAPTION>
Director
Name Age Title Since
---- --- ----- --------
<S> <C>
Aaron D. Spencer ...... 64 Chairman, Chief Executive 1979
Officer and Director
Craig S. Miller ....... 46 President, Chief Operating 1985
Officer and Director
Robert M. Brown ....... 48 Senior Vice President- 1987
Finance, Chief Financial
Officer, Treasurer and Director
Alan M. Fox ........... 48 Senior Vice President- --
Purchasing, President-Uno
Foods Inc.
William A. Gallucci ... 64 Senior Vice President- --
Franchising
Thomas W. Gathers ..... 39 Senior Vice President- --
Human Resources and Training
Eugene I. Lee ......... 34 Senior Vice President- --
Operations
Damon M. Liever ....... 41 Senior Vice President- --
Marketing
</TABLE>
The following is certain additional information concerning each executive
officer of the Company. When used below, unless otherwise noted, positions
held with the Company include positions held with the Company's predecessors.
Mr. Spencer, the founder and Chief Executive Officer of the Company, has
been Chairman since 1986 and previously served as the Company's President until
1986. Mr. Spencer has 30 years of experience in the restaurant industry and
was the founder and owner of the predecessor of the Company which operated a
chain of 24 Kentucky Fried Chicken franchised restaurants at the time the
restaurants were sold.
Mr. Miller has been President and Chief Operating Officer since 1986. From
1984 to 1986, he served as a Vice President and then Executive Vice President
of the Company. Prior to joining the Company, Mr. Miller spent 11 years with
the General Mills Inc. restaurant subsidiary, including four years in various
executive capacities with Casa Gallardo Mexican restaurants and six years with
the Red Lobster restaurant chain. Mr. Miller has a total of 28 years of
experience in the restaurant industry.
Mr. Brown has been Senior Vice President-Finance since 1988 and has served
as Chief Financial Officer and Treasurer since 1987. From 1987 to 1988, he
served as
-13-
<PAGE> 14
Vice President-Finance of the Company. From 1984 to 1987, Mr. Brown
served as vice president, treasurer and chief financial officer of the waste
management subsidiary of Genstar Corporation, and was employed by SCA Services,
Inc. from 1980 to 1984, most recently as assistant controller. Mr. Brown is a
certified public accountant and has worked in accounting and finance since
1969.
Mr. Fox has been Senior Vice President-Purchasing since October 1990.
Also, since 1990, Mr. Fox has been President of Uno Foods Inc., the Company's
subsidiary responsible for retail pizza distribution. Mr. Fox served as Senior
Vice President-Purchasing and Development from 1989 to 1990, and served as Vice
President of Purchasing from 1988 to 1989. Prior to joining the Company, from
1971 to 1988, Mr. Fox served as vice president-purchasing at Worcester Quality
Foods, Inc. a wholesale food service distributor. Mr. Fox has a total of 24
years of experience in the restaurant and food service industries.
Mr. Gallucci has been Senior Vice President-Franchising since October
1994. From 1988 to 1994, he served as Senior Vice President-Operations, and
from 1985 to 1988, he served as Vice President-Operations of the Company.
Prior to joining the Company, Mr. Gallucci served for 12 years with Magic Pan
International, Inc. as a division operations vice president, and prior to that
he was employed by Stouffer Corporation for 16 years. Mr. Gallucci has a total
of 38 years of experience in the restaurant industry.
Mr. Gathers has been Senior Vice President-Human Resources and Training
since November 1992. Mr. Gathers served as Vice President-Human Resources and
Training since August 1990. Prior to joining the Company, Mr. Gathers served
in several senior training and development functions with the General Mills
Inc. restaurant subsidiary from 1981 to 1990. Mr. Gathers has a total of 19
years of experience in the restaurant industry.
Mr. Lee has been Senior Vice President-Operations since October 1994.
From 1992 to 1994, he served as Vice President-Operations of the Company. From
1988, when he joined the Company, to 1992, Mr. Lee held several operations
management positions. Prior to joining the Company, Mr. Lee served for 10
years with the York Steak House division of General Mills, Inc. as an area
supervisor. Mr. Lee has a total of 17 years of experience in the restaurant
industry.
Mr. Liever has been Senior Vice President-Marketing since January 1994.
From 1993 to 1994, he served as Vice President-Marketing of the Company. Prior
to joining the Company, Mr. Liever served as Vice President-Marketing for the
Black-Eyed Pea restaurant division of Unigate PLC from 1991 to 1993. From 1981
to 1991 Mr. Liever held several senior marketing positions with Pepsico
subsidiaries, including Frito-Lay and Taco Bell.
Officers are elected by, and serve at the pleasure of, the Board of
Directors.
See also "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT," "ITEM 11. EXECUTIVE COMPENSATION," "ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," and "ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
-14-
<PAGE> 15
ITEM 2. PROPERTIES
- -------------------
The Company owns a 30,000 square foot production plant in Brockton,
Massachusetts. The production plant produces frozen product for service aboard
American Airlines flights, as well as fresh, refrigerated pizzas that are sold
at deli counters in approximately 900 supermarkets in New England, New York,
New Jersey, Pennsylvania and Ohio. This facility provides sufficient capacity
to support double the level of sales achieved in fiscal 1995. See "ITEM 1.
Other Business Development."
Prior to fiscal 1992, all Company-owned restaurants were located in
leased space. However, during fiscal 1992, the Company purchased real estate
to develop new restaurants in Portland, Maine, Lynnfield, Massachusetts and
Hyannis, Massachusetts, and also purchased the real estate related to its three
urban Chicago restaurants; during fiscal 1993 the Company purchased real estate
to develop new restaurants in Orlando, Florida; during fiscal 1994 in Amherst,
New York, and Paoli and Franklin Mills, Pennsylvania; and in fiscal 1995, in
Potomac, Virginia, Schaumburg, Illinois, Denver, Colorado and Williamsburg,
Virginia. During fiscal 1996, the Company intends to purchase approximately
four additional restaurant properties.
The leases for Company-owned restaurants typically have initial terms
of 20 years with certain renewal options and provide for a base rent plus real
estate taxes, insurance and other expenses, plus additional percentage rents
based on revenues of the restaurant. All of the Company's franchised
restaurants are in space leased from parties unaffiliated with the Company,
with the exception of one franchised restaurant which is subleased from the
Company. Franchised restaurant leases typically have lease terms through the
initial term of the franchise agreements.
One of the Company-owned restaurants in Boston, Massachusetts is
located on the first floor of a six-story office building owned by Aaron D.
Spencer, Chairman and Chief Executive Officer of the Company. Mr. Spencer has
leased the entire building to the Company pursuant to a five-year lease, ending
on March 29, 1997, at a rent of $162,000 per year. The rent will be increased
by 12% of the cost of any improvements to the building made by Mr. Spencer.
The Company is responsible for all taxes, utilities, insurance, maintenance and
repairs. The lease may be terminated by either the Company or Mr. Spencer upon
six months prior notice. If Mr. Spencer or the Company terminates the lease, a
new lease between the Company and Mr. Spencer relating only to the restaurant
space of the building will become effective immediately. The new lease will
have a five-year term with two five-year renewal options. Rent under the new
lease will be 6.5% of total restaurant revenues but with a minimum rent,
determined by independent appraisal, equal to the fair market rent at the time
the new lease becomes effective. The Company currently sublets all but the
restaurant space at rents which approximate the $162,000 annual rent that it is
obligated to pay Mr. Spencer. Management believes that the terms of both the
existing lease and the new lease which will become effective upon termination
of the existing lease are comparable to those otherwise available in the real
estate market.
The Company's executive offices are located in two adjacent buildings
in West Roxbury, Massachusetts. The first, a three-story building owned by Mr.
Spencer, is leased to the Company pursuant to a five-year lease, commencing on
March 30, 1987, with options to renew for two additional five-year periods.
Rent during the initial term of the lease was $30,000 per year. Currently,
the first of the two five-year options has been exercised at a rate of $36,000
per year. During the final option period, rent will be equal to fair market
rent, but may not be less than the rent under the lease during the immediately
preceding term. The value of any leasehold improvements made by the Company
will not be considered in determining fair market
-15-
<PAGE> 16
value rent. The Company added the third floor to the building. The
Company is responsible for all taxes, utilities, insurance, maintenance and
repairs. The second, a two-story building owned by Mr. Spencer's children, is
also leased to the Company pursuant to a 15 year lease commencing on February
1, 1990, with options to renew for three additional five-year periods. Rent
during the first five years of the initial term of the lease was $106,800 per
year, increasing to $128,160 per year for the next five years, and to $153,792
for the final five years of the initial term of the lease. The Company is
responsible for all taxes, utilities, insurance, maintenance and repairs. Rent
during any option period will be 120% of the rent for the prior term of the
lease. Management believes that the terms of the leases for the two offices
are as favorable as otherwise available in the real estate market. With the
two buildings, the executive offices currently consist of approximately 25,000
square feet and house the Company's executive, administrative and clerical
offices.
-16-
<PAGE> 17
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
As of November 30, 1995, the Company was not a party to any material
pending legal proceedings other than ordinary routine litigation incidental to
the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
-17-
<PAGE> 18
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
<TABLE>
MARKET INFORMATION
The Company's Common Stock, $.01 par value, is listed on the New York
Stock Exchange under the symbol "UNO." The table below sets forth the range of
high and low sales prices on the New York Stock Exchange for the period from
October 4, 1993 to October 1, 1995, adjusted to reflect the stock split paid on
February 28, 1995:
<CAPTION>
COMMON STOCK
PRICE
-----------------
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED OCTOBER 2, 1994
- ---------------------------------
First Quarter $ 8.70 $ 7.00
Second Quarter $ 8.50 $ 6.50
Third Quarter $ 8.60 $ 7.10
Fourth Quarter $10.90 $ 7.90
FISCAL YEAR ENDED OCTOBER 1, 1995
- ---------------------------------
First Quarter $11.10 $ 9.30
Second Quarter $12.80 $10.10
Third Quarter $12.00 $10.25
Fourth Quarter $10.375 $ 7.75
</TABLE>
NUMBER OF STOCKHOLDERS
As of October 1, 1995, there were approximately 4,300 beneficial owners
of the Company's Common Stock.
DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and
for the foreseeable future intends to continue its policy of retaining earnings
to finance the development and growth of the Company. The Board of Directors
may reconsider this policy from time to time in light of conditions then
existing, including the Company's earnings performance, financial condition and
capital requirements. Pursuant to both the private placement in June 1990 of
$10 million of senior, unsecured notes with a major insurance company, and a
$50 million unsecured revolving and term credit agreement obtained in December
1994, the Company became subject to various financial and operating covenants,
including limitations on the payment of cash dividends. The most restrictive
limitations, in general, preclude the Company from paying cash dividends, if
such payment, when aggregated with certain other payments, would exceed 35% of
net income for the then most recent four-quarter period or would cause certain
net tangible asset and debt ratios to be exceeded.
On November 15, 1994, the Board of Directors declared a five-for-four
stock split effected in the form of a stock dividend paid in shares of the
Company s Common Stock on February 28, 1995 to stockholders of record on
February 8, 1995.
-18-
<PAGE> 19
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Fiscal Year Ended
------------------------------------------------------------
Oct. 1 Oct. 2 Oct. 3 Sept. 27 Sept. 29
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES
Restaurant sales...................... $146,100 $112,674 $ 98,234 $ 77,500 $ 65,921
Consumer product sales................ 8,477 7,418 7,073 3,106 1,996
Franchise income...................... 4,129 3,973 3,638 3,507 3,408
-------- -------- -------- -------- --------
158,706 124,065 108,945 84,113 71,325
-------- -------- -------- -------- --------
COSTS AND EXPENSES
Cost of food and beverages............ 39,420 30,177 26,024 19,224 16,187
Labor and benefits.................... 47,377 36,935 32,990 24,912 21,017
Occupancy costs....................... 22,925 18,979 17,295 14,492 10,735
Other operating costs................. 13,583 10,751 9,166 9,638 5,013
General and administrative............ 11,229 9,277 8,233 7,022 7,298
Depreciation and amortization......... 10,795 7,655 7,152 5,773 5,096
-------- -------- -------- -------- --------
145,329 113,774 100,860 81,061 65,346
-------- -------- -------- -------- --------
OPERATING INCOME...................... 13,377 10,291 8,085 3,052 5,979
OTHER EXPENSE......................... (1,944) (845) (1,085) (150) (487)
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES............ 11,433 9,446 7,000 2,902 5,492
Provision for income taxes............ 4,230 3,690 2,837 1,140 2,337
-------- -------- -------- -------- --------
NET INCOME............................ $ 7,203 $ 5,756 $ 4,163 $ 1,762 $ 3,155
======== ======== ======== ======== ========
EARNINGS PER COMMON SHARE............. $ 0.58 $ 0.51 $ 0.37 $ 0.16 $ 0.29
======== ======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING... 12,364 11,360 11,291 11,313 10,738
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets.......................... $125,260 $ 92,153 $ 74,735 $ 68,117 $ 61,260
Long-term debt........................ 21,750 17,703 8,167 10,000 10,000
Capital lease obligations............. 749 820 472 474 476
Shareholders' equity.................. 83,127 55,958 49,375 45,090 43,131
OPERATING DATA:
SYSTEM-WIDE SALES(a)
Company-owned......................... $136,659 $110,272 $ 96,540 $ 77,226 $ 65,605
Franchised............................ 91,988 87,706 82,710 77,891 69,545
-------- -------- -------- -------- --------
TOTAL................................. $228,647 $197,978 $179,250 $155,117 $135,150
======== ======== ======== ======== ========
</TABLE>
- 19 -
<PAGE> 20
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Fiscal Year Ended
------------------------------------------------------------
Oct. 1 Oct. 2 Oct. 3 Sept. 27 Sept. 29
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AVERAGE RESTAURANT SALES(a)
Company-owned......................... $ 1,925 $ 1,886 $ 1,807 $ 1,786 $ 1,874
Franchised............................ 1,557 1,489 1,389 1,356 1,322
NUMBER OF RESTAURANTS
Company-owned(b)...................... 87 66 57 51 40
Franchised(c)......................... 61 61 58 59 55
-------- -------- -------- -------- --------
TOTAL AT YEAR END..................... 148 127 115 110 95
======== ======== ======== ======== ========
<FN>
- --------------------------------------
(a) Pizzeria Uno full-service restaurants, annualized.
(b) Includes one Mexican restaurant, three Bay Street Grill restaurants and four quick-
service Uno units in 1995; one Mexican restaurant and two quick-service Uno units
in 1994; one Mexican restaurant and one quick-service Uno unit in 1993 and 1992;
one steakhouse restaurant in 1991.
(c) Includes two quick-service Pizzeria Uno units in 1995 and 1994 and one in 1991.
</TABLE>
-20-
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
<TABLE>
<CAPTION>
The following table sets forth the percentage relationship to total
revenues, unless otherwise indicated, of certain items included in the
Company's income statements and operating data for the periods indicated:
52 Weeks 52 Weeks 53 Weeks
Ended Ended Ended
10/1/95 10/2/94 10/3/93
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Restaurant sales........... 92.1% 90.8% 90.2%
Consumer product sales..... 5.3 6.0 6.5
Franchise income .......... 2.6 3.2 3.3
----- ----- -----
Total ................... 100.0 100.0 100.0
COSTS AND EXPENSES:
Cost of food and beverages (1) 25.5 25.1 24.7
Labor and benefits (1) .... 30.6 30.8 31.3
Occupancy costs (1) ....... 14.8 15.8 16.4
Other operating costs (1) . 8.8 9.0 8.7
General and administrative 7.1 7.5 7.6
Depreciation and amortization(1) 7.0 6.4 6.8
----- ----- -----
OPERATING INCOME............ 8.4 8.3 7.4
OTHER EXPENSE .............. (1.2) (.7) (1.0)
----- ----- -----
INCOME BEFORE TAXES......... 7.2 7.6 6.4
Provision for income taxes . 2.7 3.0 2.6
----- ----- -----
NET INCOME ................. 4.5% 4.6% 3.8%
===== ===== =====
<FN>
(1) Percentage of restaurant and consumer product sales
</TABLE>
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Total revenues increased 28% to $158.7 million in fiscal 1995 from
$124.1 million the prior year. Company-owned restaurant sales increased 29.7%
to $146.1 million due primarily to a 21.4% increase in operating weeks of
full-service Pizzeria Uno restaurants resulting from the addition of 16
restaurants during the past four quarters, as well as the purchase of three Bay
Street Grill restaurants in December 1994. The increase in restaurant sales was
also due to a 3.3% increase in comparable store sales for the 52 weeks ended
October 1, 1995.
Consumer product sales increased 14.3% to $8.5 million from $7.4 million
in fiscal 1994 due to higher sales of Pizzeria Uno brand and private label
refrigerated pizza, as well as increased shipments of frozen pizza for tests by
customers outside New England.
Franchise income increased 3.9% to $4.1 million in fiscal 1995 from $4.0
million the prior year. Royalty income increased 4.7% to $4.0 million
principally due to an increase in comparable store sales of 2.4% for the year.
Initial franchise fees totaled $125,000 for fiscal 1995 compared to $150,000 in
fiscal 1994.
-21-
<PAGE> 22
Cost of food and beverages as a percentage of restaurant and consumer
product sales increased to 25.5% for fiscal 1995 from 25.1% the prior year.
This percentage cost increase primarily reflected changes in sales mix toward a
larger percentage of higher-cost non-pizza menu items.
Labor and benefits as a percentage of restaurant and consumer product
sales decreased slightly to 30.6% for fiscal 1995 from 30.8% the prior year,
principally due to the leverage of higher comparable store sales.
Occupancy costs as a percentage of restaurant and consumer product
sales declined to 14.8% for fiscal 1995 from 15.8% the prior year, primarily
due to an increased number of owned restaurant properties and the operating
leverage provided by the increase in comparable store sales noted above.
Other operating costs declined as a percentage of restaurant and
consumer product sales to 8.8% for fiscal 1995 from 9.0% the prior year,
principally due to the operating leverage provided by the increase in
comparable store sales.
General and administrative expenses decreased as a percentage of total
revenues to 7.1% for fiscal 1995 from 7.5% the prior year as a result of
allocating certain fixed expenses over a larger revenue base.
Depreciation and amortization expenses as a percentage of restaurant
and consumer product sales increased to 7.0% for fiscal 1995 from 6.4% the
prior year, principally due to increased amortization of pre-opening costs
associated with the higher rate of unit growth.
Operating income increased 30.0% to $13.4 million for fiscal 1995
compared to $10.3 million in fiscal 1994. The operating profit margin improved
slightly to 8.4% from 8.3%, primarily as a result of the increase in
Company-owned restaurants and comparable store sales.
Other expense increased to $1,944,000 or 1.2% as a percentage of total
revenues in fiscal 1995 from $845,000 or .7% of total revenues the prior year.
This increase was due to higher interest expense associated with the increased
level of debt used to fund the Company's accelerated expansion plan and its
ownership of an increasing number of restaurant properties. In addition, other
expense in the comparable period in 1994 was favorably affected by a $312,000
gain on the sale of a restaurant to a franchisee.
The effective income tax rate declined to 37% for fiscal 1995 from
39.1% in fiscal 1994, primarily due to the effect of the FICA tip tax credit,
which became effective on January 1, 1994 and generally lower state income
taxes.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR (53 WEEKS) 1993
Total revenues increased 13.9% to $124.1 million in fiscal 1994 from
$108.9 million in the prior year. Company-owned restaurant sales increased
14.7% to $112.7 million in fiscal 1994 due primarily to a 9.4% increase in
operating weeks of full-service restaurants resulting from the addition of
eight new restaurants, and a 6.5% increase in comparable store sales.
Consumer product sales increased 4.9% to $7.4 million in fiscal 1994
from $7.1 million in the prior year primarily due to expanded sales of private
label, thin-crust pizzas to several supermarket chains in New England. Initial
shipments
-22-
<PAGE> 23
of both refrigerated and frozen Pizzeria Uno brand pizzas commenced in
fiscal 1994 to new customers in New York, New Jersey, Pennsylvania and Ohio in
order to expand the Company's regional presence beyond New England.
Franchise income increased 9.2% to $4.0 million in fiscal 1994 from
$3.6 million in the prior year. Royalty income increased 9.5% to $3.8 million
in fiscal 1994 from $3.5 million in the prior year primarily due to an increase
of 7.1% in average unit sales. Initial franchise fees totaled $150,000 in
fiscal 1994 compared to $147,500 in fiscal 1993.
Cost of food and beverages as a percentage of restaurant and consumer
product sales increased to 25.1% in fiscal 1994 from 24.7% in the prior year,
reflecting primarily changes in sales mix toward a larger percentage of higher
cost non-pizza menu items.
Labor and benefits as a percentage of restaurant and consumer product
sales decreased slightly to 30.8% in fiscal 1994 from 31.3% in the prior year,
principally due to the leverage of higher comparable store sales.
Occupancy costs as a percentage of restaurant and consumer product
sales declined to 15.8% in fiscal 1994 from 16.4% in the prior year, resulting
from the Company's purchase of the real estate for several restaurants since
fiscal 1992, and the operating leverage provided by the increase in comparable
store sales.
Other operating costs as a percentage of restaurant and consumer
product sales were 9.0% for fiscal 1994, remaining relatively unchanged from
8.7% in the prior year.
General and administrative expenses decreased as a percentage of total
revenues to 7.5% in fiscal 1994 from 7.6% in the prior year, principally due to
the allocation of certain fixed expenses over a larger revenue base.
Depreciation and amortization expenses as a percentage of restaurant
and consumer product sales decreased to 6.4% in fiscal 1994 from 6.8% in the
prior year principally due to the increase in comparable store sales.
Operating income increased 27.3% to $10.3 million in fiscal 1994 from
$8.1 million for the prior year. The operating profit margin increased to 8.3%
in fiscal 1994 from 7.4% in the prior year, principally due to an increase in
Company-owned restaurants and comparable store sales.
Other expense declined to $845,000 in fiscal 1994 from $1.1 million in
the prior year, principally due to a $312,000 gain on the sale of a restaurant
to a franchisee in fiscal 1994.
The effective income tax rate declined to 39.1% in fiscal 1994 from
40.5% in fiscal 1993, primarily due to the FICA tip credit, which became
effective on January 1, 1994.
-23-
<PAGE> 24
<TABLE>
Liquidity and Sources of Capital
<CAPTION>
The following table (000's omitted) presents a summary of the Company's
cash flows for fiscal 1995.
<S> <C>
Net cash provided by operating activities....... $16,136
Net cash used in investing activities........... (40,138)
Net cash provided by financing activities....... 24,346
-------
Increase in cash ............................... $ 344
=======
</TABLE>
Historically, the Company has leased most of its restaurant locations
and pursued a strategy of controlled growth, financing its expansion
principally from operating cash flow, equity offerings and from the sale of
senior, unsecured notes and short-term borrowing under revolving lines of
credit. During fiscal 1995, the Company's investment in property, equipment and
leasehold improvements was $39.9 million.
The Company opened 16 restaurants during fiscal 1995 and currently
plans to open up to 12 restaurants in fiscal 1996. The Company expects that
the average cash investment required to open a full-service Pizzeria Uno
restaurant, excluding land and pre-opening costs, will be approximately $1.5
million.
As of October 1, 1995, the Company had outstanding indebtedness of
$21.8 million under its unsecured, revolving line of credit, $3.3 million of
senior, unsecured notes and $820,000 in capital lease obligations. In December
1994, the Company obtained a $50.0 million unsecured revolving credit facility
to replace its then existing $20.0 million revolving credit facility. The new
revolving credit facility will convert to a three year term loan in December
1997. Advances under the revolving credit facility will accrue interest at
either the bank's prime rate plus .25%, or alternatively, at 100-150 basis
points above LIBOR. The Company anticipates using the revolving credit
facility in the future for repayment of the $3.3 million of principal
outstanding under its senior, unsecured notes, for the development of
additional restaurants, and for working capital.
On October 26, 1995, the Company entered into a five year interest rate
swap agreement involving the exchange of floating rate interest payment
obligations for fixed rate interest payment obligations. The notional amount
of this interest rate swap agreement was $20 million. The Company entered into
this agreement in order to manage interest costs and risks associated with
fluctuating interest rates.
During June 1995, the Company completed a secondary public equity
offering of 2.3 million shares of its Common Stock underwritten by Montgomery
Securities. The Company received $22.6 million in net proceeds from the
offering.
In October 1995, the Board of Directors of the Company authorized the
repurchase of up to a total of 1.5 million shares of the Company's Common stock
in the market from time to time during the subsequent six months. This
superseded the Board of Directors previous authorization in July 1995 for the
repurchase of up to a total of 500,000 shares of the Company's Common Stock. As
of November 30, 1995, the Company had repurchased a total of 494,100 shares of
its Common Stock at prices between $7.00 and $8.25 per share.
-24-
<PAGE> 25
The Company believes that existing cash balances, cash generated from
operations and borrowings under its revolving line of credit will be sufficient
to satisfy the Company's working capital and capital expenditure requirements
through fiscal 1996.
IMPACT OF INFLATION
Inflation has not been a major factor in the Company's business for the
last several years. The Company believes it has historically been able to pass
on increased costs through menu price increases, but there can be no assurance
that it will be able to do so in the future. Future increases in local area
construction costs could adversely affect the Company's ability to expand.
SEASONALITY
The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating income being lower in its first and second quarters
than its other quarters due to reduced winter volumes.
-25-
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The financial statements and supplementary data are listed under Part
IV, Item 14 in this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
-26-
<PAGE> 27
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------------------------------------------------------------
The information required by this Item 10 is hereby incorporated by
reference to the text appearing under Part I, Item 1 - Business, under the
caption "Executive Officers of the Registrant" at page 13 of this Report, and
by reference to the Company's definitive Proxy Statement which is expected to
be filed by the Company within 120 days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required by this Item 11 is hereby incorporated by
reference to the Company's definitive Proxy Statement which is expected to be
filed by the Company within 120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information required by this Item 12 is hereby incorporated by
reference to the Company's definitive Proxy Statement which is expected to be
filed by the Company within 120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required by this Item 13 is hereby incorporated by
reference to the Company's definitive Proxy Statement which is expected to be
filed by the Company within 120 days after the close of its fiscal year.
-27-
<PAGE> 28
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
(A) 1. INDEX TO FINANCIAL STATEMENTS
----------------------------- PAGE
-----
<S> <C>
Report of Independent Auditors ........................... 32
Consolidated Balance Sheets -- October 1, 1995 and
October 2, 1994 ......................................... 33
Consolidated Statements of Income -- Years ended
October 1, 1995, October 2, 1994, and
October 3, 1993 ......................................... 34
Consolidated Statements of Shareholders' Equity --
Years ended October 1, 1995, October 2, 1994, and
October 3, 1993 ......................................... 35
Consolidated Statements of Cash Flows -- Years ended
October 1, 1995, October 2, 1994, and
October 3, 1993 ......................................... 36
Notes to Consolidated Financial Statements ............... 37
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
-----------------------------
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
3. EXHIBITS
--------
(3) Articles of Incorporation and By-laws.
--------------------------------------
(a) Restated Certificate of Incorporation, as amended, filed as Exhibit
3.1 to the Company s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 2, 1995 (the "April 2, 1995 Form 10-Q").*
(b) By-laws filed as Exhibit 3.2 to the April 2, 1995 Form 10-Q.*
(4) Instruments Defining the Rights of Security Holders, including
--------------------------------------------------------------
Indentures.
-----------
(a) Specimen Certificate of Common Stock filed as Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1991 (the "1991 Annual Report on Form 10-K").*
(b) Note Purchase Agreement dated as of June 1, 1990 between the Company,
Uno Restaurants, Inc., Connecticut General Life Insurance Company,
CIGNA Property and Casualty Insurance Company on behalf of one or
more separate accounts, Insurance Company of North America and Life
Insurance Company of North America, filed as Exhibit 4 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
July 1, 1990,* and First Amendment to Note Purchase Agreement dated
as of July 31, 1991, filed as Exhibit 4(b) to the 1991 Annual Report
on Form 10-K,* and Second
-28-
<PAGE> 29
Amendment to Note Purchase Agreement dated as of April 30,
1992, filed as Exhibit 4(b) to the 1992 Annual Report on Form 10-K,*
and Third Amendment to Note Purchase Agreement dated as of February
15, 1993, filed as Exhibit 4(b) to the 1993 Annual Report on Form
10-K.*
(10) Material Contracts.
-------------------
(a) Lease between the Company and Aaron D. Spencer dated March 30, 1987
for premises in West Roxbury, Massachusetts, filed as Exhibit 10.2 to
the 1987 Registration Statement.*
(b) Lease between the Company and Aaron D. Spencer dated March 30, 1987
for premises in Boston, Massachusetts, filed as Exhibit 10.3 to the
1987 Registration Statement.*
(c) Lease between Uno Restaurants, Inc. and Lisa S. Cohen and Mark N.
Spencer dated February 1, 1990 for premises in West Roxbury,
Massachusetts, filed as Exhibit 10(d) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1990 (the "1990
Annual Report on Form 10-K").*
(d) Form of Franchise Agreement and Area Franchise Agreement, filed as
Exhibit 10.5 to the Registration Statement on Form S-2 (Registration
No. 33-38944) (the "1991 Registration Statement").*
(e) Uno Restaurant Corporation 1987 Employee Stock Option Plan, as
amended, filed as Exhibit A to the Company's Proxy Statement for the
Annual Meeting of Stockholders held on February 22, 1994.* **
(f) Uno Restaurant Corporation 1989 Non-Qualified Stock Option Plan for
Non-Employee Directors, filed as Exhibit A to the Company's Proxy
Statement for the Annual Meeting of Stockholders held on February 8,
1995.* **
(g) Uno Restaurant Corporation 1993 Non-Qualified Stock Option Plan for
Non-Employee Directors, filed as Exhibit A to the Company's Proxy
Statement for the Annual Meeting of Stockholders held on March 2,
1993.* **
(h) Form of Indemnification Agreement between the Company and its
Directors filed as Exhibit 10.6 to the 1987 Registration Statement.*
**
(i) Variable Royalty Plan for Franchises, filed as Exhibit 10(l) to the
1991 Annual Report on Form 10-K.*
(j) $50,000,000 Revolving Credit and Term Loan Agreement dated as of
December 9, 1994 by and among Uno Restaurants, Inc., as Borrower, Uno
Foods Inc., Pizzeria Uno Corporation, URC Holding Company, Inc. and
Uno Restaurant Corporation, as Guarantors, and Fleet Bank of
Massachusetts, N.A. as Agent (without exhibits) filed as Exhibit
10(p) to the 1994 Annual Report on Form 10-K,* and First Amendment to
Revolving Credit and Term Loan Agreement dated as of January 30,
1995, and Second Amendment to Revolving Credit and Term Loan
Agreement dated as of November 7, 1995.
(k) Interest Rate Swap Agreement between Fleet Bank of Massachusetts,
N.A. and Uno Restaurants, Inc. dated October 25, 1995.
-29-
<PAGE> 30
(l) Asset Purchase Agreement dated September 1, 1994, by and among Bay
Street Restaurants, Inc., Bay Street of Philadelphia, Pennsylvania,
Inc., Bay Street of Woodbridge, New Jersey, Inc., Bay Street of
Schaumburg, Illinois, Inc. and Bay Street Services, Inc.
(collectively, the "Seller"), and UNO Bay, Inc., B.S. of Woodbridge,
Inc., B.S. of Schaumburg, Inc. and B.S. Intangible Asset Corp.
(collectively, the "Purchaser") filed as Exhibit 10(q) to the 1994
Annual Report on Form 10-K.*
(m) Change in Control Protection Agreements dated January 6, 1994 between
Uno Restaurant Corporation and each of its named executive officers,
Mr. Spencer, Mr. Miller, Mr. Brown, Mr. Fox and Mr. Gallucci filed as
Exhibit 10(r) to the 1994 Annual Report on Form 10-K.* **
(n) Master Lease-Purchase Agreement between ORIX Credit Alliance, Inc.,
as Lessor, and Massachusetts Industrial Finance Agency, as Lessee,
dated April 19, 1994, and Master Sublease-Purchase Agreement between
Massachusetts Industrial Finance Agency, as Sublessor, and Uno Foods,
Inc. as Sublessee, dated April 19, 1994 filed as Exhibit 10(s) to the
1994 Annual Report on Form 10-K.*.
(11) Statement Re: Computation of Per Share Earnings
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP, Independent Auditors
(27) Financial Data Schedule
- --------------------------
* In accordance with Rule 12b-23 and Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, reference is made to the documents previously filed
with the Securities and Exchange Commission, which documents are hereby
incorporated by reference.
** Management Contract
-30-
<PAGE> 31
(B) REPORTS ON FORM 8-K
-------------------
During the fiscal quarter ended October 1, 1995, the Company did not
file any Current Reports on Form 8-K.
-31-
<PAGE> 32
Report of Independent Auditors
The Board of Directors
Uno Restaurant Corporation
We have audited the accompanying consolidated balance sheets of Uno Restaurant
Corporation and subsidiaries (the Company) as of October 1, 1995 and October 2,
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended October 1, 1995.
These financial statements are the responsibility of the Company'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 consolidated financial position of Uno Restaurant
Corporation and subsidiaries at October 1, 1995 and October 2, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 1, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
November 1, 1995
32
<PAGE> 33
Uno Restaurant Corporation and Subsidiaries
<TABLE>
Consolidated Balance Sheets
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
-------------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,305 $ 961
Royalties receivable 725 553
Consumer product receivable 567 473
Inventory 2,226 1,744
Deferred pre-opening costs 1,253 568
Prepaid expenses and other assets 2,221 1,532
-------------------
Total current assets 8,297 5,831
Property, equipment and leasehold improvements, net 112,498 80,057
Deferred income taxes 1,151 1,442
Other assets:
Liquor licenses and other assets 3,314 1,823
Deposit 3,000
-------------------
3,314 4,823
-------------------
$125,260 $92,153
===================
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
-----------------------------
(Dollar amounts in thousands,
except per share data)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
urrent liabilities:
Accounts payable $ 6,238 $ 5,006
Accrued expenses 3,913 3,996
Accrued compensation and taxes 2,231 2,357
Income taxes payable 126 654
Current portions of long-term debt and capital lease
obligations 3,404 3,400
----------------------------
Total current liabilities 15,912 15,413
Long-term debt, net of current portion 21,750 17,303
Capital lease obligations, net of current portion 749 820
Other liabilities 3,722 2,659
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $1.00 par value, 1,000,000 shares
authorized, no shares issued or outstanding
Common Stock, $.01 par value, 25,000,000 shares
authorized, 13,682,270 shares in 1995 and 9,072,499
shares in 1994 issued 137 91
Additional paid-in capital 53,433 30,613
Retained earnings 32,457 25,254
----------------------------
86,027 55,958
Treasury Stock (358,100 shares, at cost) (2,900)
----------------------------
Total shareholders' equity 83,127 55,958
----------------------------
$ 125,260 $92,153
============================
</TABLE>
See accompanying notes.
33
<PAGE> 34
Uno Restaurant Corporation and Subsidiaries
<TABLE>
Consolidated Statements of Income
<CAPTION>
YEAR ENDED
---------------------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
---------------------------------------------------------
(53 WEEKS)
(Amounts in thousands, except
per share data)
<S> <C> <C> <C>
Revenues:
Restaurant sales $ 146,100 $ 112,674 $ 98,234
Consumer product sales 8,477 7,418 7,073
Franchise income 4,129 3,973 3,638
---------------------------------------------------------
158,706 124,065 108,945
Costs and expenses:
Cost of food and beverages 39,420 30,177 26,024
Labor and benefits 47,377 36,935 32,990
Occupancy costs 22,925 18,979 17,295
Other operating costs 13,583 10,751 9,166
General and administrative 11,229 9,277 8,233
Depreciation and amortization 10,795 7,655 7,152
---------------------------------------------------------
145,329 113,774 100,860
---------------------------------------------------------
Operating income 13,377 10,291 8,085
Other income (expense):
Interest expense (1,924) (1,147) (1,077)
Other income (expense) (20) 302 (8)
---------------------------------------------------------
(1,944) (845) (1,085)
---------------------------------------------------------
Income before income taxes 11,433 9,446 7,000
Provision for income taxes 4,230 3,690 2,837
---------------------------------------------------------
Net income $ 7,203 $ 5,756 $ 4,163
=========================================================
Earnings per common share $ .58 $ .51 $ .37
=========================================================
Weighted-average number of common
shares 12,364 11,360 11,291
=========================================================
</TABLE>
See accompanying notes.
34
<PAGE> 35
Uno Restaurant Corporation and Subsidiaries
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
COMMON STOCK
-------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
-----------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 27, 1992 8,964 $ 90 $ 29,744 $15,335 $ (79) $45,090
Net income (53 weeks) 4,163 4,163
Exercise of stock options 12 20 79 99
Tax benefit from exercise of
nonqualified stock options 23 23
-----------------------------------------------------------------------
Balance at October 3, 1993 8,976 90 29,787 19,498 49,375
Net income 5,756 5,756
Exercise of stock options 96 1 712 713
Tax benefit from exercise of
nonqualified stock options 114 114
-----------------------------------------------------------------------
Balance at October 2, 1994 9,072 91 30,613 25,254 55,958
Net income 7,203 7,203
5-for-4 stock split 2,275 23 (23)
Sale of Common Stock, net of offering
costs 2,300 23 22,541 22,564
Exercise of stock options 35 226
Purchase of Treasury Stock (2,900) (2,900)
Tax benefit from exercise of
nonqualified stock options 76 76
-----------------------------------------------------------------------
Balance at October 1, 1995 13,682 $137 $ 53,433 $32,457 $(2,900) $83,127
=======================================================================
</TABLE>
See accompanying notes.
35
<PAGE> 36
Uno Restaurant Corporation and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
YEAR ENDED
----------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
----------------------------------------------
(53 WEEKS)
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,203 $ 5,756 $ 4,163
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,896 7,765 7,235
Deferred income taxes 291 547 (424)
Provision for deferred rent 637 462 735
Gain on disposal of equipment (28) (321) (82)
Changes in operating assets and liabilities, net
of effects from business acquisitions:
Royalties receivable (172) (77) (55)
Inventory (482) (429) (127)
Prepaid expenses and other assets (3,736) (960) (1,629)
Accounts payable and other liabilities 2,055 1,948 794
Income taxes payable (528) (229) 377
----------------------------------------------
Net cash provided by operating activities 16,136 14,462 10,987
INVESTING ACTIVITIES
Additions to property, equipment and leasehold
improvements (39,864) (22,170) (12,460)
Proceeds from sale of fixed assets 42 2,529 483
Increase in deposit (3,000)
Purchase of business, net of cash acquired (316) (1,800) 108
----------------------------------------------
Net cash used in investing activities (40,138) (24,441) (11,869)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 60,950 39,895 31,735
Principal payments on debt and capital lease
obligations (56,570) (30,780) (30,417)
Issuance of Common Stock 22,564
Purchase of Treasury Stock (2,900)
Exercise of stock options 302 827 122
----------------------------------------------
Net cash provided by financing activities 24,346 9,942 1,440
----------------------------------------------
Increase (decrease) in cash 344 (37) 558
Cash at beginning of year 961 998 440
----------------------------------------------
Cash at end of year $ 1,305 $ 961 $ 998
==============================================
</TABLE>
See accompanying notes.
36
<PAGE> 37
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 1, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Uno Restaurant
Corporation and its wholly-owned subsidiaries (the Company). All intercompany
accounts and transactions have been eliminated in consolidation. Company-owned
restaurants are located predominately in the Northeast and Mid-Atlantic states
and franchised restaurants are located throughout the United States.
FISCAL YEAR
The Company's fiscal year ends on the close of business on the Sunday closest to
September 30 in each year. The fiscal year ended October 3, 1993 included 53
weeks of operations.
INVENTORY
Inventory, which consists of food, beverages and store supplies, is stated at
the lower of cost (first-in, first-out method) or market.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost. The Company
provides for depreciation of buildings and equipment over their estimated useful
lives using the straight-line method. Leasehold improvements are amortized over
the shorter of their estimated useful lives or the term of the lease using the
straight-line method.
REVENUE RECOGNITION - FRANCHISE FEES
The Company defers franchise fees until the franchisee opens the restaurant and
all services have been substantially performed; at that time, the entire amount
of the fee is recorded as income. Royalty income is recorded as earned based on
rates provided by the
37
<PAGE> 38
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
respective franchise agreements. Expenses related to franchise activities
amounted to approximately $1,889,000, $1,427,000 and $1,210,000 in fiscal years
1995, 1994 and 1993, respectively.
<TABLE>
A summary of full-service franchise unit activity is as follows:
<CAPTION>
YEAR ENDED
------------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Units operating at beginning of year 59 58 59
Units opened 5 5 3
Units closed (5) (1) (2)
Units converted to Company-owned units (3) (2)
------------------------------------------------
Units operating at end of year 59 59 58
================================================
</TABLE>
PRE-OPENING COSTS
Costs relating to the opening of new restaurants are deferred until the
restaurants open and are amortized over 12 months from that point using the
straight-line method.
INCOME TAXES
In fiscal years 1995 and 1994, deferred income taxes are recognized for
temporary differences between financial statement and income tax bases of assets
and liabilities for which income tax benefits and obligations will be realized
in future years. In fiscal year 1993, the provision for deferred income taxes
represents the tax effect of differences in the timing of income and expense
recognition for tax and financial statement purposes.
38
<PAGE> 39
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER COMMON SHARE
Earnings per common share amounts are calculated based upon the weighted-average
number of shares outstanding, giving effect to the dilutive effect of stock
options. Average shares outstanding and all per share amounts included in the
accompanying consolidated financial statements and notes thereto are based on
the increased number of shares, giving retroactive effect to the five-for-four
stock split in fiscal year 1995 (see Note 7).
RECLASSIFICATIONS
Certain amounts in the accompanying 1994 and 1993 financial statements have been
reclassified to permit comparison with 1995.
2. BUSINESS ACQUISITIONS AND DISPOSITIONS
In December 1994, the Company completed an agreement with Bay Street
Restaurants, Inc. to purchase the net assets of three restaurants located in
Illinois, New Jersey and Pennsylvania. In December 1993, the Company acquired
the leasehold improvements and equipment of three franchised restaurants in
Connecticut. These acquisitions have been accounted for under the purchase
method of accounting. The results of operations of the acquired companies prior
to the dates of acquisition would not have a material impact on the consolidated
results of operations in fiscal years 1995, 1994 and 1993.
During 1995, the Company assigned its leasehold interest in its Fairview
Heights, Illinois restaurant to an unaffiliated party in exchange for the
leasehold interest in that unaffiliated party's restaurant located in Orlando,
Florida. The Company recorded the transaction at fair market value, and wrote
off the net book value of equipment no longer usable.
On November 8, 1993, the Company sold to a franchisee for $2,500,000 a Pizzeria
Uno restaurant in Lake Buena Vista, Florida and recorded a gain of $312,000,
which has been included in other income in fiscal year 1994.
39
<PAGE> 40
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
----------------------------
(In thousands)
<S> <C> <C>
Land $ 11,093 $ 7,601
Buildings 18,056 9,729
Equipment 42,430 31,797
Leasehold improvements 74,011 55,657
Construction in progress 3,263 2,870
----------------------------
148,853 107,654
Less allowances for depreciation and amortization 36,355 27,597
----------------------------
$112,498 $ 80,057
============================
</TABLE>
4. RELATED-PARTY TRANSACTIONS
The Company leases three buildings from its principal shareholder for a
restaurant and for corporate office space. Rent expense in the amount of
approximately $442,000 was charged to operations in each of the fiscal years
presented. The Company believes that the terms of these leases approximate fair
rental value.
The Company's President and his brother own and operate three franchised
restaurants. Additionally, the Chairman of the Company owns a 50% interest in a
franchised pizza takery, and one of the directors of the Company has a
partnership interest in a franchised restaurant. These franchisees pay royalties
to the Company under standard franchise agreements, with the exception of the
pizza takery, which is being operated as a test concept and, as a result, is not
currently being charged royalties.
5. LEASES
The Company conducts the majority of its operations in leased facilities, which
are accounted for as capital or operating leases. The leases typically provide
for a base rent plus real estate taxes, insurance and other expenses, plus
additional contingent rent based
40
<PAGE> 41
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
5. LEASES (CONTINUED)
upon revenues of the restaurant. Contingent rent amounted to $1,017,000,
$981,000 and $842,000 in fiscal years 1995, 1994 and 1993, respectively. At
October 1, 1995, the minimum rental commitments under all noncancelable capital
and operating leases with initial or remaining terms of more than one year are
as follows:
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
- ----------- ----------------------------
(In thousands)
<S> <C> <C>
1996 $ 8,334 $ 130
1997 8,741 130
1998 8,647 130
1999 8,457 130
2000 8,398 93
Thereafter 83,869 1,293
----------------------------
$126,446 1,906
========
Less amount representing interest 1,086
-------
Present value of net minimum lease payments 820
Less current portion of obligation under capital leases 71
-------
Long-term obligation under capital leases $ 749
=======
</TABLE>
Total expenses for all leases were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CAPITAL
CAPITAL LEASE LEASE ASSET OPERATING LEASE
FISCAL YEAR INTEREST AMORTIZATION RENTALS
- ----------- -------------------------------------------------
(In thousands)
<C> <C> <C> <C>
1995 $63 $71 $11,509
1994 51 58 10,193
1993 41 44 9,337
</TABLE>
Certain operating lease agreements contain free rent inducements and scheduled
rent increases which are being amortized over the terms of the agreements,
ranging from 15 to 20 years, using the straight-line method. The deferred rent
liability, included in other liabilities, amounted to $3,296,000 at October 1,
1995 and $2,659,000 at October 2, 1994.
41
<PAGE> 42
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
6. FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
---------------------------
(In thousands)
<S> <C> <C>
Revolving credit and note agreement $21,750 $13,969
10.22% senior notes payable to Cigna Insurance
Company
3,333 6,667
-------------------------
25,083 20,636
Less current portion 3,333 3,333
-------------------------
$21,750 $17,303
=========================
</TABLE>
The Company has a $50,000,000 unsecured revolving line of credit which converts
to a three-year term loan in December 1997. The Company is entitled to borrow at
its discretion amounts which accrue interest at variable rates based on either
the LIBOR or prime rate. At October 1, 1995, interest on outstanding borrowings
ranged from 6.87% to 8.75%. A commitment fee of approximately .33% is accrued on
unused borrowings under the credit agreement. The note agreements contain
certain financial and operating covenants, including maintenance of certain
levels of net worth and income.
The Company made cash payments of interest of $2,445,000, $1,465,000 and
$1,219,000 during fiscal years 1995, 1994 and 1993, respectively. The Company
capitalized interest during the construction period of newly constructed
restaurants amounting to $509,000 in fiscal year 1995, $228,000 in fiscal year
1994 and $186,000 in fiscal year 1993 and included those amounts in leasehold
improvements.
42
<PAGE> 43
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. FINANCING ARRANGEMENTS (CONTINUED)
The Company provides certain limited lease financing to qualified franchisees
through an agreement with an unaffiliated finance company. The Company's maximum
guarantee under the agreement was $1,993,000 at October 1, 1995. The Company has
also guaranteed up to a maximum of $431,000 of future lease payments in the
event of default by specific franchisees.
The Company has an outstanding letter of credit in the amount of $150,000 at
October 1, 1995, which expires in December 1996.
7. COMMON STOCK TRANSACTIONS
On November 15, 1994, the Board of Directors of the Company declared a
five-for-four stock split payable to shareholders on February 28, 1995. In the
third quarter of fiscal 1995, the Company obtained $22.6 million in exchange for
2.3 million shares of common stock in connection with a secondary common stock
offering.
In July 1995, the Board of Directors authorized the purchase of up to 500,000
shares of the Company's common stock in the open market. Under this arrangement,
the Company purchased 358,100 shares as treasury stock during fiscal year 1995.
Subsequent to year end, the Board of Directors increased its authorization to
purchase up to a total of 1.5 million shares of the Company's common stock in
the open market.
<TABLE>
8. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
-------------------------
(In thousands)
<S> <C> <C>
Prepaid insurance $ 821 $ 621
Prepaid rent 359 202
Prepaid other 233 100
Other accounts receivable 808 609
-------------------------
$2,221 $1,532
=========================
</TABLE>
43
<PAGE> 44
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
----------------------------
(In thousands)
<S> <C> <C>
Accrued rent $1,290 $1,380
Accrued insurance 778 459
Accrued utilities 616 539
Accrued vacation 330 175
Accrued interest 210 282
Other 689 1,161
---------------------
$3,913 $3,996
=====================
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Savings and Employee Stock Ownership Retirement
Plan (the Plan) for all of its eligible employees. The Plan is maintained in
accordance with the provisions of Section 401(k) of the Internal Revenue Code
and allows all employees with at least six months of service to make annual
tax-deferred voluntary contributions up to 15% of their salary. Under the Plan,
the Company matches a specified percentage of the employees' contributions,
subject to certain limitations, and makes annual discretionary contributions of
the Company's Common Stock. Total contributions made to the plans were $153,000,
$110,000 and $25,000 in fiscal years 1995, 1994 and 1993, respectively.
The Company sponsors a Deferred Compensation Plan which allows officers to defer
up to 20% of their annual compensation. These assets are placed in a rabbi trust
and are presented as assets of the Company in the accompanying balance sheet as
they are available to the general creditors of the Company in the event of the
Company's insolvency. The related liability of $426,000 at October 1, 1995 is
included in other liabilities in the accompanying balance sheet. Deferred
compensation expense in the amounts of $173,000 and $265,000 were recorded in
fiscal year 1995 and 1994, respectively.
44
<PAGE> 45
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES
Effective October 4, 1993, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 109 (Statement 109). As permitted by Statement 109,
the Company has elected not to restate the financial statements of any prior
years. The effect of the change on net income for fiscal 1994, as well as the
cumulative effect, was not material.
Deferred taxes are attributable to the following temporary differences:
<TABLE>
<CAPTION>
OCTOBER 1 OCTOBER 2
1995 1994
---------------------------
(In thousands)
<S> <C> <C>
DEFERRED TAX ASSETS:
Deferred rent $1,337 $1,087
Accrued expenses 204 277
Franchise fees 100 101
Depreciation 38 350
Other 267 473
------------------------
Total deferred tax assets 1,946 2,288
DEFERRED TAX LIABILITIES:
Deferred pre-opening costs 484 313
Prepaid insurance 232 172
Royalty fee 76 92
Other 3 269
------------------------
Total deferred tax liabilities 795 846
------------------------
NET DEFERRED TAX ASSETS $1,151 $1,442
========================
</TABLE>
45
<PAGE> 46
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
11. INCOME TAXES (CONTINUED)
The provision (credit) for income taxes consisted of the following:
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
--------------------------------------------------
YEAR ENDED
--------------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
--------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $3,098 $2,536 $2,490
State 841 607 771
3,939 3,143 3,261
Deferred:
Federal 228 243 (370)
State 63 304 (54)
291 547 (424)
----------------------------------------------
Income tax expense $4,230 $3,690 $2,837
==============================================
</TABLE>
<TABLE>
A reconciliation of the effective tax rates with the federal statutory rates is
as follows:
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
--------------------------------------------------
YEAR ENDED
--------------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.1% 34.0% 34.0%
State income taxes, net of federal income
tax benefit 4.9 6.0 6.7
Tax credits (2.6) (1.8)
Other .6 .9 (.2)
--------------------------------------------------
Effective income tax rate 37.0% 39.1% 40.5%
==================================================
</TABLE>
46
<PAGE> 47
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES (CONTINUED)
The Company made income tax payments of $3,667,000, $3,779,000 and $2,826,000
during fiscal years 1995, 1994 and 1993, respectively.
12. STOCK OPTION PLANS
The 1987 Employee Stock Option Plan (the Plan) provides for up to 1,875,000
shares of common stock issuable upon exercise of options granted under the Plan.
Options may be granted at an exercise price not less than fair market value on
the date of grant. All options vest at a rate of 20% per year beginning one year
after the date of grant, with the exception of 93,750 and 62,500 options granted
to the President and Chairman of the Company, respectively, which vest
immediately at the date of grant. All options terminate ten years after the date
of grant, with the exception of the 175,000 options granted to the Chairman,
which terminate five years after the date of grant. Options outstanding at
October 1, 1995 are non-qualified stock options.
The 1989 and 1993 Non-Qualified Stock Option Plans for Non-Employee Directors
(the Directors Plans) provide for up to 101,563 shares of Common Stock issuable
upon exercise of options granted under the Directors Plans. The 1989 and 1993
Directors Plans terminate on November 10, 1999 and August 17, 2002,
respectively, but such termination shall not affect the validity of options
granted prior to the dates of termination. Options are to be granted at an
exercise price equal to the fair market value of the shares of Common Stock at
the date of grant. Options granted under the Directors Plans may be exercised
commencing one year after the date of grant and ending ten years from the date
of grant.
47
<PAGE> 48
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
12. STOCK OPTION PLANS (CONTINUED)
Information regarding the Company's stock option plans, updated to reflect the
five-for-four stock split described in Note 7, is summarized below:
<CAPTION>
YEAR ENDED
---------------------------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 3
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of period 1,043,735 960,483 713,013
Granted 277,489 257,298 334,966
Exercised (at $4.07 to $8.64 per share) (41,400) (120,101) (24,313)
Canceled (79,537) (53,945) (63,183)
---------------------------------------------
Options outstanding at close of period 1,200,287 1,043,735 960,483
=============================================
Option price range at close $4.07 $4.07 $4.07
of fiscal year TO $11.80 to $11.40 to $11.40
Options exercisable at close of period 538,932 430,249 444,126
Options available for grant at close of period 481,496 679,448
</TABLE>
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
JANUARY 1 APRIL 2 JULY 2 OCTOBER 1
1995 1995 1995 1995
-------------------------------------------------------------
(Amounts in thousands, except per share information.)
<S> <C> <C> <C> <C>
Revenues $35,976 $37,151 $41,536 $44,043
Gross profit (1) 7,773 7,771 9,466 10,519
Operating income 2,786 2,555 3,527 4,509
Income before income taxes 2,415 1,972 2,940 4,106
Net income 1,520 1,243 1,852 2,588
Earnings per common share .13 .11 .15 .19
</TABLE>
48
<PAGE> 49
Uno Restaurant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
13. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
JANUARY 2 APRIL 3 JULY 3 OCTOBER 2
1994 1994 1994 1994
-----------------------------------------------------------
(Amounts in thousands, except per share information.)
<S> <C> <C> <C> <C>
Revenues $27,567 $28,028 $32,259 $36,211
Gross profit (1) 5,501 5,575 6,903 8,512
Operating income 1,755 1,771 2,639 4,126
Income before income taxes 1,780 1,483 2,362 3,821
Net income 1,059 882 1,490 2,325
Earnings per common share .09 .08 .13 .20
<FN>
(1) Restaurant and consumer product sales, less cost of food and beverages,
labor and benefits, occupancy, and other operating expenses, excluding
advertising expenses.
</TABLE>
14. SUBSEQUENT EVENT
On October 26, 1995, the Company entered into a five year interest rate swap
agreement involving the exchange of floating rate interest payment obligations
for fixed rate interest payment obligations. The notional amount of this
interest rate swap agreement was $20 million. The Company entered into this
agreement in order to manage interest costs and risks associated with
fluctuating interest rates. In the event that a counterparty fails to meet the
terms of the interest rate swap agreement, the Company's exposure is limited to
the interest rate differential. The Company has executed this agreement with a
creditworthy institution and considers the risk of nonperformance to be remote.
49
<PAGE> 50
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-80584 and Post-Effective Amendment No. 2 to Form S-8 No.
33-22875) pertaining to the Uno Restaurant Corporation 1987 Employee Stock
Option Plan (Form S-8 No. 33-80586) pertaining to the Uno Restaurant Corporation
1989 Non-Qualified Stock Option Plan for Non-Employee Directors and (Form S-8
No. 33-80664) pertaining to the Uno Restaurant Corporation 1993 Non-Qualified
Stock Option Plan for Non-Employee Directors of our report dated November 1,
1995, with respect to the consolidated financial statements of Uno Restaurant
Corporation included in the Annual Report (Form 10-K) for the year ended October
1, 1995.
ERNST & YOUNG LLP
Boston, Massachusetts
December 18, 1995
50
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Uno Restaurant Corporation
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
By (Signature and Title) /s/ Robert M. Brown
Robert M. Brown, Senior Vice President
Date December 20, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
By (Signature and Title) /s/ Aaron D. Spencer
----------------------------------------------------------------
Aaron D. Spencer, Chairman, Chief Executive Officer and Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ Craig S. Miller
----------------------------------------------------------------
Craig S. Miller,
President, Chief Operating Officer and Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ Robert M. Brown
----------------------------------------------------------------
Robert M. Brown,
Treasurer, Senior Vice President-Finance,
Chief Financial Officer and Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ John T. Gerlach
----------------------------------------------------------------
John T. Gerlach, Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ E. Robert Kinney
----------------------------------------------------------------
E. Robert Kinney, Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ S. James Coppersmith
----------------------------------------------------------------
S. James Coppersmith, Director
Date December 20, 1995
-----------------
By (Signature and Title) /s/ Stephen J. Sweeney
-----------------------------------------------------------------
Stephen J. Sweeney, Director
Date December 20, 1995
-----------------
</TABLE>
51
<PAGE> 52
<TABLE>
EXHIBIT INDEX
--------------
<CAPTION>
EXHIBIT NUMBER PAGE
- -------------- ----
<S> <C> <C>
(3)(a) Restated Certificate of Incorporation *
(3)(b) By-laws *
(4)(a) Specimen Certificate of Common Stock *
(4)(b) Note Purchase Agreement dated as of June 1, 1990 between the Company,
Uno Restaurants, Inc., Connecticut General Life Insurance Company,
CIGNA Property and Casualty Company on behalf of one or more
separate accounts, Insurance Company of North America and Life
Insurance Company of North America,* and First Amendment to Note
Purchase Agreement dated as of July 31, 1991,* and Second Amendment
to Note Purchase Agreement dated as of April 30, 1992,* and Third
Amendment to Note Purchase Agreement dated as of February 15, 1993. *
(10)(a) Lease between the Company and Aaron D. Spencer dated March 30, 1987
for premises in West Roxbury, Massachusetts *
(10)(b) Lease between the Company and Aaron D. Spencer dated March 30, 1987
for premises in Boston, Massachusetts *
(10)(c) Lease between Uno Restaurants, Inc. and Lisa S. Cohen and Mark N.
Spencer dated February 1, 1990 for premises in West Roxbury,
Massachusetts *
(10)(d) Form of Franchise Agreement and Area Franchise Agreement *
(10)(e) Uno Restaurant Corporation 1987 Employee Stock Plan, and As Amended
*
(10)(f) Uno Restaurant Corporation 1989 Non-Qualified Stock Option Plan for
Non-Employee Directors *
(10)(g) Uno Restaurant Corporation 1993 Non-Qualified Stock Option Plan for
Non-Employee Directors *
(10)(h) Form of Indemnification Agreement between the Company and its
Directors *
(10)(i) Variable Royalty Plan for Franchises. *
(10)(j) $50,000,000 Revolving Credit and Term Loan Agreement dated as of
December 9, 1994 by and among Uno Restaurants, Inc., as Borrower,
Uno Foods Inc., Pizzeria Uno Corporation, URC Holding Company, Inc.
and Uno Restaurant Corporation, as Guarantors, and Fleet Bank of
Massachusetts, N.A. as Agent (without exhibits),* and First
Amendment to Revolving Credit and Term Loan Agreement dated as of
January 30, 1995, and Second Amendment to Revolving Credit and Term
Loan Agreement dated as of November 7, 1995.
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE
- -------------- ----
<S> <C> <C>
(10)(k) Interest Rate Swap Agreement between Fleet Bank of Massachusetts,
N.A. and Uno Restaurants, Inc. dated October 25, 1995.
(10)(l) Asset Purchase Agreement dated September 1, 1994, by and among Bay
Street Restaurants, Inc., Bay Street of Philadelphia, Pennsylvania,
Inc., Bay Street of Woodbridge, New Jersey, Inc., Bay Street of
Schaumburg, Illinois, Inc. and Bay Street Services, Inc.
(collectively, the "Seller"), and UNO Bay, Inc., B.S. of Woodbridge,
Inc., B.S. of Schaumburg, Inc. and B.S. Intangible Asset Corp.
(collectively, the "Purchaser"). *
(10)(m) Change in Control Protection Agreements dated January 6, 1994 between
Uno Restaurant Corporation and each of its named executive officers,
Mr. Spencer, Mr. Miller, Mr. Brown, Mr. Fox and Mr. Gallucci. *
(10)(n) Master Lease-Purchase Agreement between ORIX Credit Alliance, Inc., as
Lessor, and Massachusetts Industrial Finance Agency, as Lessee,
dated April 19, 1994, and Master Sublease-Purchase Agreement between
Massachusetts Industrial Finance Agency, as Sublessor, and Uno
Foods, Inc. as Sublessee, dated April 19, 1994. *
(11) Statement Re: Computation of Per Share Earnings
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP, Independent Auditors
(27) Financial Data Schedule
- -------------------------------
<FN>
*In accordance with Rule 12b-23 and Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, reference is made to the documents previously filed
with the Securities and Exchange Commission, which documents are hereby
incorporated by reference.
</TABLE>
53
<PAGE> 1
Exhibit 10(j)
FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT is entered
into as of January 30, 1995, by and among UNO RESTAURANTS, INC., a
Massachusetts corporation (the "Borrower"), UNO FOODS INC., a Massachusetts
corporation "UFI"), PIZZERIA UNO CORPORATION, a Delaware corporation ("PUC"),
UNO RESTAURANT CORPORATION, a Delaware corporation ("URC"), URC HOLDING
COMPANY, INC., a Delaware corporation ("UHC" and, together with UFI, PUC, URC
and the Borrower, hereinafter referred to collectively, as the "Loan Parties"),
FLEET BANK OF MASSACHUSETTS, N.A., a national banking association ("Fleet"),
THE FIRST NATIONAL BANK OF BOSTON, a national banking association ("FNBB") and
MELLON BANK, N.A., a national banking association ("Mellon"), and FLEET BANK OF
MASSACHUSETTS, N.A., as Agent for the Banks referred to below (Fleet, together
with its successors and assigns in such capacity, the "Agent").
RECITALS
--------
WHEREAS, the Loan Parties, the Agent and the Banks have entered into
that certain Revolving Credit and Term Loan Agreement dated as of December 9,
1994 (as amended and in effect from time to time, the "Credit Agreement"); and
WHEREAS, the Loan Parties, the Agent and the Banks desire to amend
certain provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereby agree as follows:
Section 1. Amendments to Credit Agreement.
-------------------------------
1.1. Section 1.1 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by deleting the definition "Banks" appearing therein in
its entirety and substituting therefor the following:
"`BANKS' shall mean, Fleet, FNBB, Mellon, and their respective
successors and assigns."
1.2. Section 1.1 of the Credit Agreement is hereby further amended, as
of the date of this Amendment, by adding thereto the following new defined
term, such term to be inserted in the appropriate alphabetical order:
"`FEDERAL FUNDS RATE,' shall mean, for any day, a fluctuating interest
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
-1-
<PAGE> 2
that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent."
1.3. Section 1.2 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by deleting such Section in its entirety and
substituting therefor the following:
"Section 1.2. ACCOUNTING TERMS. All accounting terms used and not
defined in this Agreement shall be construed in accordance with GAAP
consistently applied, and all financial data required to be delivered
hereunder shall be prepared in accordance with such principles. If any
changes in accounting principles are hereafter occasioned by promulgation
of rules, regulations, pronouncements or opinions by or are otherwise
required by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions), and any of such changes results in a
change in the method of calculation of, or affect the results of
calculation of, any of the financial covenants, standards or terms found
herein, then the parties hereto agree to enter into and diligently pursue
negotiations in order to amend such financial covenants, standards or terms
so as to reflect fairly and equitably such changes, with the desired result
that the criteria for evaluating the financial condition and results of
operations of URC and its Subsidiaries shall be the same after such changes
as if such changes had not been made. If the parties are unable to agree
upon the amendments to any such financial covenants, standards or terms,
the parties agree to submit any remaining disputes to an independent third-
party accounting firm (having no substantial relationship with any party)
of national recognition selected by such parties for a determination of the
appropriate amendments to such financial covenant, standard or term, which
determination shall be binding upon the parties."
1.4. Section 2.2 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by deleting paragraph (e) of such Section in its
entirety and substituting therefor the following:
"(e) Notwithstanding the foregoing provisions of this Section 2.2, the
Borrower shall not be required to provide notice to the Agent of Advances
which are made in accordance with "target balance" services provided by the
Agent (each, a "Target Balance Advance"), and the minimum borrowing amounts
established under Section 2.2(a) shall not apply to such Target Balance
Advances. All Target Balance Advances shall be Prime Rate Loans unless
otherwise agreed by the Borrower, the Agent and the other Banks. The Agent
shall, to the extent practicable, notify each Bank on the date of any
Target Balance Advance of such Bank's Commitment Percentage of such
Advance. Provided that the Agent has notified the Banks prior to 3:00 p.m.
on the date of such Target Balance Advance, each Bank shall make available
to the Agent before the close of business on such date, at the office of
the Agent specified in Section 15.3, in immediately available funds, such
Bank's Commitment Percentage of the Target Balance Advance. In the event
the Agent shall provide such notice after 3:00 p.m. but before the close of
business on the date of any Target Balance Advance, the Banks shall furnish
to the Agent their respective
-2-
<PAGE> 3
Commitment Percentages of such Target Balance Advance prior to 11:00 a.m.
on the following Business Day, together with one days' interest thereon
calculated at the Federal Funds Rate (it being understood that as
between the Borrower and the Banks, interest shall commence to accrue on
the date of funding any Target Balance Advance on the full amount so
funded, notwithstanding the timing of funding by the Banks to the Agent)."
1.5. Section 2.12 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by adding thereto a new paragraph (g) as follows:
"(g) To the extent that any applicable law (including but not limited to
applicable laws pertaining to fraudulent conveyance or fraudulent transfer)
would render the full amount of any Loan Party's obligations under this
Section 2.12 invalid or unenforceable, such Loan Party's obligations
hereunder shall be limited to the maximum amount which does not result in
such invalidity or unenforceability."
1.6. Section 3.2 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by deleting such Section in its entirety and
substituting therefor the following:
"Section 3.2. CONDITIONS TO ALL ADVANCES. The Banks' obligation to make
any Loan pursuant to this Agreement, or to continue any Loan as, or convert
any Loan to, a LIBOR Rate Loan, shall be subject to compliance by each of
the Loan Parties with its respective agreements contained in this Agreement
and each other Bank Agreement, and to the satisfaction, at or before the
making, continuation or conversion of such Loan, of all of the following
conditions precedent:
(a) The representations and warranties herein and those made by
or on behalf of the Loan Parties and the Affiliate Guarantors in any other
Bank Agreement shall be correct in all material respects as of the date on
which any Loan is made, with the same effect as if made at and as of such
time (except as to transactions permitted hereunder and except that the
references in Article 5 to the 1994 Financial Statements shall be deemed
to refer to the most recent annual financial statements furnished to the
Banks pursuant to Section 6.2 hereof);
(b) On the date of making, continuing or converting any Loan as
described above, there shall exist no Default; and
(c) The making, continuation or conversion of the requested
Loan as described above, shall not be prohibited by any law or
governmental order or regulation applicable to the Banks, the Agent or the
Borrower and all necessary consents, approvals and authorizations of any
Person (other than the Banks) for any such Loan shall have been obtained.
The request by the Borrower for the making, continuation or conversion
of each Loan as provided above, and the acceptance by the Borrower of each
such Loan, shall be
-3-
<PAGE> 4
deemed a representation and warranty by the Borrower that the
conditions specified above in this Section 3.2 have been satisfied."
1.7. Section 9.1 of the Credit Agreement is hereby amended, as of the
date of this Amendment, by deleting paragraph (f) thereof in its entirety and
substituting therefor the following:
"(f) other Indebtedness in an aggregate amount not to exceed $5,000,000
at any time, so long as on the date URC or any Subsidiary becomes liable
with respect to such other Indebtedness and immediately after giving effect
thereto, and to the concurrent retirement of any other Indebtedness, there
shall be no Default hereunder; and"
1.8. Section 9.2 of the Credit Agreement is hereby amended, as of the date
of this Amendment, as follows: (i) by deleting the word "and" appearing at the
end of paragraph (e) of such Section; (ii) by deleting the period appearing at
the end of paragraph (f) of such Section and substituting therefor the phrase
"; and"; and (iii) by adding thereto a new paragraph (g) as follows:
"(g) Liens in favor of the Agent for the benefit of the Banks securing
the Bank Obligations."
1.9. Section 9.4 of the Credit Agreement is hereby amended as of the date
of this Amendment, by deleting the reference to Section 10.9 of the Senior Note
Purchase Agreement appearing therein and substituting therefor reference to
Section 10.9(a) of the Senior Note Purchase Agreement.
Section 2. EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective as of the date hereof upon receipt by the Agent of a counterpart
hereof executed by the Required Banks and each of the parties hereto.
Section 3. LOAN PARTIES' REPRESENTATIONS AND WARRANTIES. In order to
induce the Agent and the Banks to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, the Loan Parties hereby
represent, warrant and agree that (a) all representations and warranties
contained in Article 5 of the Credit Agreement are true, correct and complete
in all material respects on and as of the date hereof to the same extent as
though made on and as of this date, except to the extent that such
representations and warranties specifically relate to an earlier date, in which
event they are true, correct and complete in all material respects as of such
earlier date; and (b) no event has occurred and is continuing or will result
from the consummation of the transactions contemplated by this Amendment which
would constitute a Default or an Event of Default.
-4-
<PAGE> 5
Section 4. Miscellaneous.
--------------
4.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(a) On and after the date of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import referring to the Credit Agreement, and each
reference in the Bank Agreements to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement shall
mean and be a reference to the Credit Agreement, as amended by this
Amendment;
(b) Except as specifically amended by this Amendment, the
Credit Agreement and the other Bank Agreements shall remain in full force
and effect and are hereby ratified and confirmed; and
(c) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provisions of, or operate as a waiver of any right, power or remedy of
Agent or any Bank under, the Credit Agreement or any of the other Bank
Agreements.
4.2 FEES AND EXPENSES. The Loan Parties acknowledges that all costs,
fees and expenses incurred by the Agent and its counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall be for
the account of the Loan Parties.
4.3 EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
4.4 HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes or be given any substantive
effect.
4.5 APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE UNDER,
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
[END OF TEXT]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Loan Parties, the Agent and the Banks have caused
this Amendment to be executed by their duly authorized officers as of the date
set forth above.
UNO RESTAURANT CORPORATION
By:______________________________
Name: Robert M. Brown
Title: Senior Vice President
URC HOLDING COMPANY, INC.
By:______________________________
Name: Robert M. Brown
Title: Senior Vice President
UNO RESTAURANTS, INC.
By:______________________________
Name: Robert M. Brown
Title: Senior Vice President
UNO FOODS INC.
By:______________________________
Name: Robert M. Brown
Title: Senior Vice President
PIZZERIA UNO CORPORATION
By:______________________________
Name: Robert M. Brown
Title: Senior Vice President
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
By:______________________________
Name: Barrie K. King
Title: Vice President
-6-
<PAGE> 7
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
MELLON BANK, N.A.
By:______________________________
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.,
By:______________________________
Name: Barrie K. King
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
MELLON BANK, N.A.
By:______________________________
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By:______________________________
Name: Barrie K. King
Title: Vice President
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
-7-
<PAGE> 8
By:______________________________
Name: Barrie K. King
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
MELLON BANK, N.A.
By:______________________________
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By:______________________________
Name: Barrie K. King
Title: Vice President
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<PAGE> 9
============================================================================
SECOND AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Dated as of November 7, 1995
Among
UNO RESTAURANTS, INC.
as Borrower
UNO FOODS, INC.,
PIZZERIA UNO CORPORATION,
URC HOLDING COMPANY, INC.
and
UNO RESTAURANT CORPORATION
as Guarantors
and
FLEET BANK OF MASSACHUSETTS, N.A.,
THE FIRST NATIONAL BANK OF BOSTON
and
MELLON BANK, N.A.,
as the Banks
and
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
===============================================================
<PAGE> 10
SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT is
entered into as of November 7, 1995 by and between UNO RESTAURANTS, INC. a
Massachusetts corporation (the "Borrower"), UNO FOODS, INC., a Massachusetts
corporation ("UFI"), PIZZERIA UNO CORPORATION, a Delaware corporation ("PUC"),
UNO RESTAURANT CORPORATION, a Delaware corporation, ("URC"), URC HOLDING
COMPANY, INC. ("UHC" and, together with UFI, PUC, URC and the Borrower,
hereinafter referred to collectively as the "Loan Parties"), FLEET BANK OF
MASSACHUSETTS, N.A., a national banking association, THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, and MELLON BANK, N.A., a national
banking association, as Banks, and FLEET BANK OF MASSACHUSETTS, N.A., a
national banking association, as Agent (the "Agent").
Recitals
--------
The Loan Parties, the Banks and the Agent are parties to a Revolving
Credit and Term Loan Agreement dated as of December 9, 1994, as amended (the
"Credit Agreement") and desire to amend the Credit Agreement in various
respects. All capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Credit Agreement.
NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 5, the Loan Parties, the Banks and the Agent
hereby amend the Credit Agreement, as follows:
Section 1. DEFINITIONS. Section 1.1 of the Credit Agreement is
hereby amended by adding a new definition of "Permitted Stock Repurchase" in
alphabetical order, as follows:
"PERMITTED STOCK REPURCHASE" shall mean the repurchase by URC
of shares of its common stock from time to time during the period from
October 30, 1995 through April 25, 1996 in an aggregate amount required
in order to complete the stock repurchases authorized by resolutions
adopted by the Board of Directors of URC on October 26, 1995 and at
prices not exceeding the price approved by the Board of Directors
therein.
Section 2. AMENDMENT OF COVENANTS. Article 7 of the Credit
Agreement is hereby amended by deleting Sections 7.1 and 7.3 in their entirety
and substituting the following therefor, respectively:
Section 7.1 CONSOLIDATED TANGIBLE NET WORTH. URC will at
all times maintain Consolidated Tangible Net Worth in an amount not
less than the sum of (i) $52,264,000, PLUS (ii) 50% of the sum of
Consolidated Net Income (0% in the case of a deficit) for each fiscal
quarter ending after October 2, 1994, PLUS (iii) 100% of the net
proceeds received by URC in connection with any offering of its capital
stock LESS (iv) the amounts expended by URC on the Permitted Stock
Repurchase.
Section 7.3. RATIO OF CONSOLIDATED LIABILITIES TO CONSOLIDATED
TANGIBLE NET WORTH. URC shall at all times maintain a ratio of
Consolidated Liabilities to Consolidated Tangible Net Worth of not
more than 1.0 to 1.0.
<PAGE> 11
Section 3. WAIVER OF COVENANT DEFAULTS. The Banks hereby waives
the failure of the Loan Parties to satisfy the requirements of Section 7.6 of
the Credit Agreement for the fiscal year ended September 30, 1995 as a result
of URC and its Subsidiaries incurring capital expenditures of greater than
$39,000,000 for such fiscal year; provided that for such fiscal year URC and
its Subsidiaries shall not have made or incurred consolidated Capital
Expenditures in excess of $40,200,000.
Section 4. AMENDMENT OF EXHIBIT B. EXHIBIT B to the Credit
Agreement is hereby deleted in its entirety and the new EXHIBIT B attached
hereto is substituted therefor.
Section 5. EFFECTIVENESS: CONDITIONS TO EFFECTIVENESS. This Second
Amendment to Revolving Credit and Term Loan Agreement shall become effective as
of October 31, 1995 upon execution hereof by the parties hereto and
satisfaction of the following conditions:
(a) OFFICERS' CERTIFICATE. The Loan Parties shall have
delivered to the Agent an Officers' Certificate in the form of EXHIBIT
A hereto.
(b) ACKNOWLEDGMENT OF AFFILIATE GUARANTORS. The Loan Parties
shall have delivered to the Agent an Acknowledgment of Affiliate
Guarantors in the form of EXHIBIT C hereto.
Section 6. REPRESENTATIONS AND WARRANTIES: NO DEFAULT. The Loan
Parties hereby confirm to the Banks the representations and warranties of the
Loan Parties set forth in Article 5 of the Credit Agreement (as amended hereby)
as of the date hereof, as if set forth herein in full. The Loan Parties hereby
certify that, after giving effect hereto, no Default exists under the Credit
Agreement.
Section 7. MISCELLANEOUS. The Loan Parties, jointly and severally,
agree to pay on demand all the Agent's reasonable expenses in preparing,
executing and delivering this Second Amendment to Revolving Credit and Term
Loan Agreement, and all related instruments and documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of the Agent's
special counsel, Goodwin, Procter & Hoar. This Second Amendment to Revolving
Credit and Term Loan Agreement shall be a Bank Agreement and shall be governed
by and construed and enforced under the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Loan Parties, the Banks and the Agent have
caused this Second Amendment to Revolving Credit and Term Loan Agreement to be
executed by their duly authorized officers as of the date first set forth
above.
UNO RESTAURANTS, INC.
By: ______________________________
Name: Robert M. Brown
Title: Senior Vice President
<PAGE> 12
UNO FOODS, INC.
By: ______________________________
Name: Robert M. Brown
Title: Senior Vice President
PIZZERIA UNO CORPORATION
By: ______________________________
Name: Robert M. Brown
Title: Senior Vice President
URC HOLDING COMPANY, INC.
By: ______________________________
Name: Robert M. Brown
Title: Senior Vice President
UNO RESTAURANT CORPORATION
By: ______________________________
Name: Robert M. Brown
Title: Senior Vice President
FLEET BANK OF MASSACHUSETTS, N.A.
By: ______________________________
Name: Barrie K. King
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: ______________________________
Name: Timothy G. Clifford
Title: Vice President
MELLON BANK, N.A.
By: ______________________________
Name: Joseph T. McDonald, Jr.
Title: Vice President
<PAGE> 13
FLEET BANK OF MASSACHUSETTS, N.A.
as Agent
By: ______________________________
Name: Barrie K. King
Title: Vice President
<PAGE> 1
Exhibit 10(k)
(Multicurrency--Cross Border)
ISDA
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.
MASTER AGREEMENT
dated as of October 25, 1995
Fleet Bank of Massachusetts, N.A. and Uno Restaurants, Inc. have entered and/or
anticipate entering into one or more transactions (each a "Transaction") that
are or will be governed by this Master Agreement, which includes the schedule
(the "Schedule"), and the documents and other confirming evidence (each a
"Confirmation") exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise
<PAGE> 2
pursuant to this Agreement, in freely transferable funds and in the
manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by payment), such delivery will be
made for receipt on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties make
and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant
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<PAGE> 3
governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted or
withheld from any additional amount paid by X to Y under this Section
2(d)) promptly upon the earlier of determining that such deduction or
withholding is required or receiving notice that such amount has been
assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount actually
received by Y (free and clear off Indemnifiable Taxes, whether assessed
against X or Y) will equal the full amount Y would have received had no
such deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that it would not
be required to be paid but for:
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or brought in
a court of competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a Change in Tax
Law.
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability
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<PAGE> 4
for interest, but including any related liability for penalties only if
Y has failed to comply with or perform any agreement contained in Section
4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required
to pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but
excluding) the date of actual payment, at the Default Rate. Such interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in
the performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into and, in the case of the representations in Section 3(f), at all times
until the termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all necessary
action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any
provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it or any of its
assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been
complied with; and
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<PAGE> 5
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding
in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
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<PAGE> 6
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of such
demand), with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be executed and
to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect to its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if
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<PAGE> 7
such failure is not remedied on or before the third Local Business Day
after notice of such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
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<PAGE> 8
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider of such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement of grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability generally
to pay its debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the benefit of
its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is presented
for its winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of the
institution or presentation thereof; (5) has a resolution passed
for its winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks or
becomes subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all
or substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has
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<PAGE> 9
an analogous effect to any of the events specified in clauses (1)
to (7)(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of
the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with or
into, or transfers all of substantially all its assets to, another equity
and, at the time of such consolidation, amalgamation, merger or transfer:
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement;
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under this
Agreement.
(b) Termination Events. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the
event is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party): -
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action is
taken or brought with respect to a party to this
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<PAGE> 10
Agreement) or (y) a Change in Tax Law, the party (which will be the
Affected Party) will, or there is a substantial likelihood that it will,
on the next succeeding Scheduled Payment Date ( 1 ) be required to pay to
the other party an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
required to be deducted or withheld for or on account of a Tax (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no
additional amount is required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to pay
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is
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effective as an Early Termination Date in respect of all outstanding
Transactions. If, however, "Automatic Early Termination" is specified in the
Schedule as applying to a party, then an Early Termination Date in respect of
all outstanding Transactions will occur immediately upon the occurrence with
respect to such party of an Event of Default specified in Section 5(a)(vii)(1),
(3), (5), (6) or, to the extent analogous thereto, (8), and as of the time
immediately preceding the institution of the relevant proceeding or the
presentation of the relevant petition upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(4) or, to the
extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and obligations
under this Agreement in respect of the Affected Transactions to another of
its Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(k) on action to avoid that Termination
Event.
(iv) RIGHT TO TERMINATE, IF: --
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
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(2) An Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event Upon
Merger occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then continuing,
designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i)
or 2(e) in respect of the Terminated Transactions will be required to be
made, but without prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest
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thereon (before as well as after judgment) in the Termination Currency,
from (and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such
interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment
method, either the "First Method" or the "Second Method". If the parties fail
to designate a payment measure or payment method in the Schedule, it will be
deemed that "Market Quotation" or the "Second Method", as the case may be,
shall apply. The amount, if any, payable in respect of an Early Termination
Date and determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:-
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the Non-defaulting Party)
in respect of the Termination Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting
Party less (B) the Termination Currency Equivalent of the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting Party;
if it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
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(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Termination Transactions,
and an amount will be payable equal to (1) the sum of (a)
one-half of the difference between the Settlement Amount of the
party with the higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount ("Y") and
(b) the Termination Currency Equivalent of the Unpaid Amounts
owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all Terminated
Transactions) and an amount will be payable equal to one-half of
the difference between the Loss of the party with the higher
Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the Early Termination Date to the date for payment determined under
Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain
and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. TRANSFER
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Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required
to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual Currency
payable in respect of this Agreement, the party receiving the payment will
refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is
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able, acting in a reasonable manner and in good faith in converting the
currency received into the Contractual Currency, to purchase the Contractual
Currency with the amount of the currency of the judgment or order
actually received by such party. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection with the
purchase of or conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by
an exchange of telexes or electronic messages on an electronic messaging
system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission (or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging
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system, which in each case will be sufficient for all purposes to evidence
a binding supplement to this Agreement. The parties will specify therein
or through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organization of such party, the obligations
of such party are the same as if it had entered into the Transaction through
its head or home office. This representation will be deemed to be repeated by
such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address
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or number or in accordance with the electronic messaging system details
provided (see the Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
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Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given
in the manner provided for notices in Section 12. Nothing in this Agreement
will affect the right of either party to serve process in any other manner
permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the persons or any entity directly or
indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of
the entity or person.
"APPLICABLE RATE" means:
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(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of , or any change in or amendment to, any law (or in the
application or official interpretation of any law, that occurs on or after the
date on which the relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified
as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
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recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "lawful" and "unlawful" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an mount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain,
cost of funding or, at the election of such party but without duplication, loss
or cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting
from any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination
Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or
(3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of- pocket expenses referred to under Section 11. A party will determine
its Loss as of the relevant Early Termination Date, or, if that is not
reasonably practicable, as of the earliest date thereafter as is reasonably
practicable. A party may (but need not) determine its Loss by reference to
quotations of relevant rates or prices from one or more leading dealers in the
relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in
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<PAGE> 22
consideration of an agreement between such party (taking into account any
existing Credit Support Document with respect to the obligations of such party)
and the quoting Reference Market- maker to enter into a transaction (the
"Replacement Transaction") that would have the effect of preserving for such
party the economic equivalent of any payment or delivery (whether the
underlying obligation was absolute or contingent and assuming the satisfaction
of each applicable condition precedent) by the parties under Section 2(a)(i) in
respect of such Terminated Transaction or group of Terminated Transactions that
would, but for the occurrence of the relevant Early Termination Date, have been
required after that date. For this purpose, Unpaid Amounts in respect to the
Terminated Transaction or group of Terminated Transactions are to be executed
but, without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of
each applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market- maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (without regard to different time zones) on or as soon
as reasonably practicable after the relevant Early Termination Date. The day
and time as of which those quotations are to be obtained will be selected in
good faith by the party obliged to make a determination under Section 6(e),
and, if each party is so obliged, after consultation with the other. If more
than three quotations are provided, the Market Quotation will be the arithmetic
mean of the quotations, without regard to be quotations having the highest and
lowest values. If exactly three such quotations are provided, the Market
Quotation will be the quotation remaining after disregarding the highest and
lowest quotations. For this purpose, if more than one quotation has the same
highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed
that the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof of
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organized, managed and controlled or
considered to have its seat, (b) where an
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<PAGE> 23
Office through which party is acting for purposes of this Agreement is located,
(c) in which the party executes this Agreement and (d) in relation to any
payment, from or through which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section (a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of: -
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of
such party or any applicable Specified Entity of such party) and the other
party to this Agreement (or any Credit Support Provider of such other party or
any applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions),
(b) any combination of these transactions and (c) any other transaction
identified as a Specified Transaction in this Agreement or the relevant
confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
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<PAGE> 24
"TAX" means any present or future tax, levy, impost, duty, charge, assessment
or fee of any nature (including interest, penalties and additions thereto) that
is imposed by any government or other taxing authority in respect of any
payment under this Agreement other than a stamp, registration, documentation or
similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in respect
of any mount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a
rate for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to
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<PAGE> 25
such party on or prior to such Early Termination Date and which has not been so
settled as at such Early Termination Date, an amount equal to the fair market
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding) such
Early Termination Date, at the Applicable Rate. Such amounts of interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b)
above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
Fleet Bank of Massachusetts, N.A. Uno Restaurants, Inc.
By:_______________________________ By:____________________________
Name: Peter M. Fleisher Name:
Title: Vice President Title:
Date: October 25, 1995 Date:
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<PAGE> 26
(Multicurrency--Cross Border)
ISDA
International Swap and Derivatives Association, Inc.
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of October 25, 1995
------------------
between
Fleet Bank of Massachusetts, N.A. and Uno Restaurants, Inc.
- --------------------------------- ---------------------
("Party A") ("Party B")
PART 1. TERMINATION PROVISIONS.
In the Agreement:
(a) "SPECIFIED ENTITY" means in relation to Party A and Party B for the
purpose of:
Section 5(a)(v) None
---------------
Section 5(a)(vi) None
----------------
Section 5(a)(vii) None
----------------
Section 5(b)(iv) None
----------------
(b) "SPECIFIED TRANSACTION" will have the meaning specified in SECTION 14 of
this Agreement. For purposes of clause (c) of such definition Specified
Transaction includes any transaction, now or hereafter existing between Party A
or any of its Affiliates and Party B, any Credit Support Provider of Party B,
or any Specified Entity of Party B under which Party A is or may be owed
payment or performance of any nature whatsoever.
(c) THE "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party A
and Party B
The following provisions apply:
(i) "SPECIFIED INDEBTEDNESS": with respect to any person, means all
obligations of that person identified as Specified Indebtedness in SECTION
14, except as excluded in the proviso to this definition, as well as all
reimbursement obligations in respect of letter of credit, financial
guaranty insurance or surety bonds issued for the account of that person
and trade debt incurred other than through borrowings; PROVIDED, HOWEVER,
that
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<PAGE> 27
indebtedness or obligations in respect of deposits received in the
ordinary course of the banking business of such person shall not
constitute Specified Indebtedness.
(ii) "THRESHOLD AMOUNT" means: (i) with respect to Party A, 3% of
stockholders' equity of Party A, and (ii) with respect to Party B,
$250,000.
(d) The "Credit Event Upon Merger" provisions of SECTION 5(b)(iv) will apply
to Party A and Party B.
Notwithstanding SECTION 5(b)(iv) of this Agreement, "Credit Event
Upon Merger" means (1)(a) with respect to Party A or Party B, such
party ("X"), any Credit Support Provider of X or any applicable
Specified Entity of X consolidates or amalgamates with, or mergers
with or into, or transfers all or substantially all its assets to, or
receives all or substantially all the assets or obligations of,
another entity and such action does not constitute an event described
in SECTION 5(a)(viii) or (b) with respect to Party B, (A) any person
or entity acquires directly or indirectly the beneficial ownership of
equity securities having the power to elect a majority of the board
of directors of such party ("X"), any Credit Support Provider of X,
or any applicable Specified Entity of Party X or (B) such party
("X"), any Credit Support Provider of X, or any applicable Specified
Entity of X effects any substantial change in its capital structure
by means of the issuance, incurrence or guarantee of debt or the
issuance of preferred stock or other securities convertible into or
exchangeable for, debt or preferred stock and (2)(a) the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or
such Specified Entity, as the case may be, immediately prior to such
action or (b) with respect to Party B, Party A's policies in effect
as at such time would not permit Party A to enter into every
Transaction then outstanding with the resulting, surviving or
transferee entity of Party B, such Credit Support Provider or such
Specified Entity, as the case may be (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party).
(e) The "AUTOMATIC EARLY TERMINATION" provisions of SECTION 6(a) will not
apply to Party A or Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of SECTION 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENT will not apply.
(i) The following provision is hereby added to SECTION 5(a) of the Agreement
as an Event of Default":
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<PAGE> 28
"(ix) Unsatisfied Judgments. The party, any Credit Supporter Provider of
such party or any Specified Entity of such party for the purpose of
SECTION 5(a)(vii) has a final judgment for the payment of in excess of
$1,000,000 issued against it by a court of competent jurisdiction and such
judgment is not discharged or its execution stayed pending appeal within
90 days of such judgment or such judgment is not discharged within 90 days
of the expiration of any such stay."
PART 2. TAX REPRESENTATIONS.
(a) PARTY A AND PARTY B PAYER TAX REPRESENTATIONS. For the purpose of SECTION
3(e) of this Agreement, each of Party A and Party B makes the following
representations:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under SECTION 2(e). 6(d)(ii) or 6(e) of this
Agreement) to be made by it to the other party under this Agreement. In
making this representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to SECTION 3(f) of this
Agreement, (ii) the satisfaction of the agreement of the other party
contained in SECTION 4(a)(i) OR 4(a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the other party
pursuant to SECTION 4(a)(i) OR 4(a)(iii) of this Agreement and (iii) the
satisfaction of the agreement of the other party contained in SECTION 4(d)
of this Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other party
does not deliver a form or document under SECTION 4(a)(iii) by reason of
material prejudice to its legal or commercial position.
(b) PARTY A PAYEE TAX REPRESENTATIONS. For the purpose of SECTION 3(f) of this
Agreement, Party A makes the following representation:
Party A is a national banking association duly organized under the laws
of the United States and is not a foreign corporation for United States
tax purposes.
(c) PARTY B PAYEE TAX REPRESENTATIONS. For the purpose of SECTION 3(f) of this
Agreement, Party B makes the following representation:
Party B is a corporation duly organized and incorporated in the state of
Massachusetts and is not a foreign corporation for United States tax
purposes.
PART 3. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of SECTIONS 4(a)(i) AND (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are:
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<PAGE> 29
<TABLE>
<CAPTION>
Party required to Date by which
deliver document Form/Document Certificate to be delivered
- ---------------- ------------------------- ---------------
<S> <C> <C>
Party B An executed United States Internal Revenue Upon execution of
Service form W-9 (or any successor thereto). this Agreement.
</TABLE>
<TABLE>
(b) Other documents to be delivered are:
<CAPTION>
Covered by
Party required to Form/Document Date by which to Section 3(d)
Deliver document Certificate be delivered Representation
---------------- ----------- ------------ --------------
<S> <C> <C> <C>
Party B A certificate of an authorized Upon execution of this Yes
officer for such party certifying Agreement and as
the authority, names and true deemed necessary for
signatures of the officers any further
signing this Agreement, and each documentation.
Confirmation, reasonably
satisfactory in form and
substance to Party A.
Party B Annual audited financial Promptly upon request. No.
statements prepared in accordance
with generally accepted
accounting principles in the
country in which the entity to
which they relate is organized.
Party B Quarterly unaudited financial Promptly upon request. No.
statements prepared in accordance
with generally accepted
accounting principles in the
country outstanding entity to
which they relate is organized.
Party B A written opinion of legal Upon execution of this No.
counsel to Party B and any Credit Agreement and as
Support Provider for Party B deemed necessary for
reasonably satisfactory in form any further
and substance to Party A. documentation.
</TABLE>
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<PAGE> 30
<TABLE>
<S> <C> <C> <C>
Party B Certified copies of documents Upon execution of this Yes.
evidencing each action taken by Agreement.
Party B to authorize its
execution of this Agreement and
each Confirmation, and the
performance of its obligations
hereunder as well as its bylaws
and articles of incorporation.
Party B Such other documents as Party A Promptly upon request. Yes.
may reasonably request in
connection with each transaction.
</TABLE>
PART 4. MISCELLANEOUS.
(a) ADDRESSES FOR NOTICES. For the purpose of SECTION 12(a) of this Agreement:
Address for notices or Fleet Bank of Massachusetts, N.A.
communications to 75 State Street, MA BO F03E
Party A: Bank Treasury Division
Boston, Massachusetts 02109
Attention: Mr. Brian C. Snell,
Assistant Vice President
Telex: 144203
Facsimile No. (617) 346-1180
Answerback: FLEETB1
Telephone No. (617) 346-1169
Address for Uno Restaurants, Inc.
notices for 100 Charles Park Road
communications West Roxbury, MA 02132
to Party B:
Attention: Mr. Robert Brown
Facsimile No.: Telephone No.:
(617) 325-6744 (617) 323-9200
(b) PROCESS AGENT. For the purpose of SECTION 13(c) of this Agreement, Not
Applicable.
(c) OFFICES. The provisions of SECTION 10(a) will apply to this Agreement.
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<PAGE> 31
(d) MULTIBRANCH PARTY. For the purpose of SECTION 10(c) of this Agreement, Not
Applicable.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to a relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document, Not
Applicable.
(g) CREDIT SUPPORT PROVIDER means, Not Applicable.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference
to choice of law doctrine).
(i) NETTING OF PAYMENTS. Subparagraph (ii) of SECTION 2(c) of this
Agreement will apply to all Transactions. In the event of Termination
upon an Event of Default, the parties hereto agree to utilize bi-
lateral close-out netting of all payments due under all Transactions.
(j) "AFFILIATE" will have the meaning specified in SECTION 14 of this
Agreement.
PART 5. OTHER PROVISIONS.
(a) 1991 ISDA DEFINITIONS. The definitions and provisions contained in
the 1991 ISDA Definitions (the "1991 Definitions") as published by
the International Swaps and Derivatives Association, Inc. are
incorporated into this Agreement by reference. For these purposes,
all references in the 1991 ISDA Definitions to a "Swap Transaction"
shall be deemed to apply to each Transaction under this Agreement.
Any definitions incorporated into a Confirmation shall prevail over
the provisions of this Agreement, or the 1991 ISDA Definitions.
(b) ACCURACY OF SPECIFIED INFORMATION. SECTION 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before
the period:
"or, in the case of audited or unaudited financial statements, a fair
presentation of the financial condition of the relevant party"
(c) ADDITIONAL REPRESENTATIONS. For purposes of SECTION 3 of this
Agreement, the following shall be added, immediately following
paragraph (f) thereof:
"(g) This Agreement and each Transaction constitutes a "swap
agreement" within the meaning of Commodity Futures Trading Commission
("CFTC") regulations Section 35.1(b)(1).
(h) It is an "eligible swap participant" within the meaning of CFTC
Regulations Section 35.1(b)(2).
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<PAGE> 32
(i) Neither this Agreement nor an Transaction is one of a fungible
class of agreements that are standardized as to their material
economic terms, within the meaning of CFTC Regulations Section
35.2(b).
(j) The creditworthiness of the other party was or will be a
material consideration in entering into or determining the terms of
this Agreement and each Transaction, including pricing, cost or
credit enhancement terms of the Agreement or Transaction, within the
meaning of CFTC Regulations Section 35.2(c).
(k) It has entered into this Agreement (including each Transaction
evidenced hereby) in conjunction with its line of business (including
financial intermediation services) or the financing of its business.
(l) It engages, will engage and holds itself out as engaging in
"financial contracts", as defined in Regulation EE of the Federal
Reserve Board, as a counterparty on both sides of one or more
"financial markets" (as defined in such regulation) and it fulfills
at least one of the quantitative tests contained in such regulation.
(m) The individual(s) executing and delivering this Agreement and
any other documentation (including any Credit Support Document)
relating to this Agreement to which it is a party or that it is
required to deliver are duly empowered and authorized to do so, and
it has duly executed and delivered this Agreement and any Credit
Support Documents to which it is a party."
(d) FORMS. For purposes of SECTION 4(a)(iii) of this Agreement, the
following shall be added immediately prior to the existing test:
"upon learning that such form or document is required or".
(e) RIGHT OF SET-OFF; COUNTERCLAIM. Without affecting the provisions of this
Agreement requiring the calculation of certain net payment amounts,
all payments under this Agreement shall be made without Set-off or
counterclaim and will not be subject to any conditions except as
provided in SECTION 2 of this Agreement and except as provided in the
following clauses (i) through (iii):
(i) if there is a Defaulting Party, the Non-defaulting Party will
have the right to Set-off, counterclaim or withhold payment of any
obligation, whether matured or unmatured, of the Defaulting Party
under this Agreement or any other agreement between the parties
regardless of the office or branch through which a party is acting,
and the Non-defaulting Party's obligations hereunder or thereunder to
the Defaulting Party shall be deemed to be satisfied and discharged
to the extent of such Set-off, counterclaim or withholding;
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<PAGE> 33
(ii) upon the occurrence and during the continuance of an Event of
Default or a Potential Event of Default, the right of an Affiliate of
the Non-Defaulting Party to receive payment from the Defaulting Party
may be assigned to the Non-Defaulting Party and the Non-Defaulting
Party's obligations hereunder shall be Set-off and shall be deemed to
be satisfied and discharged pursuant to clause (i) above to the
extent of such assignment; and
(iii) any obligation of a Non-Defaulting Party hereunder shall in any
event be conditioned upon and subject to the condition precedent that
and shall arise only upon the date that all indebtedness and
obligations, whether matured or unmatured, of the Defaulting Party to
the Non-Defaulting Party or any Affiliate of the Non-Defaulting Party
shall have been paid in full.
(f) TAX EVENT. The following is hereby inserted in SECTION 5(b)(ii)
before the words "there is a substantial likelihood that":
"in the written opinion of legal counsel of recognized standing
(which may include in-house legal counsel)"
(g) CONFIRMATIONS. For each Transaction Party A and Party B agree to
enter into hereunder, Party A shall promptly send to Party B a
Confirmation setting forth the terms of such Transaction. Party B
shall execute and return the Confirmation to Party A or request
correction of any error within forty-eight (48) hours of trade date.
Failure of Party B to respond within such period shall not affect the
validity or enforceability of such Transaction and shall be deemed to
be an affirmation of such terms.
(h) CONSENT TO RECORDING. Each party consents to the monitoring or
recording, at any time and from time to time, by the other party of
any and all communications between officers or employees of the
parties, waives any further notice of such monitoring or recording,
and agrees to notify its officers and employees of such monitoring or
recording.
(i) WAIVER OF JURY TRIAL.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY PROCEEDINGS.
(j) NOTICE OF EVENT OF DEFAULT. Each party agrees, upon learning of the
occurrence of any event or commencement of any condition that
constitutes an Event of Default or a Potential Event of Default with
respect to itself, promptly to give the other party notice of such
event or condition. Failure to give notice within 30 days of learning
of such event or condition shall constitute an Event of Default
within respect to such party.
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<PAGE> 34
(k) CHANGE OF ACCOUNT. SECTION 2(b) of this Agreement is hereby amended
by the addition of the following after the word "delivery" in the
first line thereof:
"to another account in the same legal and tax jurisdiction as the
original account".
(l) NON-RELIANCE. In connection with the negotiation of. the entering
into, and the confirming of the execution of this Agreement, and
Credit Support Document to which it is a party, each Transaction, and
any other documentation relating to this Agreement to which it is a
party or that it is required by this Agreement to deliver:
(i) it is not relying (for purposes of making any investment
decision or otherwise) upon any advice, counsel, or
representations (whether written or oral) of the other party to
this Agreement, such Credit Support Document, each Transaction
or such other documentation other that the representations
expressly set forth in this Agreement, such Credit Support
Document and in any Confirmation;
(ii) it has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent it
has deemed necessary, and it has made its own investment,
hedging and trading decisions (including decisions regarding the
suitability of any Transaction pursuant to this Agreement) based
upon any advice from such advisors as it has deemed necessary
and not upon any view expressed by the other party to this
Agreement, such Credit Support Document, each Transaction or
such other documentation;
(iii) it has a full understanding of all the terms, conditions,
and risks (economic and otherwise) of the Agreement, such Credit
Support Document, each Transaction, and such other documentation
and is capable of assuming and willing to assume (financially
and otherwise) those risks;
(iv) it is entering into this Agreement, such Credit Support
Document, each Transaction, and such other documentation for the
purposes of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with a line of
business and not for purposes of speculation;
(v) it is entering into this Agreement, such Credit Support
Document, each Transaction, and such other documentation as
principal, and not as agent or in any other capacity, fiduciary
or otherwise; and
(vi) the other party to this Agreement, such Credit Support document,
each Transaction, and such other documentation (a) is not acting
as a fiduciary or financial, investment or commodity trading
advisor for it; (b) has not given to it (directly or indirectly
through any other person) any assurance,
-34-
<PAGE> 35
guaranty or representation whatsoever as to the merits (either
legal, regulatory, tax, financial, accounting or otherwise) of
this Agreement, such Credit Support Document, each Transaction,
and such other documentation; and (c) has not committed to unwind
the Transactions.
FLEET BANK OF MASSACHUSETTS, N.A. UNO RESTAURANT, INC.
- --------------------------------- --------------------
By: ________________________ By: ___________________________
Name: Peter M. Fleisher Name:
Title: Vice President Title:
Date: October 25, 1995 Date:
-35-
<PAGE> 36
October 26, 1995
Mr. Bob Brown
Unos Restaurants, Inc.
100 Charles Park Road
West Roxbury, MA 02132
RE: Interest Rate Swap Transaction
Dear Mr. Brown:
The purpose of this letter agreement is to confirm the terms and
conditions of the Swap Transaction entered into between us on the Trade Date
referred to below (the "Swap Transaction"). This letter agreement constitutes
a "Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete binding agreement between
you and us as to the terms of the Transaction to which this Confirmation
relates. In addition, you and we agree to use all reasonable efforts promptly
to negotiate, execute and deliver an agreement in the form of the ISDA Master
Agreement (Multicurrency-Cross Border) (the "ISDA Form"), with such
modifications as you and we will in good faith agree. If the Agreement is not
executed and returned to Fleet Bank of Massachusetts, N.A. within 45 days of
the date that it is sent, Fleet Bank of Massachusetts, N.A. may, at its option,
terminate this transaction. Upon the execution by you and us of such an
agreement, this confirmation will supplement, form a part of, and be subject to
that agreement. All provisions contained or incorporated by reference in that
agreement upon its execution will govern this Confirmation except as expressly
modified below. Until we execute and deliver that agreement, this
Confirmation, together with all other documents referring to the ISDA Form
(each a "Confirmation") confirming transactions (each a "Transaction") entered
into between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form of
<PAGE> 37
the ISDA Form as if we had executed an agreement in such form (but without any
Schedule) on the Trade Date of the first such Transaction between us. In the
event of any inconsistency between the provisions of that agreement and this
Confirmation this Confirmation will prevail for the purpose of this
Transaction. For the purpose hereof, Fleet Bank of Massachusetts, N.A. is
referred to as "Party A" and Unos Restaurants, Inc. is referred to as "Party B".
<TABLE>
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
<S> <C>
Notional Amount: USD 20,000,000.00
Trade Date: October 25, 1995
Effective Date: October 27, 1995
Termination Date: October 27, 2000, subject to adjustment in
accordance with the Modified Following Business
Day Convention.
FIXED AMOUNTS:
- --------------
Fixed Rate Payer: PARTY B
Fixed Rate: 6.04%
Fixed Rate Actual/360
Day Count Fraction:
Fixed Rate Payment Dates: The 27th of each month, commencing on November
27, 1995 and ending on the Termination Date,
subject to adjustment in accordance with the
Modified Following Business Day Convention.
FLOATING AMOUNTS:
- -----------------
Floating Rate Payer: PARTY A
</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
Floating Rate Payment Dates: The 27th of each month, commencing on November
27, 1995 and ending on the Termination Date,
subject to adjustment in accordance with the
Modified Following Business Day Convention.
Floating Rate for Initial 5.87109%
Calculation Period:
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One Month
Spread: None
Floating Rate Day Count Fraction: Actual 3/60
Reset Dates: The first day of each Floating Rate Calculation
Period.
Method of Averaging: Not Applicable
Compounding: Not Applicable
Business Day: New York and London
Credit Support Document: In the event that collateral is secured for the
underlying loan debt, any swap exposure will be
cross collateralized through the Agreement
between Party A and Party B dated December 9,
1994 by considering this Confirmation, and the
related ISDA Master Agreement dated October 25,
1995, a Bank Agreement as defined in the
aforementioned Agreement, as amended from time
to time.
Governing Law: New York State Law (without reference to choice
of law doctrine)
Calculation Agent: Fleet Bank of Massachusetts, N.A.
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
ACCOUNT DETAILS:
- ----------------
Payments to Party A: Federal Reserve Boston
Fleet Bank of Massachusetts, N.A.
ABA #011000138
A/C 2014361-03156
Attn: Interest Rate Products
Payments to Party B: Please Advise:
Bank Name:___________________
Account Name:_________________
Account Number:_______________
</TABLE>
3. Party B shall deliver to Party A, at the time of its execution of
this Confirmation, evidence of the specimen signature and incumbency of each
person who is executing the Confirmation on the party's behalf, unless such
evidence has previously been supplied in connection with the Agreement and
remains true and in effect.
4. Each party has entered into this Swap Transaction solely in
reliance on its own judgment. Neither party has any fiduciary obligation to
the other party relating to this Swap Transaction. In addition, neither party
has held itself out as advising, or has held out any of its employees or agents
as having the authority to advise, the other party as to whether or not the
other party should enter into this Swap Transaction, any subsequent actions
relating to this Swap Transaction or any other matters relating to this Swap
Transaction. Neither party shall have any responsibility or liability
whatsoever in respect of any advise of this nature given, or views expressed,
by it or any such persons to the other party relating to this Swap Transaction,
whether or not such advice is given or such views are expressed at the request
of the other party.
<PAGE> 40
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us via fax (617) 241-1894/1987 or mail to:
Fleet Services Corporation
Attn: Irene Kelley
Mailstop: MAMLSFTTOP
P.O. Box 2197
Boston, MA 02106-2197
We are delighted to have completed this transaction with you. If you
have any questions regarding this confirmation, please call Irene Kelley at
(617) 241-1818.
FLEET BANK OF MASSACHUSETTS, N.A.
By: ___________________________________
Name: Janet M. Gately
A.V.P. Treasury Operations
Accepted and confirmed as of the date first written above:
Unos Restaurants, Inc.
By: _____________________________
Authorized Signatory
Name: Robert M. Brown
Title: Senior Vice President
<PAGE> 1
<TABLE>
EXHIBIT 11
----------
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Year Ended
-------------------------------------
Oct. 1 Oct. 2 Oct. 3
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average shares outstanding 12,079,411 11,260,965 11,212,393
Common Stock equivalents:
Stock options 284,660 99,022 78,694
---------- --------- ----------
TOTAL * 12,364,071 11,359,987 11,291,087
========== ========== ==========
Net Income (in thousands) $ 7,203 $ 5,756 $ 4,163
========== ========== ==========
Earnings Per Common Share $ .58 $ .51 $ .37
========== ========== ==========
<FN>
* Adjusted to reflect the stock split paid on February 28, 1995.
</TABLE>
54
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
<S> <C>
SUBSIDIARIES JURISDICTION OF INCORPORATION URC
- ------------ ---------------------------------
Holding Company, Inc. Delaware
SUBSIDIARIES OF URC HOLDING COMPANY, INC.
- -----------------------------------------
B.S. Acquisition Corp. New Jersey
B.S. Intangible Asset Corp. Delaware
Pizzeria Uno Corporation Delaware
Uno Restaurants, Inc. Massachusetts
Uno Restaurant Securities Corporation Massachusetts
Uno Foods Inc. Massachusetts
SUBSIDIARIES OF B.S. ACQUISITION CORP.
- --------------------------------------
B.S. of Schaumburg, Inc. Illinois
B.S. of Woodbridge, Inc. New Jersey
Uno Bay, Inc. Pennsylvania
SUBSIDIARIES OF UNO RESTAURANTS, INC.
- -------------------------------------
8250 International Drive Corporation Florida
Franklin Mills Pizzeria, Inc. Pennsylvania
Grayborn Buena Vista, Inc. Florida
Herald Center Uno Rest. Inc. New York
Kissimmee Uno, Inc. Florida
Marketing Services Group, Inc. Massachusetts
Marlborough Takery, Inc. Massachusetts
Newington Uno, Inc. Connecticut
Newport News Uno, Inc. Virginia
Newton Takery, Inc. Massachusetts
Paramus Uno, Inc. New Jersey
Pizzeria Due, Inc. Illinois
Pizzeria Uno, Inc. Illinois
Pizzeria Uno of Albany Inc. New York
Pizzeria Uno of Annapolis, Inc. Maryland
Pizzeria Uno of Ballston, Inc. Virginia
Pizzeria Uno of Bay Ridge, Inc. New York
Pizzeria Uno of Bayside, Inc. New York
Pizzeria Uno of Bethesda, Inc. Maryland
Pizzeria Uno of Brockton, Inc. Massachusetts
Pizzeria Uno of Buena Vista, Inc. Florida
Pizzeria Uno of Columbus Avenue, Inc. New York
Pizzeria Uno of Dock Square, Inc. Massachusetts
Pizzeria Uno of East Village Inc. New York
Pizzeria Uno of 86th Street, Inc. New York
Pizzeria Uno of Fair Oaks, Inc. Virginia
Pizzeria Uno of Fairfield, Inc. Missouri
Pizzeria Uno of Forest Hills, Inc. New York
Pizzeria Uno of Harbor Place, Inc. Maryland
Pizzeria Uno of Kingston, Inc. Massachusetts
Pizzeria Uno of Lynbrook Inc. New York
Pizzeria Uno of Norfolk, Inc. Virginia
</TABLE>
55
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Pizzeria Uno of Paramus, Inc. New Jersey
Pizzeria Uno of Penn Center, Inc. New York
Pizzeria Uno of Reston, Inc. Virginia
Pizzeria Uno of St. Louis, Inc. Missouri
Pizzeria Uno of South Street Seaport, Inc. New York
Pizzeria Uno of Springfield, Inc. Massachusetts
Pizzeria Uno of Syracuse, Inc. New York
Pizzeria Uno of Tennessee, Inc. Tennessee
Pizzeria Uno of Union Station, Inc. District of Columbia
Pizzeria Uno of Washington, DC, Inc. District of Columbia
Pizzeria Uno of Westfarms, Inc. Delaware
Plizzettas of Concord, Inc. New Hampshire
Plizzettas of Paoli, Inc. Pennsylvania
Sewell Corporation Illinois
Su Casa, Inc. Illinois
Tiffany Uno, Inc. Colorado
Uno of Aurora, Inc. Illinois
Uno of Daytona, Inc. Florida
Uno of Falls Church, Inc. Virginia
Uno of Greenwood, Inc. Colorado
Uno of Henrietta, Inc. New York
Uno of Manchester, Inc. Connecticut
Uno of Schaumburg, Inc. Illinois
Uno of Smoketown, Inc. Virginia
Uno of Sterling, Inc. Virginia
Uno of Victor, Inc. New York
Uno Restaurant of Columbus, Inc. Ohio
Uno Restaurant of Great Neck, Inc. New York
Uno Restaurant of Shrewsbury, Inc. Massachusetts
Uno Restaurant of St. Charles, Inc. Maryland
Uno Restaurant of Woburn, Inc. Massachusetts
Uno Restaurants of New York Inc. New York
Westminster Uno, Inc. Colorado
SUBSIDIARY OF SEWELL CORPORATION
- --------------------------------
Saxet Corporation Delaware
SUBSIDIARY OF UNO RESTAURANTS OF NEW YORK INC.
- ----------------------------------------------
Pizzeria Uno Massachusetts Business Trust Massachusetts
</TABLE>
56
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-03-1994
<PERIOD-END> OCT-01-1995
<CASH> 1,305
<SECURITIES> 0
<RECEIVABLES> 1,292
<ALLOWANCES> 0
<INVENTORY> 2,226
<CURRENT-ASSETS> 8,297
<PP&E> 148,853
<DEPRECIATION> 36,355
<TOTAL-ASSETS> 125,260
<CURRENT-LIABILITIES> 15,912
<BONDS> 22,499
<COMMON> 137
0
0
<OTHER-SE> 82,990<F1>
<TOTAL-LIABILITY-AND-EQUITY> 125,260
<SALES> 158,706
<TOTAL-REVENUES> 158,706
<CGS> 39,420
<TOTAL-COSTS> 145,329
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,924
<INCOME-PRETAX> 11,433
<INCOME-TAX> 4,230
<INCOME-CONTINUING> 7,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,203
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
<FN>
<F1>NET OF TREASURY STOCK
</FN>
</TABLE>
