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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee required)
For the fiscal year ended December 29, 1997
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
Commission file number: 33-48183
American Restaurant Group, Inc.
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Exact Name of Registrant as Specified in Its Charter
Delaware 33-0193602
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
450 Newport Center Drive
Newport Beach, California 92660
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(Address of Principal Executive Offices) (Zip Code)
(714) 721-8000
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by a 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 [ ]
Indicate by a 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 the registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendments to this
Form 10-K. [X]
The number of outstanding shares of the Registrant's Common Stock (one cent par
value) as of March 2, 1998 was 128,081.
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AMERICAN RESTAURANT GROUP, INC.
INDEX
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PAGE
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PART I
ITEM 1. BUSINESS................................................................ 1
ITEM 2. PROPERTIES.............................................................. 5
ITEM 3. LEGAL PROCEEDINGS....................................................... 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................... 6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS..................................................... 6
ITEM 6. SELECTED FINANCIAL DATA................................................. 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................. 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................................... 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................... 13
ITEM 11. EXECUTIVE COMPENSATION.................................................. 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................................... 16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................... 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K................................................. 17
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PART I
ITEM 1. BUSINESS
INTRODUCTION
American Restaurant Group, Inc., a Delaware corporation (the "Company"), through
its subsidiaries, competes predominately in the midscale segment of the United
States restaurant industry. The Company was formed on August 13, 1986 by Anwar
S. Soliman, Chairman of the Board and Chief Executive Officer of the Company and
other members of current senior management, to acquire certain operations of
Saga Corporation, a wholly owned subsidiary of Marriott Corporation (the
"Acquisition"). The Acquisition was completed in February 1987. (Prior to the
completion of the Acquisition, the Company had no significant operations.) The
Company is a subsidiary of American Restaurant Group Holdings, Inc., a Delaware
corporation ("Holdings").
As of December 29, 1997, the Company operated 231 restaurants located in 17
states, principally California and Texas. The Company operates five restaurant
divisions: Black Angus (western-style steakhouses specializing in steak and
prime rib), Grandy's (family-oriented, quick-service restaurants specializing in
fried and grilled chicken, country-fried steak and country breakfasts), Spoons
(casual-style restaurants featuring fajitas, salads and hamburgers), Spectrum
(upscale Northern Italian, American and Mexican specialty restaurants) and
National Sports Grill (sports-theme restaurants featuring generous portions and
microbrewery beers). In addition, as of December 29, 1997, Grandy's franchised
61 restaurants in the southern United States.
DIVISION OVERVIEW
BLACK ANGUS
As of December 29, 1997, Black Angus operated 102 Stuart Anderson's Black Angus
and Stuart Anderson's Cattle Company steakhouses located primarily in
California, the Pacific Northwest and Arizona. The chain was founded in Seattle
in 1964 and is the Company's largest restaurant concept. Black Angus restaurants
are typically located in highly visible and heavily traveled areas in or near
retail and commercial businesses. The restaurants are generally freestanding and
range in size from 6,600 to 12,000 square feet, seating approximately 220 to 350
customers. Black Angus restaurants are distinctly Western in their design and
feature booth seating for dining. They are generally open for lunch from 11:30
a.m. to 4:00 p.m. and for dinner from 4:00 p.m. to 10:00 p.m.
As of December 28, 1992, Black Angus operated 66 in-restaurant lounges which
offered disc jockeys, dancing and a focus on the sale of alcoholic beverages
during the after-dinner and late-night time periods. While the late-night
entertainment business in isolation generated favorable profit margins,
management was concerned that this business was negatively affecting the
positive, family image of the restaurants and negatively affecting visits by
its core customer base of middle-income families and that liability and other
expenses associated with the late-night entertainment business were increasing.
Black Angus began limiting its late-night entertainment business in 1992 and
subsequently, between 1994 and 1997, phased out its late-night entertainment
business in 9 to 19 restaurants per year. It currently operates 12 restaurants
with late-night entertainment and does not intend to discontinue these
operations, because management does not believe that the dining operations at
these restaurants have been adversely affected by the late-night entertainment
operations.
GRANDY'S
As of December 29, 1997, Grandy's operated 89 family-oriented, quick-service
restaurants located primarily in Texas and Oklahoma and franchised an additional
61 restaurants primarily in the southern United States. The chain was founded in
Lewisville, Texas in 1973. Grandy's restaurants are generally freestanding and
are located near shopping malls or other highly visible, heavily traveled areas.
The restaurants range in size from 3,800 to 5,200 square feet and have dining
areas, which generally seat 130 to 220 customers. All restaurants offer
self-service beverages with free refills, and all but two restaurants have
drive-thru service. Grandy's restaurants are generally open from 6:00 a.m. to
10:00 p.m. and serve breakfast, lunch and dinner. Grandy's differentiates itself
from its competitors by offering complete home-style meals with limited service.
Approximately 51% of Grandy's 1997 revenues were for consumption in the dining
room as opposed to take- out.
Grandy's franchise agreements generally require initial fees of $15,000 to
$25,000 per restaurant, ongoing royalties of 4% of sales (3% for some older
franchises) and advertising expenditures of approximately 4% of sales. Grandy's
provides certain
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support functions for franchisees, including initial training and ongoing
monitoring and consultations. The Company does not provide financing for
franchisees.
SPOONS
Spoons, founded in 1978, operated 19 casual-style restaurants as of December 29,
1997, all of which are located in California. Spoons restaurants are generally
freestanding, located in heavily traveled areas, ranging in size from 5,500 to
7,800 square feet and seating approximately 200 customers. These full-service
restaurants average a 40-minute table turnover and offer booth and table seating
in a casual, highly energetic atmosphere. In addition, each restaurant has a
lounge area which also serves food. Spoons restaurants are generally open from
11:00 a.m. to 12:00 midnight and feature the same menu all day.
SPECTRUM
Spectrum, founded in 1970, operated 15 unique, upscale, specialty restaurants as
of December 29, 1997, all of which are located in California. All restaurants
focus on "authentic" Northern Italian, contemporary American or Mexican cuisine.
The division includes four "Prego" restaurants, three "Tutto Mare" restaurants,
two "MacArthur Park" restaurants and six other restaurants which, although
operated under different names, generally concentrate on Northern Italian food.
Spectrum restaurants vary in size and physical type but are primarily located
proximite to concentrations of young professionals and other upper-income
customers. The restaurants are generally open from 11:00 a.m. to 12:00 midnight.
NATIONAL SPORTS GRILL
National Sports Grill, founded in 1993, operated six sports-theme restaurants as
of December 29, 1997, all of which are located in California. This concept
offers a menu featuring generous portions and microbrewery beers and provides
multiple video telecasts of national and regional sporting events as well as
interactive video games and other sporting-related games. National Sports Grill
restaurants are freestanding and generally range in size from 10,000 to 17,000
square feet, seating approximately 200 to 300 customers. The restaurants feature
a bar, a dining area, a billiards area and multiple video screens throughout.
National Sports Grill restaurants are typically open from 11:00 a.m. to 2:00
a.m.
RESTAURANT OPERATIONS
The Company has five distinct divisions. The Black Angus division is generally
managed separately from the other divisions and is organized functionally with
separate operations, marketing, finance, real estate and human resources
departments. Grandy's and the three smaller divisions are each run independently
but share among them certain support functions such as finance, administration
and human resources. In addition, at its corporate headquarters, the Grandy's
headquarters and the Company's law department offices, the Company generally
provides purchasing, cash management, insurance and other treasury functions,
and accounting and legal services, all on a centralized basis. The Company's
corporate headquarters provides strategic direction and approves major capital
expenditures, annual budgets and all salaries above a specified level.
The Company's cash management system is highly sophisticated with controls down
to the server level. Restaurants are required to make daily deposits of cash and
the Company uses a centralized cash concentration system which sweeps all of its
cash accounts on a daily basis. There is a central accounts payable and check
writing system with roughly 7,500 vendors profiled on the system.
The Company uses a combination of in-house and outside-contracted services for
its management information system needs. In-house systems include a
point-of-sale system for each restaurant and stand-alone computing at the
restaurant, division and
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corporate levels. The Company contracts for payroll services and for
mainframe-based data processing.
Each restaurant is staffed with a General Manager who is directly responsible
for the operation of the restaurant, including product quality, cleanliness,
service, inventory, cash control and the appearance and conduct of store
employees. Except for Grandy's, most restaurants also have one or two Assistant
Managers and a Chef. Managers and supervisory personnel train other restaurant
employees in accordance with detailed procedures and guidelines prescribed by
each division.
General Managers are supervised by District Managers, each of whom is
responsible for approximately seven restaurants. District Managers, General
Managers, Assistant Managers and Chefs are eligible for bonuses under each
division's extra compensation program, for which goals and objectives are
established based on the profitability, sales and other factors relating to the
restaurants.
PURCHASING AND DISTRIBUTION
To ensure standards of quality and to maximize pricing efficiencies, a central
purchasing department coordinates the supply of almost all restaurant items. The
Company purchases products throughout the United States and abroad through
agreements with various food-service vendors. None of the Company's vendors
supply the Company exclusively and no material agreements exist. The Company
routinely uses public, cold-storage facilities and makes forward commitments in
order to establish the availability and price of key food items such as beef and
seafood. In order to achieve more favorable terms, the Company recently chose to
concentrate its distribution among certain of its vendors but believes that it
could replace any of these distributors, if necessary, on a timely basis.
COMPETITION AND MARKETS
All aspects of the restaurant business are highly competitive. Price, restaurant
location, food quality, service and attractiveness of facilities are important
aspects of competition. The competitive environment is often affected by
factors beyond a particular restaurant management's control, including changes
in the public's taste and eating habits, population and traffic patterns and
economic conditions. The Company's restaurants compete with a wide variety of
restaurants, ranging from national and regional restaurant chains to locally
owned restaurants. Competition from other restaurant chains typically represents
the more important competitive influence, principally because of their
significant marketing and financial resources. Many of the Company's competitors
have substantially greater financial, marketing, personnel and other resources
than the Company. In addition, competition is not limited to a particular
segment of the restaurant industry because fast-food restaurants, steakhouses
and casual-dining restaurants are all competing for the same consumer's dining
dollars. The Company believes that its principal competitive strengths lie in
the distinctive atmosphere and food presentation offered; the value, variety and
quality of food products served; the quality and training of its employees; the
experience and ability of its management; and the economies of scale enjoyed by
the Company because of its size and geographic concentration. The Company
continually monitors consumer tastes and adjusts and updates its menus
accordingly.
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EMPLOYEES
At December 29, 1997, the Company employed approximately 11,800 persons, of whom
approximately 10,900 were hourly employees in restaurants, approximately 700
were salaried employees in restaurants (Managers and Chefs) and approximately
200 were hourly and salaried employees in divisional and corporate management
and administration. Approximately 63% of the hourly restaurant employees work on
a part-time basis (25 hours or less per week). None of the Company's facilities
are unionized. The Company believes it provides competitive compensation and
benefits to its employees and that its employee relations are good.
REGULATIONS
Each restaurant is subject to licensing and regulation by state and local
health, sanitation, safety, fire and other departments. In addition, each
restaurant (except for Grandy's) is subject to licensing with respect to the
sale of alcoholic beverages. The loss of licenses or permits by the Company's
restaurants to sell alcohol would interrupt or terminate the Company's ability
to serve alcoholic beverages at those restaurants and, if a significant number
of restaurants were affected, could have a material adverse effect on the
Company. The Company believes it has good relations with the various alcoholic
beverage authorities.
The Company is subject to the Fair Labor Standards Act and various state laws
governing such matters as minimum wages, overtime and other working conditions.
Substantially all of the Company's restaurant employees are paid at rates
related to the federal and state minimum wage, and, accordingly, increases in
the minimum wage increase the Company's labor costs.
In June 1996, the Company signed Tip Reporting Alternative Commitment (TRAC)
agreements with the Internal Revenue Service ("IRS") for all divisions that have
tipped employees. This program gives the Company partial immunity from both past
and future audits of employer-paid FICA taxes on tips reported by employees. In
exchange, the Company must encourage employees to comply with tip reporting laws
through quarterly educational materials. The Company is also required to
maintain detailed records for each tipped employee. The IRS has the ability to
terminate the TRAC agreements at any time, thereby eliminating the Company's
audit protection, if the Company's procedures are inadequate or tip reporting by
the Company's employees does not increase.
SERVICE MARKS
The Company regards its service marks and trademarks as important to the
identification of its restaurants and believes they have significant value in
the conduct of its business. The Company has registered various service marks
and trademarks with the United States Patent and Trademark Office. In addition,
certain marks have been registered in the State of California, in various other
states and in certain foreign countries.
SEASONALITY
The Company's restaurant revenues and profitability are not subject to
significant seasonal fluctuations.
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ITEM 2. PROPERTIES
Of the 231 restaurants operated by the Company on December 29, 1997, the Company
owns the land and building for six, owns the building and leases the land for
94, and leases both land and building for the remaining 131 restaurants. In
addition, the Company currently leases the land for five, and leases both the
land and the building for 11 restaurants which are now closed (of which six are
sub-leased to others). Most of the Company's restaurants are freestanding and
range from approximately 4,000 square feet for a Grandy's restaurant to as much
as 17,000 square feet for the Company's other restaurants. Most of the Company's
leases provide for the payment of the greater of a set base rental or a
percentage rental of up to 6% of gross revenues, plus real estate taxes,
insurance and other expenses.
In addition, the Company owns the land and building for the Grandy's
headquarters in Lewisville, Texas, and leases office space for its other
divisions and corporate headquarters in Los Altos and Newport Beach, California.
The following table sets forth, as of December 29, 1997, the number of
Company-operated restaurants by division and state of operation:
<TABLE>
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DIVISION
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NATIONAL TOTAL
STATE BLACK SPORTS NUMBER OF
ANGUS GRANDY'S SPOONS SPECTRUM GRILL RESTAURANTS
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California 56 0 19 15 6 96
Texas - 64 - - - 64
Oklahoma - 16 - - - 16
Washington 10 - - - - 10
Arizona 9 - - - - 9
Minnesota 6 - - - - 6
Colorado 5 - - - - 5
Kansas - 5 - - - 5
Oregon 5 - - - - 5
Indiana 3 - - - - 3
Florida - 3 - - - 3
Hawaii 2 - - - - 2
Nevada 2 - - - - 2
New Mexico 1 1 - - - 2
Alaska 1 - - - - 1
Idaho 1 - - - - 1
Utah 1 - - - - 1
--- --- --- --- --- ---
Total 102 89 19 15 6 231
=== === === === === ===
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various litigation incidental to its business,
including claims arising out of personal injuries, employment practices,
worker's compensation cases and contract lawsuits, the claims for which
sometimes involve substantial damages. Based on information presently available,
management does not believe that the outcome of such litigation will have a
material adverse effect on the Company's financial position, business or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholder of the Company in the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
As of March 2, 1998, there were seven record holders of the outstanding shares
of the Company's outstanding common stock. There is currently no market for the
Company's common stock, nor is such anticipated in the near future. The Company
has never paid dividends to its common stockholders and currently has no plans
to do so.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected historical consolidated financial data for each of the
five periods ended December 29, 1997 has been derived from the consolidated
financial statements of the Company which have been audited by Arthur Andersen
LLP, independent public accountants, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial statements and notes thereto
included elsewhere in this Form 10-K.
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Year ended (1)
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Dec. 27, Dec. 26, Dec. 25, Dec. 30 Dec. 29,
1993 1994 1995 1996(2) 1997
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(dollars in thousands)
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INCOME STATEMENT DATA:
REVENUES:
Black Angus...........................$235,345 $253,634 $243,624 $254,946 $264,175
Grandy's.............................. 111,166 109,301 101,839 90,962 78,832
Other concepts........................ 91,398 97,471 100,503 99,516 97,032
-------- -------- -------- -------- --------
Total revenues.................. 437,909 460,406 445,966 445,424 440,039
RESTAURANT COSTS:
Food and beverage..................... 136,255 142,828 138,270 141,032 140,015
Payroll............................... 132,292 136,151 134,532 137,104 133,732
Direct operating...................... 109,462 108,382 110,399 114,589 110,502
Depreciation and
amortization........................ 25,682 26,400 22,819 20,386 19,627
-------- -------- -------- -------- --------
Total restaurant costs............ 403,691 413,761 406,020 413,111 403,876
General and administrative
expenses.............................. 29,895 31,027 31,360 28,086 29,360
Non-cash charge for impairment
of long-lived assets.................. - - 20,178 13,205 3,047
Operating profit (loss)................. 4,323 15,618 (11,592) (8,978) 3,756
Interest expense, net................... 23,741 27,691 28,004 27,714 23,985
Net loss before
extraordinary loss.................... (19,216) (12,130) (39,662) (36,773) (20,292)
Extraordinary loss on
extinguishment of debt................ (10,790) - - (1,688) -
Net loss................................$(30,006) $(12,130) $(39,662) $(38,461) $(20,292)
Deficiency in earnings to cover
fixed charges (3)..................... (19,418) (12,073) (39,596) (36,692) (20,229)
BALANCE SHEET DATA:
Plant and equipment, net................ 181,889 181,496 171,030 101,169 92,322
Total assets............................ 291,989 282,438 249,053 172,129 152,011
Long-term obligations,
including current portion............. 228,612 226,394 233,011 182,137 181,399
Redeemable cumulative
preferred stock....................... - - - - -
Common stockholder's
equity (deficit)...................... (8,307) (20,437) (60,099) (91,446) (111,738)
</TABLE>
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(1) The Company's obligations under its 11.5% senior secured notes due 2003
(the "Notes") are guaranteed by each of its subsidiaries (the
"Subsidiary Guarantors"). Separate financial statements of the
Subsidiary Guarantors are not included in this Form 10-K because the
Subsidiary Guarantors are unconditionally jointly and severally liable
for the obligations of the Company under the Notes pursuant to such
guarantees. The aggregate net assets, earnings and equity of such
Subsidiary Guarantors are substantially equivalent to the net assets,
earnings and equity of the Company on a consolidated basis.
(2) The year ended December 30, 1996 included 53 weeks.
(3) For the purpose of determining the deficiency in earnings to cover fixed
charges, earnings consist of earnings before extraordinary loss, income
taxes and fixed charges. Fixed charges consist of interest on
indebtedness, the amortization of debt issue costs and that portion of
operating rental expense representative of the interest factor.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Years Ended December 25, 1995, December 30, 1996 and December 29, 1997:
Revenues. Total revenues decreased slightly from $446.0 million in 1995 to
$445.4 million in 1996 followed by a 1.2% decrease to $440.0 million in 1997.
The year ended December 30, 1996 included a 53rd week which added $6.9 million
to total revenues. Same-store-sales for 1997 decreased 2.3% from 1996, excluding
the 53rd week. Three new restaurants opened during 1997 were offset by the
closure of nineteen restaurants. There were 248, 247 and 231 restaurants
operating at the end of 1995, 1996 and 1997, respectively.
Black Angus revenues increased 4.6% from $243.6 million in 1995 to $254.9
million in 1996 and then increased 3.6% to $264.2 million in 1997. The increase
in 1997 was primarily due to $20.0 million resulting from the addition of nine
new restaurants in the second half of 1996 and the first quarter of 1997 and a
$3.2 million increase in same-store-sales (excluding late-night entertainment
and discontinued lunch). This increase was partially offset by a $5.4 million
decrease due to the closure of late-night entertainment operations at 11
restaurants, a $4.2 million decrease from the 53rd week in 1996, a $2.6 million
decrease due to discontinued lunch at 14 restaurants and a $1.7 million decrease
from two closed restaurants. Same-store-sales increased 1.4% (decreased 2.0%
including late-night entertainment and discontinued lunch) in 1997.
Grandy's revenues decreased 10.7% from $101.8 million in 1995 to $91.0 million
in 1996 followed by a 13.3% decrease to $78.8 million in 1997. The decrease in
1997 resulted from a $6.1 million decline due to the closure of 21 restaurants
in the second half of 1996 and in 1997, a $5.4 million, or a 7.1%, decline in
same-store-sales from de-emphasizing discounted sales and $1.3 million from the
53rd week in 1996. These decreases were partially offset by a $0.6 million
increase in franchise income. Franchise revenues were $2.2 million, $2.0 million
and $2.6 million in 1995, 1996 and 1997, respectively.
Revenues from other concepts (Spoons, Spectrum and National Sports Grill)
decreased 1.0% from $100.5 million in 1995 to $99.5 million in 1996 and then
decreased 2.5% to $97.0 million in 1997. Revenues declined $2.3 million due to
the closure of three restaurants in 1997 and $1.4 million due to the 53rd week
in 1996 partially offset by a $1.2 million increase in same-store-sales.
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Food and Beverage Costs. As a percentage of revenues, food and beverage costs
increased from 31.0% in 1995 to 31.7% in 1996 and then to 31.8% in 1997. The
increase in 1996 was primarily a result of higher grocery expenses.
Payroll Costs. As a percentage of revenues, labor costs increased from 30.2% in
1995 to 30.8% in 1996 and then decreased to 30.4% in 1997. The decrease in 1997
was primarily due to lower beverage labor costs at Black Angus as a result of
de-emphasizing late-night entertainment operations.
Direct Operating Costs. Direct operating costs consist of occupancy, advertising
and other expenses incurred by individual restaurants. As a percentage of
revenues, these costs increased from 24.8% in 1995 to 25.7% in 1996 and then
decreased to 25.1% in 1997. The decrease in 1997 was a result of decreased
advertising and promotion expenses partially offset by higher occupancy costs.
Depreciation and Amortization. Depreciation and amortization consists of
depreciation of fixed assets used by individual restaurants, division and
corporate offices, as well as amortization of intangible assets. As a percentage
of revenues, depreciation and amortization decreased from 5.1% in 1995 to 4.6%
in 1996 and then decreased to 4.5% in 1997. The decrease in 1997 was primarily
due to the non-cash reduction of the historical costs of certain long-lived
assets and sale/leaseback transactions in 1996.
General and Administrative Expenses. General and administrative expenses as a
percentage of revenues were 7.0% in 1995, 6.3% in 1996 and 6.7% in 1997. The
increase in 1997 was primarily due to a $2.8 million increase in non-cash
charges for costs associated with closed restaurants and a legal settlement of
$0.9 million. This increase was partially offset by reductions of $2.6 million
in division and corporate overhead.
Non-Cash Charge for Impairment of Long-Lived Assets. In December 1997 certain
assets, including fixed assets and certain related intangible assets, were
valued at less than their historic costs and resulted in a non-cash charge of
$3.0 million. This non-cash charge was 0.7% of revenues. Similar non-cash
charges of $13.2 million and $20.2 million were recorded in 1996 and 1995,
respectively.
Operating Profit. As a result of the items discussed above, operating profit
improved from an operating loss of $11.6 million in 1995 to an operating loss of
$9.0 million in 1996 and then improved to an operating profit of $3.8 million in
1997 (an operating profit of $8.6 million, $4.2 million and $6.8 million in
1995, 1996 and 1997, respectively, before the non-cash charge for impairment of
long-lived assets). The Company's divisions are not uniform in revenues, size or
profitability. For example, for the fiscal year ended 1997, Black Angus had an
operating profit of $21.2 million while Grandy's had an operating loss of $2.4
million. The other concepts had a net operating profit of $4.4 million. These
amounts exclude corporate general and administrative expenses not allocated to
the divisions.
Interest Expense - Net. Interest expense decreased from $28.0 million in 1995 to
$27.7 million in 1996 and then decreased to $24.0 million in 1997. The average
interest rate on Company borrowings was 11.5%, 11.7% and 12.3% for 1995, 1996
and 1997, respectively. Average borrowings (excluding capitalized lease
obligations) decreased from $217.7 million in 1995 to $208.2 million in 1996 and
then decreased to $171.7 million in 1997. Average borrowings declined in 1997
due to the payment of $44.1 million in principal on the senior secured notes in
the second half of 1996.
Income Taxes. Income taxes increased from a provision of $66,000 in 1995 to
$81,000 in 1996 and then decreased to $63,000 in 1997. The provisions represent
amounts provided for certain minimum state income taxes.
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Extraordinary Loss. An extraordinary loss of $1.7 million occurred in 1996 with
the extinguishment of a prior term loan. This extraordinary loss resulted from a
non-cash charge to expense for capitalized debt costs associated with the debt
repaid. There were no extraordinary losses in 1995 or 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
borrowings under its credit facilities. The Company requires capital principally
for the acquisition and construction of new restaurants, the remodeling of
existing restaurants and the purchase of new equipment and leasehold
improvements. As of December 29, 1997, the Company had cash of approximately
$5.7 million.
In general, restaurant businesses do not have significant accounts receivable
because sales are made for cash or by credit card vouchers which are ordinarily
paid within three to five days, and do not maintain substantial inventory as a
result of the relatively brief shelf life and frequent turnover of food
products. Additionally, restaurants generally are able to obtain trade credit in
purchasing food and restaurant supplies. As a result, restaurants are frequently
able to operate with working capital deficits, i.e., current liabilities exceed
current assets. At December 29, 1997, the Company had a working capital deficit
of $57.2 million. All of the Company's senior debt was classified as long term
at the end of 1997 due to the consummation of its Recapitalization Plan in
February 1998.
The Company estimates that capital expenditures of $6.0 million to $10.0 million
are required annually to maintain and refurbish its existing restaurants. In
addition, the Company spends approximately $10.0 million to $13.0 million
annually for repairs and maintenance which are expensed as incurred. Other
capital expenditures, which are generally discretionary, are primarily for the
construction of new restaurants and for expanding, reformatting and extending
the capabilities of existing restaurants and for general corporate purposes.
Total capital expenditures were $16.3 million in 1995, $13.3 million in 1996,
and $4.6 million in 1997. New store capital expenditures included in these
amounts were $3.6 million, $4.8 million and $0.4 million for 1995, 1996 and
1997, respectively. The Company estimates that capital expenditures in 1998 will
be approximately $12.0 million. The Company intends to open new restaurants with
small capital outlays and to finance most of the expenditures through operating
leases.
On March 13, 1996, Holdings completed a private placement of its 14% senior
discount debentures due 2005 with a face value of $17.0 million producing
aggregate proceeds of approximately $7.1 million. Substantially all of the net
proceeds of the offering were contributed by Holdings to the Company. The new
proceeds were used by the Company for general corporate purposes.
In the second half of 1996, the Company completed sale/leaseback transactions,
under which it sold certain land, buildings, and other improvements relating to
24 Black Angus restaurants, 30 Grandy's restaurants and two Spoons restaurants
for an aggregate sale price of $63.4 million and simultaneously executed
long-term leases under which it will continue to operate the restaurants. The
leases call for initial aggregate annual rent payments of $8.0 million with
scheduled future increases. The proceeds of the transactions were used to redeem
at par a portion of its senior secured notes in the amount of $45.4 million,
representing principal and interest thereon; to repay bank debt and interest
thereon and to partially cash collateralize outstanding letters of credit in a
combined amount of $7.4 million; and for fees and expenses of such transactions
as well as a consent solicitation relating to the senior secured notes, with the
balance used by the Company to make capital expenditures and to purchase other
assets. The Company recorded an extraordinary loss on extinguishment of debt
relating to the write-off of capitalized debt costs in the amount of $1.7
million and a $2.2 million loss on
10
<PAGE> 13
disposition of assets underlying certain leases. In addition, a $5.9 million
gain related to the Black Angus sale/leasebacks was deferred and will be
amortized over the initial term of the underlying leases.
In March 1997, the Company's senior secured noteholders consented to an
amendment which provided for an increase of $10 in the stated principal amount
for each $1,000 in stated principal amount of consenting noteholders. This
resulted in an increase of approximately $1.6 million in the stated principal
amount of the senior secured notes and $1.2 million in the actual outstanding
principal amount of the senior secured notes.
In September 1997, the Company failed to make the $40.5 million payment that was
due under the sinking fund provisions of its senior secured notes. The Company
was late, but within the grace period, in paying the quarterly interest of $4.1
million on its senior secured notes which was due September 15, 1997. The
Company was restricted from paying the quarterly interest of $1.2 million on its
subordinated debt which was due September 15, 1997 and December 15, 1997.
In December 1997, the Company was late, but within the grace period, in paying
the quarterly interest of $4.1 million on its senior secured notes which was due
December 15, 1997.
On February 25, 1998, the Company completed a recapitalization plan (the
"Recapitalization Plan") which included, among other things, the issuance by the
Company of (a) $155.0 million of the 11.5% senior secured notes due 2003 (the
"Notes") and (b) 35,000 preferred stock units of the Company (the "Units"), each
Unit consisting of $1,000 initial liquidation preference of 12% senior
pay-in-kind exchangeable preferred stock and one common stock purchase warrant
initially to purchase 2.66143 shares of the common stock at an initial exercise
price of one cent per share.
Also as part of the Recapitalization Plan, the Company concurrently (a) redeemed
at par senior secured notes of $126.4 million together with accrued and penalty
interest thereon and repaid certain other interest-bearing short-term
liabilities, (b) repurchased its existing 10.25% subordinated notes at 65% of
the aggregate principal amount of $45.0 million together with accrued and
penalty interest thereon, and canceled the related warrants to purchase common
stock of Holdings, and (c) established a $15.0 million revolving credit facility
to include letters of credit. Letters of credit outstanding after the
Recapitalization Plan were $3.9 million. A quarterly fee of 0.5% per annum is
payable on the unused portion of the revolving credit facility and a fee of 2.5%
per annum is payable on outstanding letters of credit.
As an additional component of the Recapitalization Plan, Holdings extended the
accretion period on its senior discount debentures due 2005 (the "Holdings
Debentures"), from June 15, 1999 to maturity on December 15, 2005, and amended
certain provisions of the Holdings Debentures. The Holdings Debentures will
accrete at a rate of 14.25%, compounded semi-annually. Certain holders of the
Holdings Debentures with an accreted value of approximately $10.8 million
surrendered such debentures for cancellation and received $3.6 million principal
amount of the Notes, in addition to the $155.0 million of the Notes sold as
mentioned above.
Substantially all assets of the Company are pledged to its senior lenders. In
addition, the subsidiaries have guaranteed the indebtedness owed by the Company
and such guarantee is secured by substantially all of the assets of the
subsidiaries. In connection with such indebtedness, contingent and mandatory
prepayments may be required under certain specified conditions and events. There
are no compensating balance requirements.
Although the Company is highly leveraged, based upon current levels of
operations and anticipated growth, the Company expects that cash flows generated
from operations together with its other available sources of liquidity will be
adequate to make required payments of principal and interest on its
indebtedness, to make
11
<PAGE> 14
anticipated capital expenditures and to finance working capital requirements.
However, the Company does not expect to generate sufficient cash flow from
operations in the future to pay the Notes upon maturity and, accordingly, it
expects to refinance all or a portion of such debt, obtain new financing or
possibly sell assets.
The Company's net operating loss carryforwards may be subject to significant
limitations on use or elimination under applicable provisions of the Internal
Revenue Code of 1986, as amended, as a result of changes in ownership of the
Company.
YEAR 2000 COMPLIANCE
The Company utilizes certain programs and operating systems in its organization,
including applications used in sales, financial business systems and various
administrative functions. To the extent that the Company's software applications
contain source code that is unable to appropriately interpret the upcoming
calendar year 2000 and beyond, some level of modification or replacement of
such applications will be necessary. Management does not expect year 2000
compliance costs to have any material adverse impact on the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128 Earnings per Share
and SFAS No. 129 Disclosure of Information about Capital Structure were issued
in February 1997 and are effective for periods ending after December 15, 1997.
The Company adopted SFAS No. 128 and SFAS No. 129 for the period ending December
29, 1997 and such adoption has not materially affected the Company's financial
statements. SFAS No. 130 Reporting Comprehensive Income and SFAS No. 131
Disclosures about Segments of an Enterprise and Related Information were issued
in June 1997. The Company will adopt SFAS No. 130 and SFAS No. 131 in 1998 and
anticipates that such adoption will not materially affect the Company's
financial statements.
IMPACT OF INFLATION
Although inflationary increases in food, labor or operating costs could
adversely affect operations, the Company has generally been able to offset
increases in cost through price increases, labor scheduling and other management
actions.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein are forward-looking regarding cash flow from
operations, restaurant openings, capital requirements and other matters. These
forward-looking statements involve risks and uncertainties and, consequently,
could be affected by general business conditions, the impact of competition,
governmental regulations and inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
12
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the Company's current
directors and each of its executive officers and key management personnel:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Anwar S. Soliman 60 Chairman, Chief Executive Officer,
Director
Ralph S. Roberts 55 President, Chief Operating Officer,
Director
William J. McCaffrey, Jr. 51 Chief Financial Officer, Vice President,
Treasurer, Assistant Secretary
Wilfred H. Partridge 68 Vice President - Purchasing
Patrick J. Kelvie 46 Secretary and General Counsel
</TABLE>
Officers are elected by the Board of Directors and serve at the discretion of
the Board.
Anwar S. Soliman. Mr. Soliman has served as Chairman, Chief Executive Officer
and a Director of the Company since its organization in 1986. Prior to joining
the Company, Mr. Soliman was Executive Vice President of W. R. Grace & Co.
("Grace") and Group Executive of the Grace Restaurant Group, which he started in
1977. Mr. Soliman spent 22 years with Grace in various executive positions. He
is also a trustee of the Orange County Museum of Art and a member of the Board
Council of Boys Hope of California. Mr. Soliman received both a B. Commerce and
an M.B.A. from Alexandria University and a Ph.D. from New York University.
Ralph S. Roberts. Mr. Roberts has served as a Director of the Company since 1991
and has served as the President and Chief Operating Officer of the Company since
1986. Mr. Roberts has over 25 years of experience in the restaurant industry and
before joining the Company was Deputy Group Executive of Operations of the Grace
Restaurant Group and Vice President of Grace. Prior to joining Grace in 1980, he
was Vice President of the Stouffer Restaurant Division and President and
co-founder of the Rusty Scupper restaurants. Mr. Roberts received a B.A. from
Princeton University.
William J. McCaffrey, Jr. Mr. McCaffrey served as a Director of the Company from
1991 to 1998 and has served as the Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary of the Company since 1986. Prior thereto he
was Chief Financial Officer of the Grace Restaurant Group, having spent 12 years
with Grace. For eight years, Mr. McCaffrey was assistant to the Chief Executive
Officer of Grace. He received a B.S., M.E. from the University of Notre Dame and
an M.B.A. from Harvard University.
Wilfred H. Partridge. Mr. Partridge has served as Vice President responsible for
purchasing and distribution for the Company since 1986. Mr. Partridge has over
30 years experience in the restaurant industry encompassing purchasing,
production and distribution, as well as restaurant operations, and was President
of Grace Restaurant Services before joining the Company. Mr. Partridge served as
Vice President of Purchasing, Production and Distribution with Marriott
Corporation (Bob's Big Boy Division) for 19 years. He served as Director of
Manufacturing and Distribution for Foodmaker Company (Jack-in-the-Box) and also
operated his own restaurants in the San Diego area. He received a B.A. in
Commercial Science from Benjamin Franklin University.
13
<PAGE> 16
Patrick J. Kelvie. Mr. Kelvie has served as General Counsel of the Company since
1987 and Secretary of the Company since 1989. From 1987 to 1989, Mr. Kelvie was
an Assistant Secretary of the Company. Between 1978 and 1987, Mr. Kelvie held
various legal counsel positions for Saga Corporation. Mr. Kelvie received a B.A.
from the University of California at Berkeley and a J.D. from Harvard Law
School.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation for services rendered in
all capacities which the Company paid to or accrued for the Chief Executive
Officer and each of the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- --------------------------------------------------------------- ------------------- -------
OTHER NUMBER ALL
ANNUAL RESTRICTED OF OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(a) AWARD(S) SARS PAYOUTS SATION(b)
- ------------------ ---- ------ ----- ------------------ ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anwar S. Soliman 1997 $ 945,793 $ 0 $99,975 - - - $24,300
(Chairman and CEO) 1996 1,233,640 0 96,125 - - - 24,303
1995 1,233,640 0 62,660 - - - 18,002
Ralph S. Roberts 1997 558,181 0 50,360 - - - 13,050
(President and COO) 1996 704,935 0 48,295 - - - 8,351
1995 704,935 0 28,230 - - - 8,351
William J. Mccaffrey, Jr. 1997 252,500 0 3,850 - - - 17,525
(Chief Financial Officer) 1996 325,000 0 5,680 - - - 14,846
1995 311,539 30,000 0 - - - 9,571
Wilfred H. Partridge 1997 225,308 0 5,900 - - - 7,038
(Vice President - 1996 290,000 0 7,610 - - - 5,754
Purchasing) 1995 279,231 30,000 0 - - - 5,884
Patrick J. Kelvie 1997 188,077 0 0 - - - 1,512
(Secretary And 1996 175,000 0 0 - - - 1,312
General Counsel) 1995 175,000 0 0 - - - 1,262
</TABLE>
- ----------
(a) Amounts shown are for reimbursement during the fiscal year for the
payment of premiums and income taxes thereon relating to executive life
and disability plans. In addition, Holdings and the Company maintain key
man life insurance policies for the benefit of Holdings and the Company
on Messrs. Soliman and Roberts.
(b) Amounts shown in this column for the last fiscal year include the
following: group term life insurance premiums of $24,300, $13,050,
$15,286 and $5,040 for Messrs. Soliman, Roberts, McCaffrey and
Partridge, respectively; and Company matching contributions to a 401(k)
plan of $2,239, $1,998 and $1,512 for Messrs. McCaffrey, Partridge and
Kelvie, respectively.
14
<PAGE> 17
EMPLOYMENT AGREEMENTS
The following table sets forth, with respect to each executive officer who has
entered into an employment agreement with the Company, the base salary for such
officer provided for therein together with the termination date of such
agreement:
<TABLE>
<CAPTION>
BASE TERMINATION
NAME OF INDIVIDUAL CAPACITY IN WHICH SERVED SALARY DATE
- ------------------ ------------------------ ------ ----
<S> <C> <C> <C>
Anwar S. Soliman Chairman and Chief Executive Officer $ 740,184 12/31/98
Ralph S. Roberts President and Chief Operating Officer 422,961 12/31/98
Wilfred H. Partridge Vice President - Purchasing 174,000 12/31/98
</TABLE>
Each of the agreements provides, among other things, for adjustments to the base
salaries and automatic extensions of the termination date. The agreements also
provide for certain other benefits, including, in the case of Mr. Soliman, one
year's severance pay equal to his then salary in the event of disability or
death; in the case of Mr. Roberts, one year's severance pay in the event of
death and salary for the remainder of the calendar year in the event of
disability; in the case of Mr. Partridge, six months' severance pay in the event
of death and salary for the remainder of the calendar year in the event of
disability. The employment agreements of Mr. Soliman and Mr. Roberts each
provide six months' severance pay if either executive terminates his employment
for cause. None of the Company's employment agreements provides for any salary
obligations in the event of termination by the Company for cause.
SAVINGS PLAN
The Company currently has the American Restaurant Group Savings and Investment
Plan (the "Savings Plan"), which is a 401(k) plan established for the benefit of
employees who have satisfied certain requirements. These requirements include
completion of one year of service with a minimum of 1,000 hours worked. Subject
to applicable limits imposed on tax qualified plans, eligible employees may
elect pre-tax contributions up to 18.5% of a participant's total earnings for a
calendar year (but not in excess of $9,500 for 1997). The Company makes matching
contributions to the Savings Plan equal to 25% of the participant's
contributions up to 6% of the participant's earnings. A participant is entitled
to a distribution from the Savings Plan upon termination of employment and any
such distribution will be in a lump sum form. Distributable benefits are based
on the value of the participant's individual account balance which is invested
at the direction of the participant in one or a combination of six investment
funds, none of which include investments in the Company. Under certain
circumstances, a participant may borrow amounts held in his account under the
Savings Plan. Based upon the Savings Plan vesting schedule, as of 1997, 100% of
the Company matching contributions were vested for Messrs. McCaffrey, Partridge
and Kelvie.
15
<PAGE> 18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock (as if all outstanding warrants were
exercised), as of March 2, 1998, by (i) each of the Company's directors, (ii)
the Chief Executive Officer and certain other highly compensated executive
officers of the Company, (iii) all executive officers and directors as a group
and (iv) each person believed by the Company to own beneficially more than 5% of
the Company's outstanding common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------- ----------------------- --------
<S> <C> <C>
Anwar S. Soliman 19,409 (1) 8.3%
Roberts Family Limited Partnership 9,702 4.2
William J. McCaffrey, Jr. 2,426 1.0
Wilfred H. Partridge 2,426 1.0
Patrick J. Kelvie 387 0.2
American Restaurant Group Holdings, Inc. 93,150 40.0
All directors and officers of the
Company as a group (5 persons) 34,350 (2) 14.8
TCW Asset Management Company 55,558 (3) 23.9
</TABLE>
- ----------
(1) Does not include 92,172 shares of the Company's common stock which Mr.
Soliman is deemed to be the owner of pursuant to the Voting Trust
Agreement.
(2) Does not include directors to be nominated by TCW Asset Management
Company and the initial purchaser of the Notes.
(3) Represents warrants which are immediately exercisable at a nominal price
per share. None of such warrants are exercisable after August 15, 2008.
Includes warrants beneficially owned by TCW Shared Opportunity Fund II,
L.P., TCW Leveraged Income Trust, L.P., Brown University and TCW
Shared Opportunity Fund IIB, LLC, as to which warrants TCW Asset
Management Company or an affiliate controls voting and investment power
in its capacity as general partner, investment manager or manager, and
of which TCW Asset Management Company disclaims beneficial ownership.
All of the Company's management stockholders have entered into a voting trust
agreement in accordance with which Anwar S. Soliman, Chairman and Chief
Executive Officer of the Company, exercises, as voting trustee, all voting and
substantially all other rights to which such shareholders would otherwise be
entitled until the earlier of August 15, 2005 or the earlier termination of the
Voting Trust Agreement. As a result, Mr. Soliman is considered the beneficial
owner of approximately 87.1% of the outstanding shares of Company's common stock
(approximately 47.9% on a diluted basis).
In connection with the Recapitalization Plan, each of Holdings, the Management
Stockholders, the initial purchaser of the Notes, and TCW Asset Management
Company ("TCW") entered into a stockholders agreement concerning the Company
(the "Stockholders Agreement"). The Stockholders Agreement provides that the
parties will agree to vote all of their shares of the Company's equity
securities so that the composition of the Company's Board of Directors consists
of five directors, with two directors designated by TCW, two by the Management
Stockholders and the remaining director by the initial purchaser of the Notes,
provided that after the Company does a public offering of its common stock, TCW
and the Management Stockholders will mutually choose the remaining director and
the initial purchaser will no longer have director designation rights. A
compensation committee for the Company will also be established consisting of
the two TCW designees, one of the Management Stockholders' designees and the
remaining director. The compensation committee will determine, among other
things, the compensation of management and the structuring of performance option
plans, including any options to be issued to management. The two TCW director
designees will sit on all other board committees. The Stockholders Agreement
does not limit the rights of the holders of the Preferred Stock under the
Certificate of Designation to elect additional directors to serve on the
Company's Board of Directors in certain circumstances.
16
<PAGE> 19
The Stockholders Agreement also provides that (i) in the event that Holdings
sells or transfers any of its shares of Company equity securities, directly or
indirectly, TCW will have the option to include its Company equity securities
in such sale or transfer on the same terms as Holdings' sale or transfer; (ii)
TCW will have a right of first refusal with respect to any sale of equity
securities by the Company or a party to the Stockholders Agreement (other than
Management Stockholders) to purchase the equity securities being sold; and
(iii) TCW will have the nontransferable right to approve certain major
corporate transactions concerning the Company, including mergers and
consolidations, sales of certain assets, a sale of substantially all of the
assets and properties of the Company, transactions with affiliates and
amendments to the Company's Certificate of Incorporation and Bylaws. In
addition, the Stockholders Agreement provides that certain of the TCW
purchasers will receive payments from the Company with respect to withholding
obligations as a result of their ownership of the Preferred Stock, which amount
shall not exceed $125,000 per year. None of the rights under the Stockholders
Agreement are transferable by TCW.
As of March 2, 1998, holders of the Company's exchangeable preferred stock held
warrants for common stock of approximately 41% on a diluted basis.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Consolidated Financial Statements. See the Index to Consolidated
Financial Statements on page F-1.
(c) List of Exhibits
Exhibit No. Description
- ----------- -----------
2.1 Purchase Agreement dated as of September 11, 1996 by and
between ARG Property Management Corporation and ARG
Enterprises, Inc. and ARG Properties I, LLC.***
2.2 Master lease dated September 11, 1996 between ARG
Properties I, LLC, as Landlord and ARG Enterprises, Inc.
as Tenant.***
2.3 Lease #06152 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Bloomington, Minnesota.***
2.4 Lease #06153 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Fridley, Minnesota.***
2.5 Lease #06154 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Minnetonka, Minnesota.***
2.6 Lease #06155 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Roseville, Minnesota.***
2.7 Lease dated September 11, 1996 between Safeway Inc. as
Landlord and ARG Enterprises, Inc. as Tenant.***
2.8 Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant to ARG Properties I, LLC as
Landlord.***
2.9 A Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant to Captec Net Lease Realty,
Inc. as Landlord for each of four Minnesota
restaurants.***
2.10 Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant and Safeway Inc. as
Landlord.***
3.1 Amended and Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on
July 23, 1991.*
17
<PAGE> 20
Exhibit No. Description
- ----------- -----------
3.2 Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Company filed with
the Secretary of State of Delaware on March 21, 1992.*
3.3 Amended and Restated Certificate of Incorporation of
the Company filed with the Secretary of State of Delaware
on February 23, 1998.
3.4 By-Laws of the Company.*
4.1 Indenture dated as of February 25, 1998 between the
Company and U.S. Trust Company of California, N.A., as
Trustee (including specimen certificate of 11.5% Senior
Secured Note due 2003).
4.2 Warrant Agreement dated as of February 25, 1998
between the Company and U.S. Trust Company of California,
N.A., as warrant agent (including specimen certificate of
Warrant).
4.3 Registration Rights Agreement dated as of February 25,
1998 between the Company and Jefferies & Company, Inc.
4.4 Securityholders' and Registration Right Agreement
dated as February 25, 1998 between the Company and
Jefferies & Company, Inc., as purchaser.
4.5 Management Registration Right Agreement dated as of
February 28, 1998 between the Company and the Management
Stockholders.
4.6 Certificate of Designation filed with the Secretary of
State of Delaware on February 24, 1998.
4.7 Certificate of Correction to the Certificate of
Designation filed with the Secretary of State of Delaware
on February 25, 1998.
9.1 Common Stock Voting Trust and Transfer Agreement dated as
of February 24, 1998 among the Company and the
stockholders parties thereto and Anwar S. Soliman, as
voting trustee.
9.2 Securityholders Agreement dated as of February 25, 1998
among the Company, American Restaurant Group Holdings,
Inc., Jefferies & Company, Inc., TCW Asset Management
Company and the Management Stockholders.
10.1 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Anwar S.
Soliman.**
10.2 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Ralph S.
Roberts.**
10.3 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Wilfred H.
Partridge.**
18
<PAGE> 21
Exhibit No. Description
- ----------- -----------
21.1 Subsidiaries of the Company.**
27 Financial Data Schedule
- -------------------------------
* Incorporated by reference to the Registrant's Registration Statement
No. 33-48183 on Form S-4 filed with the Securities and Exchange Commission
on May 28, 1992 as amended with Amendment No. 1 filed on September 11,
1992.
** Incorporated by reference to the Registrant's Registration Statement No.
33-74010 on Form S-4 filed with the Securities and Exchange Commission on
January 12, 1994.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated September 13, 1996 filed with the Securities and Exchange on
September 30, 1996.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ ANWAR S. SOLIMAN
--------------------------------
Anwar S. Soliman
Chairman, Chief Executive
Officer and Director
March 30, 1998
Pursuant to the requirements of the Securities 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 dates indicated.
SIGNATURE
---------
<TABLE>
<S> <C> <C>
/s/ ANWAR S. SOLIMAN Chairman, Chief Executive March 30, 1998
- ----------------------------- Officer and Director
Anwar S. Soliman (Principal Executive Officer)
/s/ WILLIAM J. McCAFFREY, JR. Chief Financial Officer, Vice March 30, 1998
- ----------------------------- President, Treasurer and
William J. McCaffrey, Jr. Assistant Secretary (Principal
Financial and Accounting Officer)
/s/ RALPH S. ROBERTS President, Chief Operating March 30, 1998
- ----------------------------- Officer and Director
Ralph S. Roberts
</TABLE>
20
<PAGE> 23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................... F-2
Consolidated Balance Sheets as of December 30, 1996
and December 29, 1997.......................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 25, 1995, December 30, 1996
and December 29, 1997.......................................................... F-5
Consolidated Statements of Common Stockholder's
Equity for Years Ended December 25, 1995,
December 30, 1996 and December 29, 1997........................................ F-6
Consolidated Statements of Cash Flows for Years
Ended December 25, 1995, December 30, 1996
and December 29, 1997.......................................................... F-7
Notes to Consolidated Financial Statements............................................. F-8
</TABLE>
F-1
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors of
American Restaurant Group, Inc.:
We have audited the accompanying consolidated balance sheets of AMERICAN
RESTAURANT GROUP, INC. (a Delaware corporation) AND SUBSIDIARIES as of December
30, 1996 and December 29, 1997, and the related consolidated statements of
operations, common stockholder's equity (deficit) and cash flows for the years
ended December 25, 1995, December 30, 1996 and December 29, 1997. 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 financial position of American Restaurant Group, Inc.
and subsidiaries as of December 30, 1996 and December 29, 1997, and the results
of their operations and their cash flows for the years ended December 25, 1995,
December 30, 1996 and December 29, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
February 27, 1998
F-2
<PAGE> 25
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1996 AND DECEMBER 29, 1997
ASSETS
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 7,493,000 $ 5,737,000
Accounts receivable, net of
reserve of $1,041,000 and
$916,000 at December 30, 1996
and December 29, 1997,
respectively 7,465,000 5,606,000
Notes receivable -- 1,000,000
Inventories 6,818,000 5,893,000
Prepaid expenses 4,485,000 3,142,000
------------ ------------
Total current assets 26,261,000 21,378,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 6,158,000 5,610,000
Buildings and leasehold
improvements 110,071,000 110,800,000
Fixtures and equipment 84,162,000 85,603,000
Property held under capital
leases 12,375,000 12,375,000
Construction in progress 6,487,000 1,827,000
------------ ------------
219,253,000 216,215,000
Less -- Accumulated depreciation 118,084,000 123,893,000
------------ ------------
101,169,000 92,322,000
------------ ------------
OTHER ASSETS:
Intangible assets 13,039,000 12,375,000
Deferred debt costs 20,168,000 21,692,000
Leasehold interests 9,946,000 9,666,000
Franchise rights 6,876,000 6,024,000
Liquor licenses and other 6,259,000 6,857,000
Cost in excess of net assets
acquired 13,305,000 12,332,000
------------ ------------
69,593,000 68,946,000
Less -- Accumulated amortization 24,894,000 30,635,000
------------ ------------
44,699,000 38,311,000
------------ ------------
Total assets $172,129,000 $152,011,000
============ ============
</TABLE>
(consolidated balance sheets continued on following page)
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 26
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 33,394,000 $ 29,420,000
Accrued liabilities 14,315,000 18,021,000
Accrued insurance 15,848,000 11,251,000
Accrued interest 1,016,000 7,514,000
Accrued payroll costs 11,059,000 10,861,000
Current portion of obligations
under capital leases 902,000 926,000
Current portion of long-term debt 41,532,000 537,000
------------- -------------
Total current liabilities 118,066,000 78,530,000
------------- -------------
LONG-TERM LIABILITIES, net of current
portion:
Obligations under capital leases 8,443,000 7,517,000
Long-term debt 131,260,000 172,419,000
------------- -------------
Total long-term
liabilities 139,703,000 179,936,000
------------- -------------
DEFERRED GAIN 5,806,000 5,283,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE CUMULATIVE PREFERRED STOCK:
Redeemable cumulative senior preferred
stock, $0.01 par value; 1,400,000
shares authorized, no shares issued
or outstanding -- --
Redeemable cumulative junior preferred
stock, $0.01 par value; 100,000
shares authorized, no shares issued
or outstanding -- --
COMMON STOCKHOLDER'S EQUITY:
Common stock, $0.01 par value;
1,000,000 shares authorized,
93,150 shares issued and outstanding 1,000 1,000
Paid-in capital 63,246,000 63,246,000
Accumulated deficit (154,693,000) (174,985,000)
------------- -------------
Total common stockholder's
deficit (91,446,000) (111,738,000)
------------- -------------
Total liabilities and
common stockholder's
equity $ 172,129,000 $ 152,011,000
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 27
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 25, 1995, DECEMBER 30, 1996
AND DECEMBER 29, 1997
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------
December 25, December 30, December 29,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ 445,966,000 $ 445,424,000 $ 440,039,000
------------- ------------- -------------
RESTAURANT COSTS:
Food and beverage 138,270,000 141,032,000 140,015,000
Payroll 134,532,000 137,104,000 133,732,000
Direct operating 110,399,000 114,589,000 110,502,000
Depreciation and amortization 22,819,000 20,386,000 19,627,000
GENERAL AND ADMINISTRATIVE EXPENSES 31,360,000 28,086,000 29,360,000
NON-CASH CHARGE FOR IMPAIRMENT
OF LONG-LIVED ASSETS 20,178,000 13,205,000 3,047,000
------------- ------------- -------------
Operating profit (loss) (11,592,000) (8,978,000) 3,756,000
INTEREST EXPENSE, net 28,004,000 27,714,000 23,985,000
------------- ------------- -------------
Loss before provision
for income taxes and
extraordinary loss (39,596,000) (36,692,000) (20,229,000)
PROVISION FOR INCOME TAXES 66,000 81,000 63,000
------------- ------------- -------------
Loss before extraordinary item (39,662,000) (36,773,000) (20,292,000)
EXTRAORDINARY LOSS ON EXTINGUISHMENT
OF DEBT -- (1,688,000) --
------------- ------------- -------------
Net loss $ (39,662,000) $ (38,461,000) $ (20,292,000)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 28
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 25, 1995, DECEMBER 30, 1996
AND DECEMBER 29, 1997
<TABLE>
<CAPTION>
Common Paid-in Accumulated
Stock Capital Deficit Total
-------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 26, 1994 $ 1,000 $ 56,132,000 $ (76,570,000) $ (20,437,000)
Net loss -- -- (39,662,000) (39,662,000)
-------- ------------- ------------- -------------
BALANCE, December 25, 1995 1,000 56,132,000 (116,232,000) (60,099,000)
Net loss -- -- (38,461,000) (38,461,000)
Cash contribution
from parent -- 7,114,000 -- 7,114,000
-------- ------------- ------------- -------------
BALANCE, December 30, 1996 1,000 63,246,000 (154,693,000) (91,446,000)
Net loss -- -- (20,292,000) (20,292,000)
-------- ------------- ------------- -------------
BALANCE, December 29, 1997 $ 1,000 $ 63,246,000 $(174,985,000) $(111,738,000)
======== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 29
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 25, 1995, DECEMBER 30, 1996
AND DECEMBER 29, 1997
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------
DECEMBER 25, DECEMBER 30, DECEMBER 29,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received From Customers $ 446,355,000 $ 445,678,000 $ 440,695,000
Cash Paid To Suppliers And Employees (413,206,000) (415,662,000) (417,714,000)
Interest Paid, Net (27,912,000) (32,524,000) (17,358,000)
Income Taxes Paid (86,000) (74,000) (30,000)
------------- ------------- -------------
Net Cash Provided By (Used In)
Operating Activities 5,151,000 (2,582,000) 5,593,000
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (16,277,000) (13,279,000) (4,650,000)
Net (Increase) Decrease In Other Assets 181,000 (2,455,000) (945,000)
Proceeds From Disposition Of Assets 29,000 64,560,000 620,000
Sale/leaseback Costs Included In
Deferred Gain -- (1,112,000) --
------------- ------------- -------------
Net Cash Provided By (Used In)
Investing Activities (16,067,000) 47,714,000 (4,975,000)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments On Indebtedness (3,949,000) (51,907,000) (1,334,000)
Borrowings On Indebtedness 11,000,000 1,791,000 186,000
Net Increase In Deferred Debt Costs (5,000) (4,165,000) (324,000)
Payments On Capital Lease
Obligations (777,000) (857,000) (902,000)
Contribution From Parent -- 7,114,000 --
------------- ------------- -------------
Net Cash Provided By (Used In)
Financing Activities 6,269,000 (48,024,000) (2,374,000)
------------- ------------- -------------
NET DECREASE IN CASH (4,647,000) (2,892,000) (1,756,000)
CASH, At Beginning Of Period 15,032,000 10,385,000 7,493,000
------------- ------------- -------------
CASH, At End Of Period $ 10,385,000 $ 7,493,000 $ 5,737,000
============= ============= =============
RECONCILIATION OF NET LOSS TO NET
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Loss $ (39,662,000) $ (38,461,000) $ (20,292,000)
Adjustments To Reconcile Net Loss To
Net Cash Provided By (Used In)
Operating Activities:
Extraordinary Loss On
Extinguishment Of Debt -- 1,688,000 --
Loss On Impairment Of Long-lived
Assets 20,178,000 13,205,000 3,047,000
Depreciation And Amortization 22,819,000 20,386,000 19,627,000
Loss On Disposition Of Assets 684,000 1,610,000 4,806,000
Amortization Of Deferred Gain -- (123,000) (523,000)
Accretion On Indebtedness 87,000 99,000 110,000
Loss In Value Of
Interest Rate Swap 98,000 -- --
(Increase) Decrease In Current
Assets:
Accounts Receivable, Net 389,000 254,000 1,656,000
Notes Receivable -- -- (1,000,000)
Inventories 1,483,000 (221,000) 925,000
Prepaid Expenses (1,288,000) (467,000) (766,000)
Increase (Decrease) In Current
Liabilities:
Accounts Payable (1,706,000) 4,155,000 (3,974,000)
Accrued Liabilities 856,000 160,000 255,000
Accrued Insurance 2,167,000 (846,000) (4,597,000)
Accrued Interest (93,000) (4,909,000) 6,517,000
Accrued Payroll Costs (861,000) 888,000 (198,000)
------------- ------------- -------------
Net Cash Provided By
(Used In) Operating
Activities $ 5,151,000 $ (2,582,000) $ 5,593,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE> 30
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1995, DECEMBER 30, 1996 AND DECEMBER 29, 1997
1. Background and Summary of Significant Accounting Policies
a. Company
American Restaurant Group, Inc., (the "Company") a Delaware corporation,
through its subsidiaries, operates middle and upper price full-service
restaurants, casual-style restaurants and quick-service restaurants
primarily in California and Texas. The Company is a subsidiary of
American Restaurant Group Holdings, Inc. ("Holdings"), also a Delaware
corporation. At year end 1995, 1996 and 1997, the Company and its
subsidiaries, collectively referred to herein as the Company, operated
248, 247 and 231 restaurants, respectively.
b. Operations
The Company's operations are affected by local and regional economic
conditions, including competition in the restaurant industry. The
Company has had recurring operating losses in recent years and was
unable to meet a required debt principal payment during 1997. A
recapitalization plan was consummated subsequent to year end 1997 (see
Note 9, "Subsequent Events"). This plan substantially eliminated debt
principal payments until the year 2003.
Management believes the recapitalization will also allow it to effect
changes in its operations and has already implemented measures to reduce
overhead costs. However, the Company does not expect to generate
sufficient cash flow from operations in the future to make principal
payments on long-term debt upon maturity in the year 2003 and,
accordingly, it expects to refinance all or a portion of such debt,
obtain new financing or possibly sell assets.
c. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
d. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses. Actual results could differ from those
estimates.
e. Inventories and Prepaid Expenses
Inventories consist of food, beverages and supplies and are valued at
the lower of cost (first-in, first-out method) or market value. When a
restaurant is opened, the initial purchase of expendable equipment, such
F-8
<PAGE> 31
as china, glassware and silverware, is recorded as prepaid supplies and
is not depreciated; however, all replacements are expensed.
f. Advertising Costs
Advertising costs are accrued as a percentage of sales and expensed
during the year. Production costs are allocated to the related
advertisements. At year end, production costs for advertisements which
have not been aired are included in prepaid expenses. Prepaid
advertising costs of $1,215,000 and $912,000 were included in prepaid
expenses at December 30, 1996 and December 29, 1997, respectively.
Advertising expenses included in net loss were $16,768,000, $20,870,000
and $16,995,000 in fiscal years 1995, 1996 and 1997, respectively.
g. Preopening Costs
Costs incurred in connection with opening a new restaurant, principally
occupancy and staff training, are accumulated as prepaid expenses and
amortized over the initial year of operations.
h. Property and Equipment
Property and equipment is carried at the lower of cost or, if impaired,
at the estimated fair value of the asset (see Note 2, "Impairement of
Long-Lived Assets"). The Company provides for depreciation and
amortization based upon the estimated useful lives of depreciable assets
using the straight-line method. Estimated useful lives are as follows:
Land improvements 20 years
Buildings 30 to 35 years
Leasehold improvements Life of lease
Fixtures and equipment 3 to 10 years
Property held under capital leases Life of lease
Substantially all of the Company's assets, including property and
equipment, are pledged as collateral on the senior debt of the Company.
i. Interest Costs
Interest costs incurred during the construction period of restaurants
are capitalized. The Company capitalized approximately $130,000,
$168,000 and $90,000 for the years ended 1995, 1996 and 1997,
respectively.
j. Other Assets
Other assets include intangible assets, leasehold interests, franchise
rights, liquor licenses and cost in excess of net assets acquired. These
costs are amortized using the straight-line method over the periods
estimated to be benefited, not greater than 40 years.
Deferred debt costs are amortized using the effective interest method
over the related debt term.
Estimated useful lives are as follows:
Intangible assets 3 to 40 years
Deferred debt costs Term of debt
Leasehold interests Life of lease
Franchise rights 35 years
Liquor licenses 40 years
Cost in excess of net assets acquired 40 years
F-9
<PAGE> 32
The following table details the components of intangible assets included
in the accompanying consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
------- -------
<S> <C> <C>
Assembled workforce $ 5,109 $ 4,862
Goodwill 3,502 3,295
Trademark/service marks 2,769 2,632
Acquisition costs 1,209 1,143
Other 450 443
------- -------
Total $13,039 $12,375
======= =======
</TABLE>
k. Insurance
The Company self-insures the first $100,000 of its annual medical and
dental benefits per family. The Company also self-insures up to the
first $350,000 per incident for property and casualty risks inherent in
its operations. Reserves for losses are established currently based upon
estimated obligations.
l. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, accounts
receivable and payable and debt instruments. The carrying values of all
financial instruments, other than debt instruments, are representative
of their fair value due to their short-term maturity. The fair value of
the Company's long-term debt instruments is estimated based on the
current rates offered to the Company.
m. Franchise Income
The Company franchises Grandy's quick-service restaurants. Franchise
fees are recognized as income as services are rendered. Franchise
royalties based upon a percentage of the franchisees' gross sales are
accrued currently. Revenues include franchise royalties and franchise
fees of $2,176,000, $1,995,000, and $2,586,000, respectively, for the
years ended 1995, 1996 and 1997. There were 55, 56 and 61 franchised
restaurants at year end 1995, 1996 and 1997, respectively.
n. Accounting Period
The Company's fiscal year ends on the last Monday in December. The years
ended 1995 and 1997 included 52 weeks while 1996 included 53 weeks.
o. Reclassifications
Certain prior year accounts have been reclassified to conform with the
current year presentation.
2. Impairment of Long-Lived Assets
Effective December 25, 1995, the Company adopted the provisions of Financial
Accounting Standards Number 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121).
This statement changed the method of evaluating the impairment of the
Company's long-lived assets, including intangible assets. Various
assumptions and estimates are used to determine fair value. The calculation
of the impairment loss is based on estimated future cash flows. The
estimates used to determine the impairment adjustment can change in the near
term as the economy and operations of specific restaurants change. The
adoption of SFAS 121, together with the effects of continuing adverse
operations of certain
F-10
<PAGE> 33
restaurants, resulted in pre-tax non-cash charges of $20,178,000,
$13,205,000 and $3,047,000 for the years ended 1995, 1996 and 1997,
respectively.
3. Lease Obligations
The Company leases certain of its operating facilities under terms ranging
up to 40 years. These leases are classified as both operating and capital
leases. Certain of the leases contain provisions calling for additional
rentals based on sales or other provisions obligating the Company to pay
related property taxes and certain other expenses.
The following is a summary of property held under leases that have been
capitalized and included in the accompanying consolidated balance sheets (in
thousands):
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
------- -------
<S> <C> <C>
Property $12,375 $12,375
Less-- Accumulated depreciation 7,066 7,687
------- -------
$ 5,309 $ 4,688
======= =======
</TABLE>
The following represents the minimum lease payments remaining under
noncancelable operating leases and capitalized leases as of December 29,
1997 (in thousands):
<TABLE>
<CAPTION>
Operating Capitalized
Fiscal years ending Leases Leases
-------- -------
<S> <C> <C>
1998 $ 27,602 $ 1,881
1999 26,483 1,791
2000 25,220 1,694
2001 23,669 1,694
2002 21,691 1,612
Thereafter 236,239 5,026
-------- -------
Total minimum lease payments $360,904 13,698
========
Less -- Imputed interest
(8.75% to 15.5%) 5,255
-------
Present value of minimum lease payments 8,443
Less -- Current portion 926
Long-term portion $ 7,517
=======
</TABLE>
Rental expense (including $1,019,000, $895,000 and $802,000, respectively,
for contingent rents under operating leases) was $22,863,000, $24,814,000
and $30,676,000 during 1995, 1996 and 1997, respectively.
F-11
<PAGE> 34
4. Long-Term Debt
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
--------- --------
<S> <C> <C>
Senior secured notes, interest only due
semi-annually beginning September 15, 1992
at 12%, amended to 13% beginning August 28,
1996 due quarterly, principal due September
15, 1998, paid February 25, 1998 $ 84,270 $ 84,356
Senior secured notes, interest only due
semi-annually beginning March 15, 1994 at
12%, amended to 13% beginning August 28,
1996 due quarterly, principal due September
15, 1998, paid February 25, 1998 41,584 41,906
Subordinated notes payable, quarterly principal
payments of $5,625,000 due beginning December
31, 1998, interest only due quarterly at
10.25%, redeemed February 25, 1998 45,000 45,000
Other 1,938 1,694
--------- --------
172,792 172,956
Less -- Current portion 41,532 537
--------- --------
Long-term portion $ 131,260 $172,419
========= ========
</TABLE>
Subsequent to year end 1997, the Company refinanced the senior secured notes
and subordinated notes payable with no principal payments due until 2003
and, therefore, this debt is classified as long-term on the balance sheet
(see Note 9, "Subsequent Events"). Maturities of the remaining long-term
debt during each of the five fiscal years subsequent to year end 1997 are
$537,000, $250,000, $281,000, $315,000 and $311,000.
In March 1996, Holdings completed a private placement of its 14% senior
discount debentures due 2005 with a face value of $17,000,000 producing
aggregate proceeds of approximately $7,114,000. Substantially all of the net
proceeds of the offering were contributed by Holdings to the Company. The
net proceeds were used by the Company for general corporate purposes.
In the second half of 1996, the Company completed sale/leaseback
transactions, under which it sold certain land, buildings, and other
improvements relating to 24 Black Angus restaurants, 30 Grandy's restaurants
and two Spoons restaurants for an aggregate sales price of $63,358,000 and
simultaneously executed long-term leases under which it will continue to
operate the restaurants. The proceeds of the transactions were used to
redeem at par a portion of its senior secured notes in the amount of
$45,403,000, representing principal and interest thereon; to repay bank debt
and interest thereon and to partially cash collateralize outstanding letters
of credit in a combined amount of $7,408,000; and for fees and expenses of
such transactions as well as a consent solicitation relating to the senior
secured notes, with the balance used by the Company to make capital
expenditures and to purchase other assets. The Company recorded an
extraordinary loss on extinguishment of debt relating to the write-off of
F-12
<PAGE> 35
capitalized debt costs in the amount of $1,646,000 and a loss of $2,230,000
on disposition of assets underlying certain leases. In addition, a gain of
$5,929,000 related to the Black Angus sale/leasebacks was deferred and will
be amortized over the initial term of the underlying leases.
In March 1997, the Company's senior secured noteholders consented to an
amendment which provided for an increase of $10 in the stated principal
amount for each $1,000 in stated principal amount of consenting noteholders.
This resulted in an increase of approximately $1,617,000 in the stated
principal amount of the senior secured notes and $1,200,000 in the actual
outstanding principal amount of the senior secured notes.
In September 1997, the Company failed to make the $40,531,000 payment that
was due under the sinking fund provisions of its senior secured notes. The
Company was late, but within the grace period, in paying the quarterly
interest of $4,124,000 on its senior secured notes which was due September
15, 1997. The Company was restricted from paying the quarterly interest of
$1,153,000 on its subordinated debt which was due September 15, 1997 and
December 15, 1997.
In December 1997, the Company was late, but within the grace period, in
paying the quarterly interest of $4,107,000 on its senior secured notes
which was due December 15, 1997. Also in December 1997, the Company
initiated a recapitalization plan which was successfully completed in
February 1998. As part of the recapitalization plan, the Company repaid the
senior secured notes and redeemed the subordinated notes payable (see Note
9, "Subsequent Events").
Substantially all assets of the Company are pledged to its senior lenders.
In addition, the subsidiaries have guaranteed the indebtedness owed by the
Company and such guarantee is secured by substantially all of the assets of
the subsidiaries. In connection with such indebtedness, contingent and
mandatory prepayments may be required under certain specified conditions and
events. There are no compensating balance requirements.
At year end 1996 and 1997, the Company had outstanding letters of credit
primarily related to its self-insurance programs of approximately
$12,356,000 and $11,005,000, respectively.
5. Income Taxes
The Company's state income tax provision, all of which was current, was
$66,000, $81,000 and $63,000 in 1995, 1996 and 1997, respectively. No
provision for Federal income tax was required in any year.
F-13
<PAGE> 36
The income tax effects of temporary differences that give rise to
significant portions of the Company's deferred income tax assets and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
---------------------------
December 30, December 29,
1996 1997
-------- --------
<S> <C> <C>
Deferred income tax asset:
Reserves and other accrued
expenses not currently deductible
for tax purposes $ 2,543 $ 2,833
Long-lived asset impairment not
recognized on tax return 5,426 6,675
Tax gain on sale/leaseback
transactions, net 3,759 3,545
Net operating loss carryforward 38,524 45,899
-------- --------
Deferred income tax asset 50,252 58,952
-------- --------
Deferred income tax liability:
Tax depreciation greater than
depreciation for financial
reporting purposes (7,000) (8,034)
Costs capitalized for financial
reporting purposes and
expensed on tax return (4,973) (4,338)
Other, net (985) (1,906)
-------- --------
Deferred income tax liability (12,958) (14,278)
-------- --------
Deferred asset, net of deferred
liability 37,294 44,674
Valuation allowance (37,294) (44,674)
-------- --------
Net deferred income tax asset $ -- $ --
======== ========
</TABLE>
The effective tax rate differs from the Federal statutory rate of 34 percent
as a result of the following items (in thousands):
<TABLE>
<CAPTION>
Year ended
----------------------------------------------
December 25, December 30, December 29,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Federal income tax benefit
at statutory rates $(13,464) $(13,049) $ (6,878)
State income tax provision
for which no federal
benefit was recorded 44 53 42
Losses for which no federal
benefit was recorded 11,513 12,834 6,125
Nondeductible items,
principally intangible
amortization 1,973 243 774
-------- -------- --------
Provision for income taxes $ 66 $ 81 $ 63
======== ======== ========
</TABLE>
At December 29, 1997, the Company had available net operating loss
carryforwards for Federal income tax purposes of $134,996,000, expiring in
2003 to 2012, and Federal general business credit carryforwards of
$9,192,000, expiring in 2003 to 2012.
F-14
<PAGE> 37
6. Commitments and Contingencies
The Company is obligated under employment agreements with certain officers
and employees. Obligations under the agreements are $1,337,000, provide for
periodic increases and expire in 1998 unless extended.
The Company has been named as defendant in various lawsuits. It is the
opinion of management that the outcome of such litigation will not
materially affect the Company's financial position or results of operations.
7. Redeemable Cumulative Senior and Junior Preferred Stock
At year end 1996 and 1997, there were 1,400,000 authorized shares of senior
preferred stock (one cent par value). There were no issued or outstanding
shares.
At year end 1996 and 1997, there were 100,000 authorized shares of junior
preferred stock (one cent par value). There were no issued or outstanding
shares.
8. Common Stock
Common stock (one cent par value) authorized, issued and outstanding is as
follows:
<TABLE>
<CAPTION>
December 30, December 29,
1996 1997
------------ ------------
<S> <C> <C>
Shares authorized 1,000,000 1,000,000
Shares issued 93,150 93,150
Shares outstanding 93,150 93,150
</TABLE>
As of December 29, 1997, all of the Company's common stock was owned by
American Restaurant Group Holdings, Inc. The Chairman and certain other
members of the Company's management owned all outstanding shares of Holdings
common stock other than shares of Holdings common stock issued to holders of
the debenture units in connection with the refinancing and rights to acquire
shares of Holdings common stock issuable upon exercise of options and
warrants. All such shares owned by management are subject to a common stock
voting trust agreement, in accordance with which the Chairman and Chief
Executive Officer of the Company exercises all voting and substantially all
other rights to which stockholders would otherwise be entitled until the
earlier of August 15, 2005 or the termination of the common stock voting
trust agreement (see Note 9, "Subsequent Events").
9. Subsequent Events
In February 1998, the Company completed a recapitalization plan (the
"Recapitalization Plan") which included, among other things, (a) the private
placement by the Company of $155,000,000 of 11.5% senior secured notes due
2003 (the "Notes") and (b) the issuance of 35,000 preferred stock units of
the Company (the "Units"), each Unit consisting of $1,000 initial
liquidation preference of 12% senior pay-in-kind exchangeable preferred
stock and one common stock purchase warrant initially to purchase 2.66143
shares of the common stock at an initial exercise price of one cent per
share.
Also as part of the Recapitalization Plan, the Company concurrently (a)
redeemed at par senior secured notes of $126,381,000 together with interest
thereon and repaid certain other interest-bearing short-term liabilities,
(b) repurchased its existing 10.25% subordinated notes at 65% of the par
amount of $45,000,000 together with interest thereon, and canceled the
F-15
<PAGE> 38
related warrants to purchase common stock of Holdings, and (c) established a
$15,000,000 revolving credit facility to include letters of credit. Letters
of credit outstanding after the Recapitalization Plan were $3,395,000. A
quarterly fee of 0.5% per annum is payable on the unused portion of the
letter of credit facility and a quarterly fee of 2.5% per annum is payable
on outstanding letters of credit.
As an additional component of the Recapitalization Plan, Holdings extended
the accretion period on its senior discount debentures due 2005 (the
"Holdings Debentures"), from June 15, 1999 to maturity on December 15, 2005,
and amended certain provisions of the Holdings Debentures. The Holdings
Debentures will accrete at a rate of 14.25%, compounded semi-annually. In
addition, holders of the Holdings Debentures with an accreted value of
approximately $10,757,000 surrendered such debentures for cancellation and
received $3,600,000 principal amount of the Notes, in addition to the Notes
sold as mentioned above. The Company recorded this non-cash transaction as a
contribution to its parent company.
In conjunction with the Recapitalization Plan, the Company issued shares of
common stock to certain members of the Company's management (the "Management
Stockholders") in an aggregate amount equal to 15% of the common stock on a
fully diluted basis. Such Management Stockholders have entered into a voting
trust agreement in accordance with which the Chairman and Chief Executive
Officer of the Company will exercise all voting and substantially all other
rights to which such Management Stockholders would otherwise be entitled
until August 15, 2005, or the earlier termination of the agreement. The
Management Stockholders also entered into a stockholders agreement with the
remaining Company stockholders, which provides that the parties will agree
to vote all of their shares of the Company's equity securities so that the
Board of Directors of the Company consists of five directors, with two
directors designated by TCW Asset Management Company, two by the Management
Stockholders, with the remaining director being an independent director
initially designated by the initial purchaser of the Notes.
F-16
<PAGE> 39
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Purchase Agreement dated as of September 11, 1996 by and
between ARG Property Management Corporation and ARG
Enterprises, Inc. and ARG Properties I, LLC.***
2.2 Master lease dated September 11, 1996 between ARG
Properties I, LLC, as Landlord and ARG Enterprises, Inc.
as Tenant.***
2.3 Lease #06152 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Bloomington, Minnesota.***
2.4 Lease #06153 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Fridley, Minnesota.***
2.5 Lease #06154 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Minnetonka, Minnesota.***
2.6 Lease #06155 dated September 11, 1996 between Captec Net
Lease Realty, Inc. and ARG Enterprises, Inc. as Tenant
for Roseville, Minnesota.***
2.7 Lease dated September 11, 1996 between Safeway Inc. as
Landlord and ARG Enterprises, Inc. as Tenant.***
2.8 Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant to ARG Properties I, LLC as
Landlord.***
2.9 A Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant to Captec Net Lease Realty,
Inc. as Landlord for each of four Minnesota
restaurants.***
2.10 Guaranty of Lease dated September 11, 1996 by ARG
Enterprises, Inc. as Tenant and Safeway Inc. as
Landlord.***
3.1 Amended and Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on
July 23, 1991.*
<PAGE> 40
Exhibit No. Description
- ----------- -----------
3.2 Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Company filed with
the Secretary of State of Delaware on March 21, 1992.*
3.3 Amended and Restated Certificate of Incorporation of
the Company filed with the Secretary of State of Delaware
on February 23, 1998.
3.4 By-Laws of the Company.*
4.1 Indenture dated as of February 25, 1998 between the
Company and U.S. Trust Company of California, N.A., as
Trustee (including specimen certificate of 11.5% Senior
Secured Note due 2003).
4.2 Warrant Agreement dated as of February 25, 1998
between the Company and U.S. Trust Company of California,
N.A., as warrant agent (including specimen certificate of
Warrant).
4.3 Registration Rights Agreement dated as of February 25,
1998 between the Company and Jefferies & Company, Inc.
4.4 Securityholders' and Registration Right Agreement
dated as February 25, 1998 between the Company and
Jefferies & Company, Inc., as purchaser.
4.5 Management Registration Right Agreement dated as of
February 28, 1998 between the Company and the Management
Stockholders.
4.6 Certificate of Designation filed with the Secretary of
State of Delaware on February 24, 1998.
4.7 Certificate of Correction to the Certificate of
Designation filed with the Secretary of State of Delaware
on February 25, 1998.
9.1 Common Stock Voting Trust and Transfer Agreement dated as
of February 24, 1998 among the Company and the
stockholders parties thereto and Anwar S. Soliman, as
voting trustee.
9.2 Securityholders Agreement dated as of February 25, 1998
among the Company, American Restaurant Group Holdings,
Inc., Jefferies & Company, Inc., TCW Asset Management
Company and the Management Stockholders.
10.1 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Anwar S.
Soliman.**
10.2 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Ralph S.
Roberts.**
10.3 Amended and Restated Employment Agreement dated as of
December 14, 1993 between the Company and Wilfred H.
Partridge.**
<PAGE> 41
Exhibit No. Description
- ----------- -----------
21.1 Subsidiaries of the Company.**
27 Financial Data Schedule
- -------------------------------
* Incorporated by reference to the Registrant's Registration Statement
No. 33-48183 on Form S-4 filed with the Securities and Exchange Commission
on May 28, 1992 as amended with Amendment No. 1 filed on September 11,
1992.
** Incorporated by reference to the Registrant's Registration Statement No.
33-74010 on Form S-4 filed with the Securities and Exchange Commission on
January 12, 1994.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated September 13, 1996 filed with the Securities and Exchange on
September 30, 1996.
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN RESTAURANT GROUP, INC.
FIRST: The name of the Corporation is American Restaurant Group, Inc.
SECOND: The registered office and registered agent of the Corporation is
The Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, New
Castle County, Delaware 19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,160,000, of which 1,000,000
shares shall be shares of Common Stock, par value of $.01 per share, and 160,000
shares of preferred stock, par value $.01 each (hereinafter referred to as
"Preferred Stock").
FIFTH: The Board of Directors of the Corporation is authorized to fix by
resolution or resolutions the designation of each series of Preferred Stock and
the powers, designations, preferences and relative participating, optional or
other rights, if any, or the qualifications, limitations or restrictions
thereof, including, without limiting the generality of the foregoing, such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors under the General Corporation Law of the State of Delaware.
SIXTH: The Board of Directors of the Corporation, acting by majority vote,
may alter, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General Corporation
Law as the same exists or may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE SEVENTH by the Stockholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
<PAGE> 1
EXHIBIT 4.1
AMERICAN RESTAURANT GROUP, INC.
as obligor
and the Guarantors referred to herein
$158,600,000
11 1/2% Senior Secured Notes due 2003
------------------------------------
INDENTURE
Dated as of February 25, 1998
------------------------------------
U.S. Trust Company of California, N.A.
Trustee
<PAGE> 2
INDENTURE, dated as of February 25, 1998, among American Restaurant
Group, Inc., a Delaware corporation (the "Company"), the Guarantors named herein
and U.S. Trust Company of California, N.A., as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Company's 11
1/2% Senior Secured Notes due 2003:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Acquired Debt" means Indebtedness of a Person existing at the time
such Person is merged with or into the Company or a Restricted Subsidiary or
becomes a Restricted Subsidiary, other than Indebtedness incurred in connection
with, or in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary; provided, that
Indebtedness of such other Person that is redeemed, defeased, retired or
otherwise repaid at the time, or immediately upon consummation of the
transaction by which such other Person is merged with or into the Company or a
Restricted Subsidiary or becomes a Restricted Subsidiary shall not be Acquired
Debt.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
(i) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; (ii) in the case of a
corporation, beneficial ownership of 10% or more of any class of Capital Stock
of such Person; and (iii) in the case of an individual (A) members of such
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (B) trusts, any trustee or
beneficiaries of which are such Person or members of such Person's immediate
family. Notwithstanding the foregoing, neither the Initial Purchaser nor any of
its Affiliates will be deemed to be Affiliates of the Company.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock or a Restricted Subsidiary (other than directors' qualifying
shares), property or other assets, including by way of a sale/leaseback
transaction (each referred to for the purposes of this definition as a
"disposition"), by the Company or any of its Restricted Subsidiaries (including
any disposition by means of merger, consolidation or similar transaction) other
than (i) a disposition by a
<PAGE> 3
2
Restricted Subsidiary to the Company or by the company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of property or
assets in the ordinary course of business, (iii) dispositions of inventory in
the ordinary course of business, (iv) for purposes of the "Limitation on Asset
Sales" covenant only, a disposition that constitutes a Restricted Payment
permitted by Section 4.7 hereof, (v) the sale, lease, transfer or other
disposition of all or substantially all the assets of the Company as permitted
under Section 5.1 hereof, (vi) the grant of Liens permitted by Section 4.12
hereof and (vii) sales of obsolete or worn- out equipment.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means the board of directors or any duly
constituted committee of any corporation or of a corporate general partner of a
partnership and any similar body empowered to direct the affairs of any other
entity.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP, and the amount of such obligations
at any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, and (ii) with respect to
any other Person, any and all partnership or other equity interests of such
Person.
"Cash Collection Account Agreement" means the Agency Account
Agreement dated as of February 25, 1998 between Wells Fargo Bank and the
Collateral Agent.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250,000,000 and commercial paper issued by others rated at least
A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) and (ii) above.
"Change of Control" means (i) the transfer (in one transaction or a
series of transactions) of all or substantially all of the Company's assets to
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) other than to one or more Existing Holders, (ii) the liquidation or
dissolution of the Company or the adoption of a plan
<PAGE> 4
3
by the stockholders of the Company relating to the dissolution or liquidation of
the Company, (iii) the acquisition by any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act), except for one or more Existing
Holders, of beneficial ownership, directly or indirectly, of more than 50% of
the aggregate ordinary voting power of the total outstanding Voting Stock of the
Company, or (iv) during any period of two consecutive years, Continuing
Directors cease for any reason to constitute a majority (excluding the Preferred
Directors, if any) of the Board of Directors of the Company then still in
office.
"Closing Date" means the date upon which the Series A Notes are
first issued.
"Collateral" means any assets of the Company or any of its
Subsidiaries defined as "Collateral" in any of the Security Documents and assets
from time to time in which a Lien exists as security for any of the Obligations.
"Collateral Agent" shall mean the Secured Party as defined in the
Security Agreement.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Company" means the party named as such above, until a successor
replaces such Person in accordance with the terms of this Indenture, and
thereafter means such successor.
"Company Security Agreement" means the Company Security Agreement,
dated as of the date hereof, by and between the Company and the Collateral
Agent, as amended or supplemented from time to time.
"Company Order" means a written request or order signed in the name
of the Company by its Chairman of the Board, President or Senior Vice President,
and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary and delivered to the Trustee.
"Consolidated EBITDA" means, with respect to any Person (the
referent Person) for any period, consolidated operating profit of such Person
and its subsidiaries for such period, determined in accordance with GAAP, plus
(to the extent such amounts are deducted in calculating such operating profit
(loss) of such Person for such period, and without duplication) amortization,
depreciation and other non-cash charges (including, without limitation, non-cash
impairment charges, amortization of goodwill, deferred financing fees and other
intangibles but excluding non-cash charges incurred after the date of this
Indenture that require an accrual of or a reserve for cash charges for any
future period); provided, that the income from operations of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of
<PAGE> 5
4
dividends or distributions paid during such period to the referent Person or a
Wholly Owned Subsidiary of the referent Person.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of (i) the consolidated interest expense (net of
interest income) of such Person and its subsidiaries for such period, whether
paid or accrued (including amortization of original issue discount, noncash
interest payments and the interest component of Capital Lease Obligations but
excluding amortization of deferred financing costs), to the extent such expense
was deducted in computing Consolidated Net Income of such Person for such
period, and (ii) dividend requirements of such Person and its consolidated
subsidiaries (whether in cash or otherwise (except dividends payable solely in
shares of Qualified Capital Stock)) with respect to preferred stock paid,
accrued, or scheduled to be paid or accrued during such period, in each case to
the extent attributable to such period and excluding items eliminated in
consolidation. For purposes of clause (ii) above, dividend requirements shall be
increased to an amount representing; the pre-tax earnings that would be required
to cover such dividend requirements; accordingly, the increased amount shall be
equal to a fraction, the numerator or which is such dividend requirements and
the denominator of which is 1 minus the applicable actual combined effective
federal, state, local, and foreign income tax rate of such Person and its
subsidiaries (expressed as a decimal), on a consolidated basis, for the fiscal
year immediately preceding the date of the transaction giving rise to the need
to calculate Consolidated Interest Expense.
"Consolidated Net Income" means, with respect to any Person (the
referent Person) for any period, the aggregate of the Net Income of such Person
and its subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided, that (i) the Net Income of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting will be included in calculating the referent Person's Consolidated
Net Income only to the extent of the amount of dividends or distributions paid
during such period to the referent Person or a Wholly Owned Subsidiary of the
referent Person, (ii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition will
be excluded, and (iii) the Net Income of any Subsidiary will be excluded to the
extent that declarations of dividends or similar distributions by that
Subsidiary of such Net Income are not at the time permitted, directly or
indirectly, by operation of the terms of its organization documents or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its owners.
"Consolidated Net Worth" means, with respect to any Person, the
total stockholders' equity of such Person determined on a consolidated basis in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity), (i) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock of such Person and its consolidated subsidiaries, and
(ii) all upward revaluations and other write-ups in the book value of any asset
of such person or a consolidated subsidiary of such person subsequent to the
Closing Date, and (iii) all Investments in persons that are not consolidated
Restricted Subsidiaries.
<PAGE> 6
5
"Continuing Directors" means (i) individuals who at the beginning of
such period were directors of the Company; (ii) any TCW Director and (iii) any
director whose election by the Board of Directors of the Company or whose
nomination for election by the stockholders of the Company was approved by a
majority of the Continuing Directors then still in office.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 11.2 or such other address as the Trustee may specify by
notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or the passage of
time or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the footnotes thereto.
"Depository" means the Person specified in Section 2.3 hereof as the
Depository with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disqualified Stock" means any Equity Interest that either by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable) is or upon the happening of an event would be required to be
redeemed or repurchased prior to the final stated maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to such final
stated maturity.
"DTC" means The Depository Trust Company.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"Existing Holders" shall mean the holders of the Common Stock of the
Company on the Issue Date, TCW or any of their affiliates.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting
<PAGE> 7
6
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession, and in the rules and
regulations of the Commission, that are in effect on the date of this Indenture.
"Global Note" means a Note that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 2 in the form
of the Note attached hereto as Exhibit A.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means all direct or indirect current and future
Restricted Subsidiaries, other than Black Angus Enterprises of Idaho, Inc.
("Idaho, Inc.") until the Company or any of its Subsidiaries makes an Investment
in Idaho, Inc.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means American Restaurant Group Holdings, Inc., a
Delaware corporation.
"Indebtedness" of any Person means (without duplication) (1) all
liabilities and obligations, contingent or otherwise, of such Person (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, debentures, notes or other similar instruments, (iii) representing the
deferred purchase price of property or services (other than liabilities incurred
in the ordinary course of business which are not more than 90 days past due),
(iv) created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (v) as lessee
under capitalized leases, (vi) under bankers' acceptance and letter of credit
facilities, (vii) to purchase, redeem, retire, defease or otherwise acquire for
value any Disqualified Stock, or (viii) in respect of Hedging Obligations, (2)
all liabilities and obligations of others of the type described in clause (1),
above, that are Guaranteed by such Person, and (3) all liabilities and
obligations of others of the type described in clause (1), above, that are
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person;
provided, that the amount of such Indebtedness shall (to the extent such Person
has not assumed or become liable for the payment of such Indebtedness in full)
be the lesser of (x) the fair market value of such property at the time of
determination and (y) the amount of such Indebtedness. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
<PAGE> 8
7
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Initial Purchaser" means Jefferies & Company, Inc.
"Intercreditor Agreement" means the intercreditor agreement among
BankBoston, N.A., as agent to the lenders under the New Credit Facility, the
Trustee, the Collateral Agent and certain other parties thereto, dated the
Closing Date.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
Consolidated EBITDA of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating the Interest
Coverage Ratio for any period, pro forma effect shall be given to: (a) the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated but on or prior to the date on which the event for
which the calculation is being made, as if the same had occurred at the
beginning of the applicable period; and (b) the occurrence of any Asset Sale
during such period by reducing Consolidated EBITDA for such period by an amount
equal to the Consolidated EBITDA (if positive) directly attributable to the
assets sold and by reducing Consolidated Interest Expense by an amount equal to
the Consolidated Interest Expense directly attributable to any Indebtedness
assumed by third parties or repaid with the proceeds of such Asset Sale, in each
case as if the same had occurred at the beginning of the applicable period. For
purposes of making the computation referred to above, acquisitions that have
been made by the Company or any of its Restricted Subsidiaries subsequent to the
commencement of such period but on or prior to the date on which the event for
which the calculation is being made shall be given effect on a pro forma basis,
assuming that all such acquisitions had occurred on the first day of such period
in a manner consistent with the calculations described in "Unaudited Selected
Consolidated Pro Forma Condensed Financial Data" contained in the Offering
Circular. Without limiting the foregoing, the financial information of the
Company with respect to any portion of such four fiscal quarters that falls
before the Closing Date shall be adjusted to give pro forma effect to the
issuance of the Notes and the application of the proceeds therefrom as if they
had occurred at the beginning of such four fiscal quarters.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding (i) commission, travel
and similar advances to officers and employees of such Person made in the
ordinary course of business and (ii) bona fide accounts receivable arising from
the sale of goods or services in the ordinary course of business consistent with
past practice), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, and any other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
<PAGE> 9
8
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Liquidated Damages" has the meaning set out in the Registration
Rights Agreement.
"Material Subsidiary" means any Subsidiary (a) that is a
"Significant Subsidiary" of the Company as defined in Rule 1-02 of Regulation
S-X promulgated by the Commission or (b) is otherwise material to the business
of the Company.
"Mortgages" means those certain first priority mortgages and deeds
of trust, each with assignments of leases and rents and including fixture
filings, dated the Closing Date, made by the Company and its Subsidiaries in
favor of the Collateral Agent.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person for such period, determined in accordance with
GAAP, excluding any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with any Asset Sales
and dispositions pursuant to sale and leaseback transactions, and excluding any
extraordinary gain (but not loss), together with any related provision for taxes
on such gain (but not loss).
"Net Proceeds" means the aggregate proceeds received in the form of
cash or Cash Equivalents in respect of any Asset Sale (including payments in
respect of deferred payment obligations when received), net of (i) the
reasonable and customary direct out-of-pocket costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), other than any such costs payable to an Affiliate of the
Company, (ii) taxes actually payable directly as a result of such Asset Sale
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), (iii) amounts required to be applied to the permanent
repayment of Indebtedness in connection with such Asset Sale, and (iv)
appropriate amounts provided as a reserve by the Company or any Restricted
Subsidiary, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or such Restricted Subsidiary, as
the case may be, after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
arising from such Asset Sale.
"New Credit Facility means the New Credit Facility, entered into on
the Closing Date between the Company, certain of its Subsidiaries, the lenders
named therein and the agent for such Lenders as the same may be amended,
modified, renewed, refunded, replaced or refinanced from time to time, including
(i) any related notes, letters of credit, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced
<PAGE> 10
9
from time to time; and (ii) any notes, guarantees, collateral documents,
instruments and agreements executed in connection with such amendment,
modification, renewal, refunding, replacement or refinancing in an aggregate
amount not to exceed $20 million.
"Notes" means, collectively, the Series A Notes and the Series B
Notes.
"Obligations" means any principal, interest, premium, penalties,
fees, indemnifications, reimbursements, damages and other obligations and
liabilities of the Company or any of the Guarantors under this Indenture, the
Security Documents, the Notes or the Guarantees of the Notes.
Offering Circular" means the Company's Offering Circular dated
February 17, 1998.
"Officers" means the Chairman of the Board, the President, the Chief
Financial Officer, Chief Operating Officer, the Treasurer, any Assistant
Treasurer, Controller, Secretary, any Assistant Secretary or any Senior Vice
President of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the President, Chief
Financial Officer, Treasurer, Controller or a Senior Vice President of the
Company.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.
"Permitted Affiliate Transactions" means (i) employment agreements,
stockholder agreements, stock options or other incentive plans existing on the
Closing Date or thereafter entered into by the Company or any Restricted
Subsidiary in the ordinary course of business with the approval of a majority of
the disinterested members of the Company's Board of Directors; (ii) transactions
between or among the Company and/or its Restricted Subsidiaries; or (iii)
reasonable and customary fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary as determined in good faith by a majority of the
disinterested directors of the Company's Board of Directors.
"Permitted Investments" means (i) Investments in the Company, any
Guarantor or any Restricted Subsidiary (including without limitation, Guarantees
of Indebtedness of any such Person), (ii) Investments in Cash Equivalents, (iii)
Investments in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary, (iv)
Hedging Obligations, (v) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers, (vi)
Investments as a result of consideration received in connection with an Asset
Sale made in compliance with Section 4.10 of this Indenture, (vii)
<PAGE> 11
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Investments existing on the Closing Date, (viii) accounts receivable owing to
the Company or any Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms, (ix) payroll, travel and similar advances in the ordinary course of
business, (x) loans or advances to employees made in the ordinary course of
business; and (xi) Guarantees permitted to be made pursuant to Section 4.9.
"Permitted Liens" means (i) Liens in favor of the Company and/or its
Restricted Subsidiaries other than with respect to intercompany Indebtedness,
(ii) Liens on property of a Person existing at the time such Person is acquired
by, merged into or consolidated with the Company or any Restricted Subsidiary,
provided, that such Liens were not created in contemplation of such acquisition
and do not extend to assets other than those subject to such Liens immediately
prior to such acquisition, (iii) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary, provided, that
such Liens were not created in contemplation of such acquisition and do not
extend to assets other than those subject to such Liens immediately prior to
such acquisition, (iv) Liens incurred in the ordinary course of business in
respect of Hedging Obligations, (v) Liens incurred in the ordinary course of
business to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations (exclusive of obligations
constituting Indebtedness) of a like nature including, without limitation, cash
retainages, (vi) Liens existing or created on the date of this Indenture, (vii)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested or remedied in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided, that any
reserve or other appropriate provision as may be required in conformity with
GAAP has been made therefor, (viii) Liens arising by reason of any judgment,
decree or order of any court with respect to which the Company or any of its
Restricted Subsidiaries is then in good faith prosecuting an appeal or other
proceedings for review, the existence of which judgment, order or decree is not
an Event of Default under this Indenture, (ix) encumbrances consisting of zoning
restrictions, survey exceptions, utility easements, licenses, rights of way,
easements of ingress or egress over property of the Company or any of its
Restricted Subsidiaries, rights or restrictions of record on the use of real
property, minor defects in title, landlord's and lessor's liens under leases on
property located on the premises rented, mechanics' liens, warehouseman's liens,
supplier's liens, repairman's liens, vendors' liens, contractor's liens and
similar encumbrances, rights or restrictions on personal or real property, in
each case not interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries, (x) Liens
incidental to the conduct of business or the ownership of properties incurred in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, bids, and government contracts and leases and subleases,
(xi) Liens for any interest or title of a lessor under any Capitalized Lease
Obligation permitted to be incurred under this Indenture; provided, that such
Liens do not extend to any property or asset that is not leased property subject
to such Capitalized Lease Obligation, (xii) any extension, renewal, or
replacement (or successive extensions, renewals or replacements), in whole or in
part, of Liens described in clauses (i) through (xi) above, (xiii) Liens
securing the Notes, and (xiv)
<PAGE> 12
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Liens in addition to the foregoing, which in the aggregate, are secured by
assets with a fair market value not in excess of $100,000 at any time.
"Permitted Tax Payments to Holdings" means payments made to Holdings
to enable Holdings to pay foreign, Federal, state, and local tax liabilities
imposed directly upon Holdings ("Tax Payments"); provided, however, that (i)
notwithstanding the foregoing, in the case of any Tax Payment that is permitted
to be made to Holdings in respect of its Federal income tax liability for any
taxable period during which Holdings is the parent company of an affiliated
group that includes the Company and each of its United States subsidiaries as
members and files a consolidated Federal income tax return, such payment shall
be determined on the basis of assuming that the Company is the parent company of
an affiliated group (the "Company Affiliated Group") filing a consolidated
Federal income tax return and that Holdings and each such United States
subsidiary is a member of the Company Affiliated Group and (ii) any Tax Payment
made to Holdings shall either be used by Holdings to pay such tax liabilities to
the applicable taxing authority within 10 days of Holdings' receipt of such
payment or refunded to the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other entity.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, by and between the Company and its Subsidiaries, on the one hand and the
Collateral Agent, on the other, as amended or supplemented from time to time.
"Preferred Directors" means the two members of the Company's Board
of Directors that the holders of a majority of the Preferred Stock, voting as
one class, may be entitled from time to time to elect pursuant to the terms of
the Preferred Stock upon the Company's failure to discharge certain obligations
thereunder, or breach of certain provisions thereof or failure to satisfy
certain tests therein.
"Preferred Stock Repurchases" means any purchase of Preferred Stock
with the portion of Excess Proceeds remaining after payment of the purchase
price of the Notes tendered pursuant to an Excess Proceeds Offer if such
purchase of Preferred Stock is within 485 days of the date of the Asset Sale
which gave rise to such Excess Proceeds Offer.
"Purchase Money Liens" means Liens to secure or securing Purchase
Money Obligations permitted to be incurred under this Indenture.
"QIB" shall mean "qualified institutional buyer" as defined in Rule
144A.
"Qualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person other than Disqualified Capital Stock.
"Qualified Equity Offering" means (i) an underwritten primary public
offering of Qualified Capital Stock of the Company pursuant to an effective
registration statement
<PAGE> 13
12
under the Securities Act or (ii) a private offering of Qualified Capital Stock
other than issuances of common stock pursuant to employee benefit plans or as
compensation to employees.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among the Company, the
Guarantors and the Initial Purchaser as such agreement may be amended, modified
or supplemented from time to time.
"Responsible Officer" when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee located at the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Securities" means Notes that bear or are required to
bear the legends set forth in Exhibit A hereto.
"Restricted Subsidiary" means a Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the Company Security Agreement and
Subsidiary Security Agreement.
"Security Documents" means, collectively, the Mortgages, the
Security Agreements, the Pledge Agreement, the Cash Collection Account
Agreement, the Intercreditor Agreement, the Trademark Security Agreement and any
other document, instrument or agreement executed or delivered by the Company or
any of its Subsidiaries from time to time pursuant to which the Company or any
such Subsidiary shall grant a Lien on any of their respective properties, assets
or revenues to secure payment of the Obligations hereunder and under the Notes
or relating to intercreditor matters.
"Series A Notes" means the Company's 11 1/2% Series A Senior Secured
Notes due 2003, as authenticated and issued under this Indenture.
"Series B Notes" means the Company's 11 1/2% Series B Senior Secured
Notes due 2003, as authenticated and issued under this Indenture.
<PAGE> 14
13
"subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Voting Stock thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person or a combination thereof and (ii) any partnership in which such
Person or any of its subsidiaries is a general partner.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Security Agreement" means the Subsidiary Security
Agreement, dated as of the date hereof, by and between the Restricted
Subsidiaries and the Collateral Agent, as amended or supplemented from time to
time.
"TCW " means TCW Asset Management Company, TCW Shared Opportunities
Fund II, TCW Leveraged Income Trust L.P.or any of their affiliates.
"TCW Directors" means members of the Board of Directors nominated by
TCW or any of their affiliates pursuant to the Stockholders Agreement (as
defined herein).
"TCW Tax Payments" means the payments made to TCW pursuant to
Section 4.2 of the Securityholders Agreement dated as of February 25, 1998 among
Holdings, the Company, TCW and the other parties thereto, which payments shall
not exceed $125,000 per year.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss. ss.
77aaa-77bbbb), as amended, as in effect on the date hereof until such time as
this Indenture is qualified under the TIA, and thereafter as in effect on the
date on which this Indenture is qualified under the TIA.
"Trademark Security Agreement" means the Trademark Collateral
Security Agreement, dated as of the Closing Date, between the Company and the
Restricted Subsidiaries, on the one hand, and the Collateral Agent on the other,
as amended or supplemented from time to time.
"transfer" means any direct or indirect sale, assignment, transfer,
lease, conveyance, or other disposition (or series of related sales, leases,
transfers or dispositions) (including, without limitation, by way of merger or
consolidation).
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that has been
designated by the Company (by written notice to the Trustee as provided below)
as an Unrestricted Subsidiary; provided, that a Subsidiary may not be designated
as an "Unrestricted Subsidiary" unless (i) such Subsidiary does not own any
Capital Stock of, or own or hold any Lien on any property of, the Company or any
Restricted Subsidiary (other than such Subsidiary), (ii)
<PAGE> 15
14
neither immediately prior thereto nor after giving pro forma effect to such
designation, would there exist a Default or Event of Default, (iii) immediately
after giving effect to such designation on a pro forma basis, the Company could
incur at least $1.00 of Indebtedness pursuant to Section 4.9(a) of this
Indenture and (iv) the creditors of such Subsidiary have no direct or indirect
recourse (including, without limitation, recourse with respect to the payment of
principal or interest on Indebtedness of such Subsidiary) to the assets of the
Company or of a Restricted Subsidiary (other than such Subsidiary). The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (a) no Default or Event of Default is existing or
will occur as a consequence thereof and (b) immediately after giving effect to
such designation, on a pro forma basis, the Company could incur at least $1.00
of Indebtedness pursuant to Section 4.9(a) of this Indenture. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions. The Company shall be deemed to make an Investment in each Subsidiary
designated as an "Unrestricted Subsidiary" immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation; provided, that if such
Subsidiary is subsequently redesignated as a Restricted Subsidiary, the amount
of such Investment shall be deemed to be reduced (but not below zero) by the
fair market value of the net consolidated assets of such Subsidiary on the date
of such redesignation.
"U.S. Government Obligations" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
"Voting Stock" means, with respect to any Person, (i) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency), (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above and (iii) the
Warrants.
"Warrants" means the warrants to purchase shares of the Company's
common stock, $0.01 par value per share, issued pursuant to the Warrant
Agreement dated February 25, 1998 between the Company and U.S. Trust of
California, N.A., as Warrant Agent.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years (rounded to the nearest
one-twelfth) obtained by dividing (i) the then outstanding principal amount of
such Indebtedness into (ii) the total of the products obtained by multiplying
(x) the amount of each then remaining installment, sinking fund, serial maturity
or other required payments of principal, including payment at final maturity, in
respect thereof, by (y) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.
<PAGE> 16
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"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or one or more Wholly Owned Subsidiaries.
Section 1.2. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction".................... 4.11
"Change of Control Offer".................. 4.14
"Change of Control Payment"................ 4.14
"Change of Control Payment Date"........... 4.14
"Definitive Notes"......................... 2.1
"Event of Default"......................... 6.1
"Excess Proceeds".......................... 4.10
"Excess Proceeds Offer".................... 4.10
"Excess Proceeds Offer Period"............. 4.10
"Excess Proceeds Payment Date"............. 4.10
"Global Note".............................. 2.1
"Guaranty"................................. 10.7
"Hedging Obligations"...................... 4.9(b)
"Paying Agent"............................. 2.3
"Purchase Amount".......................... 4.10
"Purchase Money Indebtedness".............. 4.9(b)
"Refinance"................................ 4.9(b)
"Refinancing Indebtedness"................. 4.9(b)
"Registrar"................................ 2.3
"Restricted Payments"...................... 4.7
Section 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
<PAGE> 17
16
"obligor" on the Notes means the Company, the Guarantors and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings so assigned to them.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
Section 2.1. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
incorporated in and made a part of this Indenture. Each Note shall include the
Guaranty executed by each of the Guarantors in the form of Exhibit C attached
hereto, the terms of which are incorporated and made a part of this Indenture.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued in
denominations of $1,000 and integral multiples thereof.
The Notes will be issued (i) in global form (the "Global Note"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto) and (ii) in definitive form (the
"Definitive Notes"), substantially in the form of Exhibit A attached hereto
(excluding the text referred to in footnotes 1 and 2 thereto). The Global Note
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon; provided, that the aggregate amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Note to reflect the amount of any increase
<PAGE> 18
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or decrease in the amount of outstanding Notes represented thereby shall be made
by the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.6 hereof.
Section 2.2. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Note has been authenticated under this Indenture. The form of
Trustee's certificate of authentication to be borne by the Notes shall be
substantially as set forth in Exhibit A attached hereto.
The Trustee shall, upon a Company Order, authenticate for original
issue up to $158,600,000 aggregate principal amount of each series of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
$158,600,000 except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authenticating by the Trustee includes
authenticating by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Note is registered as the owner of such
Note for the purpose of receiving payment of principal of and (subject to the
provisions of this Indenture and the Notes with respect to record dates)
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Except as set forth in the next sentence, the Notes will initially
be issued in the form of one or more registered global Notes which will be
deposited on the Closing Date with, or on behalf of, the Depository and
registered in the name of the global Holder. Notes that are originally issued to
or transferred to an institutional "accredited investor" (within the meaning of
Rule 501 under the Securities Act) who is not a "qualified institutional buyer"
(within the meaning of Rule 144A (a "QIB) or to any other persons who are not
QIBs shall be issued in the form of certificated Notes in registered form
substantially in the form set forth in Exhibit A.
<PAGE> 19
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Section 2.3. Registrar, Paying Agent and Depository.
The Company shall maintain (i) an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and (ii)
an office or agency where Notes may be presented for payment ("Paying Agent").
The Company initially appoints the Trustee as Registrar and Paying Agent. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co- registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to appoint or maintain another entity as Registrar or
Paying Agent, the Trustee shall act as such. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar, except that for purposes of
Articles Three and Eight and Sections 4.1, 4.10 and 4.14 neither the Company nor
any of its Subsidiaries shall act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Company initially appoints DTC to act as Depository with respect
to the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes and shall notify the
Trustee of any default by the Company in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary of the Company) shall
have no further liability for the money delivered to the Trustee. If the Company
or a Subsidiary of the Company acts as Paying Agent (subject to Section 2.3), it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.
Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders,
including the
<PAGE> 20
19
aggregate principal amount thereof, and the Company shall otherwise comply with
TIA ss. 312(a).
Section 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request (1) to register the
transfer of the Definitive Notes or (2) to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, that the Definitive
Notes so presented (A) have been duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and (B) in the case
of a Restricted Security, such request shall be accompanied by the following
additional documents:
(i) if such Restricted Security is being delivered to the Registrar
by a Holder for registration in the name of such Holder, without transfer,
a certification to that effect (in substantially the form of Exhibit B
attached hereto); or
(ii) if such Restricted Security is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto); or
(iii) if such Restricted Security is being transferred in reliance
on another exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of Exhibit
B attached hereto) and an opinion of counsel reasonably acceptable to the
Company and the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may be exchanged for a beneficial interest in a
Global Note only upon receipt by the Trustee of a Definitive Note, duly endorsed
or accompanied by appropriate instruments of transfer, in form satisfactory to
the Trustee, together with:
(i) written instructions from the entity surrendering such
Definitive Note directing the Trustee to make an endorsement on the Global
Note to reflect an increase in the aggregate principal amount of the Notes
represented by the Global Note, and
(ii) if such Definitive Note is a Restricted Security, a
certification (in substantially the form of Exhibit B attached hereto) to
the effect that such Definitive Note is being transferred to a QIB in
accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global
<PAGE> 21
20
Note is then outstanding, the Company shall issue and the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note. Upon receipt by the Trustee of written transfer instructions
(or such other form of instructions as is customary for the Depository) from the
Depository (or its nominee) on behalf of any Person having a beneficial interest
in a Global Note, the Trustee shall, in accordance with the standing
instructions and procedures existing between the Depository and the Trustee,
cause the aggregate principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute and the Trustee shall
authenticate and make available for delivery to the transferee a Definitive Note
in the appropriate principal amount; provided, that in the case of a Restricted
Security, such instructions shall be accompanied by the following additional
documents:
(i) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit B
attached hereto); or
(ii) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto); or
(iii) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of Exhibit
B attached hereto) and an opinion of counsel reasonably acceptable to the
Company and to the Registrar to the effect that such transfer is in
compliance with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a
Global Note shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Trustee.
(e) Transfer and Exchange of Global Notes. Notwithstanding any other
provision of this Indenture, the Global Note may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository; provided, that if:
<PAGE> 22
21
(i) the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository and a successor Depository
is not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes under
this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Notes in an aggregate principal amount equal
to the aggregate principal amount of the Global Note in exchange for such Global
Note in the names and in such authorized dominations as the Depository shall
direct the Trustee and such Notes shall be made available for delivery to the
Persons designated by the Depository.
(f) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note shall be
returned to or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in the Global Note is exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the aggregate principal
amount of Notes represented by such Global Note shall be reduced accordingly and
an endorsement shall be made on such Global Note by the Trustee to reflect such
reduction.
(g) General Provisions Relating to Transfers and Exchanges. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Notes and Global Notes at the
Registrar's request. All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes shall
be legal, valid and binding obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange (without transfer to another person) pursuant to Sections
2.10, 3.7, 4.10, 4.14 and 9.5 of this Indenture).
The Company shall not be required to (i) issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption under
Section 3.2 hereof and ending at the close of business on the day of selection;
or (ii) register the transfer of or exchange any Note so selected for redemption
in whole or in part, except the unredeemed portion of any Note being redeemed in
part; or (iii) register the transfer of or exchange a Note between a record date
and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any
<PAGE> 23
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Note is registered as the absolute owner of such Note for all purposes, and
neither the Trustee, any Agent nor the Company shall be affected by notice to
the contrary.
(h) Exchange of Series A Notes for Series B Notes. The Series A
Notes may be exchanged for Series B Notes pursuant to the terms of the Exchange
Offer. The Trustee and Registrar shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Series B Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series A Notes properly tendered in
the Exchange Offer that are represented by a Global Note and
the principal amount of Series A Notes properly tendered in
the Exchange Offer that are represented by Definitive Notes,
the name of each Holder of such Definitive Notes, the
principal amount at maturity properly tendered in the Exchange
Offer by each such Holder and the name and address to which
Definitive Notes for Series B Notes shall be registered and
sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel to the effect that the Series B Notes have been registered
under Section 5 of the Securities Act and this Indenture has been qualified
under the TIA and (iii) a Company Order, shall authenticate (A) a Global Note
for Series B Notes in an aggregate principal amount equal to the aggregate
principal amount of Series A Notes represented by a Global Note indicated in
such Officers' Certificate as having been properly tendered and (B) Definitive
Notes representing Series B Notes registered in the names of, and in the
principal amounts indicated in such Officers' Certificate.
If the principal amount of the Global Note for the Series B Notes is
less than the principal amount of the Global Note for the Series A Notes, the
Trustee shall make an endorsement on such Global Note for Series A Notes
indicating a reduction in the principal amount represented thereby.
The Trustee shall deliver such Definitive Notes for Series B Notes
to the Holders thereof as indicated in such Officers' Certificate.
Section 2.7. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee shall authenticate
a replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the
<PAGE> 24
23
Trustee and the Company to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company or the Trustee may charge for its expenses in replacing a
Note.
Every replacement Note is an obligation of the Company and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding.
If a Note is replaced pursuant to Section 2.7 hereof, the replaced
Note ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
Section 2.9. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Affiliate of the Company shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that a Trustee knows to be so owned shall be considered as not outstanding.
Section 2.10. Temporary Notes.
Pending the preparation of definitive Notes, the Company (and the
Guarantors) may execute, and upon Company Order the Trustee shall authenticate
and make available for delivery, temporary Notes that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Company (and the Guarantors)
shall cause definitive Notes to be prepared without unreasonable delay. The
definitive Notes shall be
<PAGE> 25
24
printed, lithographed or engraved, or provided by any combination thereof, or in
any other manner permitted by the rules and regulations of any principal
national securities exchange, if any, on which the Notes are listed, all as
determined by the Officers executing such definitive Notes. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
maintained by the Company for such purpose pursuant to Section 4.2 hereof,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company (and the Guarantors) shall execute, and the Trustee
shall authenticate and make available for delivery, in exchange therefor the
same aggregate principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as definitive Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall retain or
destroy cancelled Notes in accordance with its normal practices (subject to the
record retention requirement of the Exchange Act) unless the Company directs
them to be returned to it. The Company may not issue new Notes to replace Notes
that have been redeemed or paid or that have been delivered to the Trustee for
cancellation. All cancelled Notes held by the Trustee shall be returned to the
Company.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 4.1
hereof. The Company shall, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to the Holders a notice that states the
special record date, the related payment date and the amount of such interest to
be paid.
Section 2.13. Legends.
(a) Except as permitted by subsections (b) or (c) hereof, each Note
shall bear legends relating to restrictions on transfer pursuant to the
securities laws in substantially the form set forth on Exhibit A attached
hereto.
(b) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Note) pursuant to Rule 144 under
the Securities Act or pursuant to an effective registration statement under the
Securities Act:
<PAGE> 26
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(i) in the case of any Restricted Security that is a Definitive
Note, the Registrar shall permit the Holder thereof to exchange such
Restricted Security for a Definitive Note that does not bear the legends
required by subsection (a) above; and
(ii) in the case of any Restricted Security represented by a Global
Note, such Restricted Security shall not be required to bear the legends
required by subsection (a) above, but shall continue to be subject to the
provisions of Section 2.6(c) hereof; provided, that with respect to any
request for an exchange of a Restricted Security that is represented by a
Global Note for a Definitive Note that does not bear the legends required
by subsection (a) above, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144.
(c) The Company (and the Guarantors) shall issue and the Trustee
shall authenticate Series B Notes in exchange for Series A Notes accepted for
exchange in the Exchange Offer. The Series B Notes shall not bear the legends
required by subsection (a) above unless the Holder of such Series A Notes is
either (A) a broker-dealer who purchased such Series A Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act, (B) a Person participating in the distribution of the Series
A Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the
Company.
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of Section 3.7 pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.2. Selection of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed,
or, if the Notes are not so listed, pro rata, by lot or by such method as the
Trustee deems to be fair and reasonable.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
<PAGE> 27
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Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part only, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of the original Note, a new Note or
Notes in principal amount equal to the unredeemed portion shall be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such
redemption payment, interest on Notes or portions of Notes called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or the section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(8) the CUSIP number of the Notes to be redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the name of the Company and at its expense; provided that the
Company shall deliver to the Trustee, at least 45 days (unless a shorter period
is acceptable to the Trustee) prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption has been mailed to the Holders in
accordance with Section 3.3 herein, Notes called for redemption become due and
payable on the redemption date at the redemption price. At any time prior to the
mailing of a notice of redemption to the Holders pursuant to Section 3.3, the
Company may withdraw, revoke or rescind any notice of redemption delivered to
the Trustee without any continuing obligation to redeem the Notes as
contemplated by such notice of redemption.
<PAGE> 28
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Section 3.5. Deposit of Redemption Price.
On or before the redemption date, the Company shall deposit with the
Trustee (to the extent not already held by the Trustee) or with the Paying Agent
money in immediately available funds sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption price of, and accrued interest on, all Notes to be redeemed.
Interest on the Notes to be redeemed shall cease to accrue on the
applicable redemption date, whether or not such Notes are presented for payment,
if the Company makes or deposits the redemption payment in accordance with this
Section 3.5. If any Note called for redemption shall not be paid upon surrender
for redemption because of the failure of the Company to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Notes.
Section 3.6. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7. Optional Redemption.
(a) Except as set forth in Section 3.7(b), the Notes are not
redeemable at the Company's option prior to February 15, 2001. Thereafter, the
Notes will be subject to redemption at the option of the Company, in whole or in
part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon, if any, to the
applicable redemption date, if redeemed during the 12-month period beginning on
February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . .105.75%
2002 and thereafter . . . . . . . 100%
</TABLE>
(b) Notwithstanding the foregoing, at any time or from time to time
prior to February 15, 2000, the Company may, at its option, redeem up to
one-third of the original principal amount of the Notes, at a redemption price
of 111.5% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the applicable redemption date, with the net cash proceeds of one or
more Qualified Equity Offerings; provided, that (i) such redemption shall occur
within 60 days of the date of closing of such public offering and (ii) at least
two-thirds of the original aggregate principal amount of Notes remains
outstanding immediately after giving effect to each such redemption.
<PAGE> 29
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ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes.
The Company shall pay the principal and premium, if any, of, and
interest on, the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest shall be considered paid on the date
due if the Paying Agent, other than the Company or a Subsidiary of the Company,
holds on or before that date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due. Such Paying Agent shall return to the Company, no
later than three Business Days following the date of payment, any money that
exceeds such amount of principal, premium, if any, and interest then due and
payable on the Notes. The Company shall pay any and all amounts, including
without limitation Liquidated Damages, if any, on the dates and in the manner
required under the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest) on
overdue installments of interest (without regard to any applicable grace period)
at the same rate to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an
office of the Trustee, Registrar or co-registrar) in the Borough of Manhattan,
The City of New York where Notes may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Notes and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3.
<PAGE> 30
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Section 4.3. Reports.
(a) The Company shall file with the Trustee, within 15 days after
the time of filing with the Commission, copies of the reports, information and
other documents (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) that the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
If the Company is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Commission and the Trustee all
such reports, information and other documents as it would be required to file if
it were subject to the requirements of Section 13 or 15(d) of the Exchange Act;
provided, that the Company shall not be in default of the provisions of this
Section 4.3 for any failure to file reports with the Commission solely by
refusal by the Commission to accept the same for filing. The Company shall
deliver (or cause the Trustee to deliver) copies of all reports, information and
documents required to be filed with the Trustee pursuant to this Section 4.3 to
the Holders at their addresses appearing in the register of Notes maintained by
the Registrar. The Company shall also comply with the provisions of TIA ss.
314(a).
(b) If the Company is required to furnish annual, quarterly or
current reports to its stockholders pursuant to the Exchange Act, the Company
shall cause any annual, quarterly, current or other financial report furnished
by it generally to its stockholders to be filed with the Trustee mailed to the
Holders at their addresses appearing in the register of Notes maintained by the
Registrar. If the Company is not required to furnish annual, quarterly or
current reports to its stockholders pursuant to the Exchange Act, then, to the
extent not already filed with the Trustee or provided to the Holders pursuant to
paragraph (a) above, the Company shall cause the financial statements of the
Company and its consolidated Subsidiaries (and similar financial statements for
all unconsolidated Subsidiaries, if any), including any notes thereto (and, with
respect to annual reports, an auditors' report by an accounting firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to that which would
have been required to appear in annual or quarterly reports filed under Section
13 or 15(d) of the Exchange Act to be so filed with the Trustee and mailed to
the Holders promptly, but in any event, within 90 days after the end of each of
the fiscal years of the Company and within 45 days after the end of each of the
first three quarters of each such fiscal year.
(c) So long as is required for an offer or sale of the Notes to
qualify for an exemption under Rule 144A, the Company (and the Guarantors)
shall, upon request, provide the information required by clause (d)(4)
thereunder to each Holder and to each beneficial owner and prospective purchaser
of Notes identified by any Holder of Restricted Securities.
Section 4.4. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate (provided, that one of the
signatories to such Officers' Certificate shall be the Company's principal
executive officer, principal financial officer or principal accounting officer)
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of
<PAGE> 31
30
the signing Officers with a view to determine whether each has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that each of the
Company and its Subsidiaries has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he may have knowledge and what
action each is taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above shall be accompanied by a
written statement of the independent public accountants of the Company (which
shall be a firm of established national reputation reasonably satisfactory to
the Trustee) that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would lead them
to believe that either the Company or any of its Subsidiaries has violated any
provisions of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) So long as any of the Notes are outstanding, the Company shall
deliver to the Trustee forthwith upon any Officer becoming aware of (i) any
Default or Event of Default or (ii) any event of default under any mortgage,
indenture or instrument referred to in Section 6.1(5) hereof, an Officers'
Certificate specifying such Default, Event of Default or other event of default
and what action the Company is taking or proposes to take with respect thereto.
Section 4.5. Taxes.
The Company shall, and shall cause its Subsidiaries to, file all tax
returns required to be filed and to pay prior to delinquency all material taxes,
assessments and governmental levies except as contested in good faith and by
appropriate proceedings and for which reserves have been established in
accordance with GAAP.
Section 4.6. Stay, Extension and Usury Laws.
The Company (and each Guarantor) covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor hereby expressly (to the extent that it may lawfully do so)
waives all benefit or advantage of any such law and covenants that it shall not,
by resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee but shall suffer and permit the execution of every
such power as though no such law has been enacted.
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Section 4.7. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on
account of any Equity Interests of the Company or any of its Restricted
Subsidiaries (other than (x) dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or (y) dividends
or distributions payable to the Company or any Restricted Subsidiary or
(z) if the Subsidiary making such dividend or distribution is not a Wholly
Owned Subsidiary, dividends to its shareholders on a pro-rata basis),
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interest of the Company, any Subsidiary or any other Affiliate
of the Company (other than any such Equity Interest owned by the Company
or any Wholly Owned Subsidiary),
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of the
Company or any Guarantor that is subordinated in right of payment to the
Notes or such Guarantor's Guarantee thereof, as the case may be,
(iv) make any Restricted Investment, or
(v) make any payment or transfer any assets to, or on behalf
of, Holdings or any of its Affiliates
(all such payments and other actions set forth in clauses (i) through (v)
above being collectively referred to as "Restricted Payments") unless, at
the time of such Restricted Payment:
(1) no Default or Event of Default has occurred and is
continuing or would occur as a consequence thereof,
(2) immediately after giving effect thereto on a pro forma
basis, the Company could incur at least $1.00 of additional Indebtedness
under Section 4.9(a) hereof, and
(3) such Restricted Payment (the value of any such payment, if
other than cash, being determined in good faith by the Board of Directors
and evidenced by a resolution set forth in an Officers' Certificate
delivered to the Trustee), together with the aggregate of all other
Restricted Payments made after the date of this Indenture (including
Restricted Payments permitted by clauses (i), (v) (to the extent made in
cash) and (vi) of Section 4.7(b) and excluding Restricted Payments
permitted by the other clauses therein), is less than the sum of (x) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of
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32
the first quarter commencing immediately after the Closing Date to the end
of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, 100% of
such deficit), plus (y) 100% of the aggregate net cash proceeds (or of the
net cash proceeds received upon the conversion of non-cash proceeds into
cash) received by the Company from the issuance or sale, other than to a
Subsidiary, of Equity Interests of the Company (other than Disqualified
Stock) after the date of this Indenture and on or prior to the time of
such Restricted Payment, plus (z) 100% of the aggregate net cash proceeds
(or of the net cash proceeds received upon the conversion of non-cash
proceeds into cash) received by the Company from the issuance or sale,
other than to a Subsidiary, of any convertible or exchangeable debt
security of the Company that has been converted or exchanged into Equity
Interests of the Company (other than Disqualified Stock) pursuant to the
terms thereof after the date of this Indenture and on or prior to the time
of such Restricted Payment (including any additional net cash proceeds not
included in clause (y) above received by the Company upon such conversion
or exchange). The aggregate amount of each Investment constituting a
Restricted Payment since the date hereof shall be reduced by the aggregate
after-tax amount of all payments made to the Company and its Restricted
Subsidiaries with respect to such Investments; provided, that (a) the
maximum amount of such payments shall not exceed the original amount of
such Investment and (b) such payments shall also be excluded from the
calculations contemplated by clauses (3)(x) through (z) of this Section
4.7.
(b) The provisions of subsection (a) above shall not prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment would
not have been prohibited by the provisions of this Indenture,
(ii) the redemption, purchase, retirement or other acquisition
of any Equity Interests of the Company or Indebtedness of the Company or
any Restricted Subsidiary solely in exchange for Equity Interests of the
Company (other than Disqualified Stock),
(iii) the redemption, repurchase or payoff of any Indebtedness
with proceeds of any Refinancing Indebtedness permitted to be incurred
pursuant to the provisions of Section 4.9(b)(x) hereof,
(iv) payments by the Company to Holdings in respect of
Permitted Tax Payments to Holdings,
(v) the redemption of the Preferred Stock with the proceeds
of a Qualified Equity Offering,
(vi) Permitted Affiliate Transactions, or
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(vii) Preferred Stock Repurchases,
(viii) the TCW Tax Payments,
(ix) payments of dividends on Disqualified Stock issued in
accordance with Section 4.9(a) hereof, or
(x) other Restricted Payments in an aggregate amount not to
exceed $2.0 million.
(c) Not later than the date of making each Restricted Payment (other
than Restricted Payments contemplated by Section 4.7(b)), the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted, and setting forth the basis upon which the calculations
required by this Section 4.7 were computed, which calculations may be based upon
the Company's latest available financial statements.
Section 4.8. Limitation on Restrictions on Subsidiary Dividends.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary
(a) to (1) pay dividends or make any other distributions to the
Company or any of its Restricted Subsidiaries (A) on such Restricted
Subsidiary's Capital Stock or (B) with respect to any other interest or
participation in, or measured by, such Restricted Subsidiary's profits or (2)
pay any indebtedness owed to the Company or any of its Restricted Subsidiaries,
or
(b) to make loans or advances to the Company or any of its
Restricted Subsidiaries, or
(c) to transfer any of its assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of:
(i) the New Credit Facility, as in effect on the Closing Date,
or any refinancings, amendments, modifications or supplements thereof
containing dividend or other payment restrictions that are not materially
more restrictive than those contained in the New Credit Facility on the
Closing Date,
(ii) this Indenture, the Security Documents and the Notes,
(iii) applicable law,
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(iv) restrictions with respect to a Subsidiary that was not a
Subsidiary on the Closing Date in existence at the time such Person
becomes a Subsidiary (but not created as a result of or in anticipation of
such Person becoming a Subsidiary); provided, that such restrictions are
not applicable to any other Person or the properties or assets of any
other Person,
(v) customary non-assignment and net worth provisions of any
contract or lease entered into in the ordinary course of business,
(vi) customary restrictions on the transfer of assets subject
to a Lien permitted under this Indenture imposed by the holder of such
Lien,
(vii) restrictions imposed by any agreement to sell assets or
Capital Stock to any Person pending the closing of such sale, and
(viii) permitted Refinancing Indebtedness (including
Indebtedness Refinancing Acquired Debt), provided, that such restrictions
contained in any agreement governing such Refinancing Indebtedness are not
materially more restrictive than those contained in any agreements
governing the Indebtedness being Refinanced.
Section 4.9. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, (1) create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable with respect
to, contingently or otherwise (collectively, "incur"), any Indebtedness
(including Acquired Debt) or (2) issue any Disqualified Stock; provided, that
the Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and any Restricted Subsidiary may incur Acquired Debt, in
each case if (x) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to such incurrence or issuance, and (y) the Interest Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least equal to 2:1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness (including Acquired Debt) had been incurred, or the Disqualified
Stock had been issued, as the case may be, at the beginning of such four-quarter
period.
(b) The limitations of Section 4.9(a) shall not prohibit the
incurrence of:
(i) Indebtedness under the New Credit Facility, provided, that
the aggregate principal amount of Indebtedness so incurred on any date,
together with all other Indebtedness incurred pursuant to this clause (i)
and outstanding on such date, shall not exceed $20 million,
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(ii) performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations incurred in
the ordinary course of business,
(iii) obligations incurred to fix the interest rate on any
variable rate Indebtedness otherwise permitted by this Indenture ("Hedging
Obligations"),
(iv) Indebtedness owed by (1) a Restricted Subsidiary to the
Company or to a Wholly Owned Subsidiary or (2) the Company to a Wholly
Owned Subsidiary,
(v) Indebtedness outstanding on the date of this Indenture,
including the Notes and the Guarantees,
(vi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, that such
Indebtedness is extinguished within three Business Days of incurrence,
(vii) Indebtedness represented by Guarantees by the Company of
Indebtedness otherwise permitted to be incurred pursuant to this covenant
and Indebtedness represented by Guarantees by a Restricted Subsidiary of
Indebtedness of the Company or another Restricted Subsidiary otherwise
permitted to be Incurred pursuant to this covenant;
(viii) obligations with respect to customary provisions
regarding post-closing purchase price adjustments and indemnification in
agreements for the purchase or sale of a business or assets otherwise
permitted by the Indenture;
(ix) other Indebtedness in an aggregate principal amount at
any one time outstanding not to exceed $5.0 million; and
(x) Indebtedness issued in exchange for, or the proceeds of
which are contemporaneously used to extend, refinance, renew, replace, or
refund (collectively, "Refinance") Indebtedness referred to in clause (v)
above or this clause (x) or Indebtedness incurred pursuant to the Interest
Coverage Ratio test set forth in Section 4.9(a) hereof ("Refinancing
Indebtedness"); provided, that (A) the principal amount of such
Refinancing Indebtedness does not exceed the principal amount of
Indebtedness so Refinanced (plus the premiums required to be paid, and the
out-of-pocket expenses (other than those payable to an Affiliate of the
Company) reasonably incurred, in connection therewith), (B) the
Refinancing Indebtedness has a final scheduled maturity that exceeds the
final stated maturity, and a Weighted Average Life to Maturity that is
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced, and (C) the Refinancing Indebtedness ranks,
in right of payment, no more favorable to the Notes as the Indebtedness
being Refinanced.
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Section 4.10. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value (as determined in good faith by the Board of Directors
as evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets subject to such Asset Sale,
(ii) at least 75% of the consideration for such Asset Sale is in the form of
cash, Cash Equivalents or liabilities of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes or any Guarantee of the Notes) that are assumed by the transferee of such
assets (provided, that following such Asset Sale there is no further recourse to
the Company and its Restricted Subsidiaries with respect to such liabilities),
and (iii) within 12 months of such Asset Sale, the Net Proceeds thereof are (a)
invested in assets related to the business of the Company or its Restricted
Subsidiaries, or (b) used to repay, purchase or otherwise acquire Indebtedness
under the New Credit Facility or (c) to the extent not used as provided in
clause (a) or (b), applied to make an offer to purchase Notes as described below
(an "Excess Proceeds Offer"); provided, that if the amount of Net Proceeds from
any Asset Sale not invested or used pursuant to clause (a) or (b) above is less
than $5.0 million, the Company shall not be required to make an offer pursuant
to clause (c) until the aggregate amount of Excess Proceeds from all Asset Sales
exceeds $5.0 million. Pending the final application of any such Net Proceeds,
the Company or any Restricted Subsidiary may temporarily reduce Indebtedness
under the New Credit Facility or temporarily invest such Net Proceeds in Cash
Equivalents.
For the purposes of this covenant, the following are deemed to be
cash: (y) securities received by the Company or any Restricted Subsidiary from
the transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash and (z) assets related to the business of the Company or
its Restricted Subsidiaries received in an exchange of assets transaction;
provided that (i) in the event such exchange of assets transaction or series of
related exchange of assets transactions (each an "Exchange Transaction")
involves an aggregate value in excess of $2.5 million, the terms of such
Exchange Transaction shall have been approved by a majority of the disinterested
members of the Board of Directors, (ii) in the event such Exchange Transaction
involves an aggregate value in excess of $5.0 million, the Company shall have
received a written opinion from a nationally recognized independent investment
banking firm that the Company has received consideration equal to the fair
market value of the assets disposed of and (iii) any assets to be received shall
be comparable to those being exchanged as determined in good faith by the Board
of Directors.
The amount of Net Proceeds not invested, used or applied as set
forth in the preceding clauses (a) and (b) constitutes "Excess Proceeds." If the
Company elects, or becomes obligated to make an Excess Proceeds Offer, the
Company shall offer to purchase Notes having an aggregate principal amount equal
to the Excess Proceeds (the "Purchase Amount"), at a purchase price equal to
100% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the purchase date. The Company must commence such Excess
Proceeds Offer not later than 30 days after the expiration of the 12-month
period following the Asset Sale that produced Excess Proceeds. If the aggregate
purchase price for
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the Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess
Proceeds, the Company and its Restricted Subsidiaries may use the portion of the
Excess Proceeds remaining after payment of such purchase price for general
corporate purposes, including Preferred Stock Purchases.
Each Excess Proceeds Offer shall remain open for a period of 20
Business Days and no longer, unless a longer period is required by law (the
"Excess Proceeds Offer Period"). Promptly after the termination of the Excess
Proceeds Offer Period (the "Excess Proceeds Payment Date"), the Company shall
purchase and mail or deliver payment for the Purchase Amount for the Notes or
portions thereof tendered, pro rata or by such other method as may be required
by law, or, if less than the Purchase Amount has been tendered, all Notes
tendered pursuant to the Excess Proceeds Offer. The principal amount of Notes to
be purchased pursuant to an Excess Proceeds Offer may be reduced by the
principal amount of Notes acquired by the Company through purchase or redemption
(other than pursuant to a Change of Control Offer) subsequent to the date of the
Asset Sale and surrendered to the Trustee for cancellation.
Each Excess Proceeds Offer shall be conducted in compliance with all
applicable laws, including without limitation, Regulation 14E of the Exchange
Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.10, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.10 by virtue
thereof.
The Company shall, no later than 30 days following the expiration of
the 12-month period following the Asset Sale that produced Excess Proceeds,
commence the Excess Proceeds Offer, if an Excess Proceeds Offer is required by
the terms of this Indenture, by mailing to the Trustee and each Holder, at such
Holder's last registered address, a notice, which shall govern the terms of the
Excess Proceeds Offer, and shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.10, the principal amount of Notes which shall be accepted
for payment and that all Notes validly tendered shall be accepted for
payment on a pro rata basis;
(2) the purchase price and the date of purchase;
(3) that any Notes not tendered or accepted for payment
pursuant to the Excess Proceeds Offer shall continue to accrue interest;
(4) that, unless the Company defaults in the payment of the
purchase price with respect to any Notes tendered, Notes accepted for
payment pursuant to the Excess Proceeds Offer shall cease to accrue
interest after the Excess Proceeds Payment Date;
(5) that Holders electing to have Notes purchased pursuant to
an Excess Proceeds Offer shall be required to surrender their Notes, with
the form
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entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company prior to the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date;
(6) that Holders shall be entitled to withdraw their election
if the Company receives, not later than the close of business on the
second Business Day preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased;
(7) that if the aggregate purchase price of the Notes tendered
pursuant to the Excess Proceeds Offer is less than the Excess Proceeds,
the Company may use the portion of the Excess Proceeds remaining after
payment of such purchase price for general corporate purposes, including
Preferred Stock Purchases.
(8) that Holders whose Notes are purchased only in part shall
be issued Notes representing the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued
shall be in principal amount of $1,000 or whole multiples thereof; and
(9) the instructions that Holders must follow in order to
tender their Notes.
On or before the Excess Proceeds Payment Date, the Company shall (i)
accept for payment on a pro rata basis the Notes or portions thereof tendered
pursuant to the Excess Proceeds Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted and (iii) deliver to the Trustee the Notes so accepted, together with
an Officers' Certificate stating that the Notes or portions thereof tendered to
the Company are accepted for payment. The Paying Agent shall promptly mail to
each Holder of Notes so accepted payment in an amount equal to the purchase
price of such Notes, and the Trustee shall promptly authenticate and mail to
such Holders new Notes equal in principal amount to any unpurchased portion of
the Note surrendered.
The Company shall make a public announcement of the results of the
Excess Proceeds Offer as soon as practicable after the Excess Proceeds Payment
Date. For the purposes of this Section 4.10, the Trustee shall act as the Paying
Agent.
Section 4.11. Limitation on Transactions With Affiliates.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into any contract, agreement, understanding, loan, advance
or guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction"), except for (i) Affiliate Transactions, which
together with all Affiliate Transactions that are part of a common plan, have an
aggregate value of not
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more than $1.0 million; provided, that such transactions are conducted in good
faith and on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction at such time on an arm's- length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary, (ii) Affiliate
Transactions, which together with all Affiliate Transactions that are part of a
common plan, have an aggregate value of not more than $2.5 million; provided,
that a majority of the disinterested members of the Board of Directors of the
Company determine that such transactions are conducted in good faith and on
terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
the Company or such Restricted Subsidiary, (iii) Affiliate Transactions for
which the Company delivers to the Trustee an opinion as to the fairness to the
Company or such Restricted Subsidiary from a financial point of view, issued by
an investment banking firm of national standing and (iv) Permitted Affiliate
Transactions and other Restricted Payments permitted by the provisions described
in Section 4.7 hereof.
Section 4.12. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien on any asset (including, without limitation, all real, tangible or
intangible property) of the Company or any Restricted Subsidiary, whether now
owned or hereafter acquired, or on any income or profits therefrom, or assign or
convey any right to receive income therefrom, except (i) Liens in favor of the
Collateral Agent securing the Notes and Indebtedness incurred under the New
Credit Facility, (ii) Purchase Money Liens, and (iii) Permitted Liens.
Section 4.13. Corporate Existence.
Subject to Article 5 of this Indenture, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its respective Subsidiaries, in accordance with their
respective organizational documents (as the same may be amended from time to
time) and (ii) its (and its Subsidiaries) rights (charter and statutory),
licenses and franchises; provided, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors on behalf of the
Company shall determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders.
Section 4.14. Repurchase Upon a Change of Control.
Upon the occurrence of a Change of Control, the Company shall notify
the Trustee in writing thereof and shall make an offer to purchase all of the
Notes then outstanding as described below (the "Change of Control Offer") at a
purchase price equal to
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101% of the aggregate principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase (the "Change of Control Payment").
The Change of Control Offer shall be made in compliance with all
applicable laws, including without limitation, Regulation 14E of the Exchange
Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.14, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.14 by virtue
thereof.
Within 30 days following any Change of Control, the Company shall
commence the Change of Control Offer by mailing to the Trustee and each Holder a
notice, which shall govern the terms of the Change of Control Offer, and shall
state that:
(i) the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment,
(ii) the purchase price and the purchase date, which shall be
a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"),
(iii) that any Note not tendered for payment pursuant to the
Change of Control Offer shall continue to accrue interest,
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on the Change of
Control Payment Date,
(v) that any Holder electing to have Notes purchased pursuant
to a Change of Control Offer shall be required to surrender such Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date,
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes such Holder
delivered for purchase, and a statement that such Holder is withdrawing
his election to have such Notes purchased,
(vii) that a Holder whose Notes are being purchased only in
part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple
thereof,
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(viii) the instructions that Holders must follow in order to
tender their Notes, and
(ix) the circumstances and relevant facts regarding such
Change of Control.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment the Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating that the Notes or portions thereof tendered to the Company
are accepted for payment. The Paying Agent shall promptly mail to each Holder of
Notes so accepted payment in an amount equal to the purchase price for such
Notes, and the Trustee shall authenticate and mail to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any, provided, that each such new Note will be in principal amount of $1,000
or an integral multiple thereof.
The Company shall make a public announcement of the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date. For the purposes of this Section 4.14, the Trustee shall act as
the Paying Agent.
Section 4.15. Maintenance of Properties.
The Company shall, and shall cause each of its Subsidiaries to,
maintain their properties and assets in normal working order and condition as on
the date of this Indenture (reasonable wear and tear excepted) and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct of
the business of the Company and its Subsidiaries taken as a whole; provided,
that nothing herein shall prevent the Company or any of its Subsidiaries from
discontinuing any maintenance of any such properties if such discontinuance is
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole.
Section 4.16. Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to,
maintain liability, casualty and other insurance (including self-insurance
consistent with prior practice) with responsible insurance companies in such
amounts and against such risks as is in accordance with customary industry
practice in the general areas in which the Company and its Subsidiaries operate.
Section 4.17. Restrictions on Sale and Issuance of Subsidiary Stock.
The Company shall not sell, and shall not permit any of its
Restricted Subsidiaries to issue or sell, any shares of Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares) to any Person
other than the Company or a Wholly Owned
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Subsidiary; provided however, that this provision shall not prohibit the sale of
all of the Capital Stock of any Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries if the Net Proceeds from such Asset Sale are used in
accordance with the provisions of Section 4.10 of this Indenture.
Section 4.18. Line of Business.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any type of business other than the type of business
conducted or proposed to be conducted by the Company and the Restricted
Subsidiaries on the Closing Date and businesses reasonably related thereto.
ARTICLE 5
SUCCESSORS
Section 5.1. When the Company May Merge, etc.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or transfer all or substantially
all of its properties or assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries) in one or more related transactions to,
any other Person unless:
(i) the Company is the surviving Person or the Person formed
by or surviving any such consolidation or merger (if other than the
Company) or to which such transfer has been made is a corporation
organized and existing under the laws of the United States, any state
thereof or the District of Columbia,
(ii) the Person formed by or surviving any such consolidation
or merger (if other than the Company) or the Person to which such transfer
has been made assumes all the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee,
under the Notes, this Indenture, the Security Documents and the
Registration Rights Agreement,
(iii) immediately before and after such transaction, no
Default or Event of Default exists, and
(iv) the Company, or any Person formed by or surviving any
such consolidation or merger, or to which such transfer has been made, (A)
has a Consolidated Net Worth (immediately after the transaction but prior
to any purchase accounting adjustments resulting from the transaction) not
less than 100% of the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) shall be permitted, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, to incur at least $1.00 of additional Indebtedness pursuant to
Section 4.9(a) hereof.
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The Company shall deliver to the Trustee prior to the consummation
of any proposed transaction an Officers' Certificate to the foregoing effect, an
Opinion of Counsel, stating all conditions precedent to the proposed transaction
provided for in this Indenture have been complied with and a written statement
from a firm of independent public accountants of established national reputation
reasonably satisfactory to the Trustee stating that the proposed transaction
complies with clause (iv).
For purposes of this Section 5.1, the transfer of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Company, which properties and assets, if held by the Company
instead of such Restricted Subsidiaries, would constitute all or substantially
all of the properties and assets of the Company on a consolidated basis, shall
be deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
Section 5.2. Successor Substituted.
In the event of any transaction (other than a lease) contemplated by
Section 5.1 hereof in which the Company is not the surviving Person, the
successor formed by such consolidation or into or with which the Company is
merged or to which such transfer is made, or formed by such reorganization, as
the case may be, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company, and the Company shall be discharged from
its Obligations under this Indenture, the Notes, the Security Documents and the
Registration Rights Agreement with the same effect as if such successor Person
had been named as the Company herein or therein.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal (or
premium, if any) on any Note when the same becomes due and payable at
maturity, upon redemption, by acceleration, in connection with an Excess
Proceeds Offer, a Change of Control Offer or otherwise;
(3) the Company defaults in the performance of or breaches the
provisions of Sections 4.7 or 4.9 hereof and the Default continues for 30
days; or the Company defaults in the performance of or breaches the
provisions of Sections 4.10, 4.14 or Article 5 hereof;
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(4) the Company or any Guarantor fails to comply with any of
its other agreements or covenants in, or provisions of, the Notes or this
Indenture and the Default continues for 30 days after written notice
thereof has been given to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes, such notice to state that it is a "Notice
of Default;"
(5) a default occurs under (after giving effect to any
waivers, amendments, applicable grace periods or any extension of any
maturity date) any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Company or any Restricted Subsidiary (or the
payment of which is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the date of this Indenture, if (a) either (i) such default
results from the failure to pay principal on such Indebtedness or (ii) as
a result of such default the maturity of such Indebtedness has been
accelerated, and (b) the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness with respect to
which such a payment default (after the expiration of any applicable grace
period or any extension of the maturity date) has occurred, or the
maturity of which has been so accelerated, exceeds $2.5 million in the
aggregate; provided that if such default results from a failure to pay
principal on the New Credit Facility, such default shall not constitute an
Event of Default hereunder until 15 days after such default;
(6) a final non-appealable judgment or judgments for the
payment of money (other than judgments as to which a reputable insurance
company has accepted full liability) is or are entered by a court or
courts of competent jurisdiction against the Company or any Restricted
Subsidiary and such judgment or judgments remain undischarged, unbonded or
unstayed for a period of 60 days after entry, provided that the aggregate
of all such judgments exceeds $2.5 million;
(7) there is a breach by the Company or any Guarantor of any
provision of the Security Documents and the default continues for 30 days
after written notice thereof has been given to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes, such notice to
state that it is a "Notice of Default";
(8) written assertion is made by the Company or any of the
Guarantors, of the unenforceability of their obligations under the
Indenture, the Security Documents, the Notes, or the Guarantees to which
they are a party;
(9) the Company or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
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(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors,
(e) admits in writing its inability to pay debts as
the same become due; or
(10) a court of competent jurisdiction enters an order or
decree, and the order or decree remains unstayed and in effect for 60 days
under any Bankruptcy Law that:
(a) is for relief against the Company or any Material
Subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any
Material Subsidiary or for all or substantially
all of their property,
(c) orders the liquidation of the Company, or any
Material Subsidiary. an
The Company shall, upon becoming aware that a Default or Event of
Default has occurred, deliver to the Trustee a statement specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto.
Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 6.1) occurs and is continuing, the Trustee by
written notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes by written notice to the Company and the
Trustee, may declare the unpaid principal of and any accrued interest on all the
Notes to be due and payable. Upon such declaration the principal and interest
shall be due and payable immediately. If an Event of Default specified in clause
(9) or (10) of Section 6.1 with respect to the Company occurs, all outstanding
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. At any time
after a declaration of acceleration, but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Notes outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue
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interest (including any interest accrued subsequent to an Event of Default
specified in clauses (9) and (10) of Section 6.1) on all Notes, (iii) the
principal of and premium, if any, on any Notes that have become due otherwise
than by such declaration or occurrence of acceleration and interest thereon at
the rate borne by the Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate borne by the
Notes; (b) all Events of Default, other than the non-payment of principal of and
interest on the Notes that have become due solely by such declaration or
occurrence of acceleration, have been cured or waived; and (c) the rescission
would not conflict with any judgment, order or decree of any court of competent
jurisdiction.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy (under this Indenture or otherwise) to collect the
payment of principal or interest on the Notes to enforce the performance of any
provision of the Notes, this Indenture or the Security Documents.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Holders of a majority of the aggregate principal amount of the then
outstanding Notes by written notice to the Company and the Trustee may on behalf
of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under this Indenture except a continuing Default or
Event of Default in the payment of the principal of, or interest on, any Note
(other than a Default in the payment of principal of, or interest on, the Notes
that have become due as a result of acceleration) or a Default or an Event of
Default with respect to any covenant or provision which cannot be modified or
amended without the consent of the Holder of each outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.5. Control by Majority.
The Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders, or that may involve the
Trustee in personal liability.
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Section 6.6. Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
Section 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal and interest on the Note,
on or after the respective due dates expressed in the Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal (and premium, if any) and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
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Section 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor under the Notes), their creditors or their property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders of the Notes
may be entitled to receive in such proceeding whether in liquidation or under
any plan of reorganization or arrangement or otherwise. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in accordance with the requirements of the Intercreditor
Agreement and to the extent received in accordance therewith, in the following
order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.7, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and
interest, respectively;
Third: without duplication, to Holders for any other Obligations
owing to the Holders under the Notes or this Indenture; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any payment
to Holders.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.6, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(2) Except during the continuance of an Event of Default:
(a) The duties of the Trustee shall be determined solely
by the express provisions of this Indenture, and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
the Security Documents, and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) The Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture and the Security Documents. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and the
Security Documents.
(3) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of
paragraph (2) of this Section.
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(b) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee may refuse
to perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(7) The Trustee is hereby authorized to act as Collateral
Agent and to enter into the Intercreditor Agreement.
Section 7.2. Rights of Trustee.
(1) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
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(5) Unless otherwise specifically provided in this Indenture
or the Security Documents, any demand, request, direction or notice from the
Company shall be sufficient if signed by an Officer of the Company, on behalf of
the Company.
(6) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of the Company's covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 6.1(1), 6.1(2) and 4.1, or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
Section 7.5. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if the
Trustee has knowledge thereof (within the meaning of Section 7.2(6)), the
Trustee shall mail to the Holders a notice of the Default or Event of Default
within 90 days after it occurs.
Section 7.6. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to the Holders a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to the Holders shall be filed
with the Commission and
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each stock exchange on which the Notes are listed. The Company shall promptly
notify the Trustee when the Notes are listed on any stock exchange.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
parties shall agree in writing from time to time (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel, except such disbursements,
advances and expenses as may be attributable to its negligence.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it without negligence on its part arising
out of or in connection with the acceptance or administration of its duties
under this Indenture, except as set forth below. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. In the event that a conflict of interest or
conflicting defenses would arise in connection with the representation of the
Company and the Trustee by the same counsel, the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent.
The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence.
To secure the Company's payment obligations in this Section, the
Company hereby grants to the Trustee a security interest on all money or
property held or collected by the Trustee, except that held in trust to pay
principal of (and premium, if any) and interest on particular Notes. Such Lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(9) or (10) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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Section 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided that all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 hereof shall continue
for the benefit of the retiring Trustee, and the Company
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shall pay to any such replaced or removed Trustee all amounts owed under Section
7.7 upon such replacement or removal.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that, if other than
U.S. Trust Company of California, N.A., shall (a) be a corporation organized and
doing business under the laws of the United States of America or of any state
thereof or of the District of Columbia authorized under such laws to exercise
corporate trustee power, (b) be subject to supervision or examination by Federal
or state or the District of Columbia authority, and (c) have a combined capital
and surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. ss. 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is
subject to TIA ss. 310(b); provided, however, that there shall be excluded from
the operations of TIA ss. 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The
provisions of TIA ss. 311 shall apply to the Company, as obligor on the Notes.
ARTICLE 8
SATISFACTION AND DISCHARGE
Section 8.1. Discharge; Option to Effect Legal Defeasance or Covenant
Defeasance.
This Indenture shall cease to be of further effect (except that the
Company's and the Guarantors' obligations under Section 7.7 and the Trustee's
and the Paying Agent's obligations under Sections 8.6 and 8.7 shall survive)
when all outstanding Notes theretofore authenticated and issued have been
delivered (other than destroyed, lost or stolen Notes that have been replaced or
paid) to the Trustee for cancellation and the Company or the Guarantors have
paid all sums payable hereunder. In addition, the Company may elect at any
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time to have Section 8.2 or Section 8.3, at the Company's option, of this
Indenture applied to all outstanding Notes upon compliance with the conditions
set forth below in this Article 8.
Section 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented and this Indenture shall cease to be of further effect
as to all outstanding Notes and Guarantees, except as to be deemed to be
"outstanding" only for the purposes of Section 8.5 hereof and the other Sections
of this Indenture referred to in (a) and (b) below, and the Company and the
Guarantors shall be deemed to have satisfied all other of their respective
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest (and Liquidated Damages, if any) on such Notes when such
payments are due from the trust described in Section 8.5, (b) the Company's
obligations with respect to such Notes under Sections 2.4, 2.6, 2.7, 2.10, 4.2,
8.5, 8.6 and 8.7 hereof and (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's and the Guarantors'
obligations in connection therewith. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof with respect to the Notes.
Section 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18 and Article 5
and Article 10 hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, neither the Company nor any Guarantor need comply with and shall have any
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.1 hereof of
the option applicable to this Section 8.3, Sections 6.1(3) through 6.1(10)
hereof shall not constitute Events of Default with respect to the Notes.
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Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article 8 applicable to it), in trust, for the benefit of the Holders of the
Notes, cash, U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest (and Liquidated Damages, if any) on such outstanding Notes on the
stated date for payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such Notes, and the
holders of Notes must have a valid, perfected, exclusive security interest in
such trust, (ii) in the case of Legal Defeasance before the date that is one
year prior to the final stated maturity of the Notes, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of this Indenture, there has been a change in the applicable Federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of such outstanding Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such Legal Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance before the date that is one year prior to the final stated maturity
of the Notes, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the Holders of such outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Covenant Defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument to which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of such Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
other creditors of the Company; and (vii) the Company shall have delivered to
the Trustee an Officers' Certificate and an opinion of counsel, each stating
that the conditions precedent provided for, in the case of the Officers'
Certificate, (i) through (vi) and, in the case of the opinion of counsel,
clauses (i), (with respect to the validity and perfection of the security
interest) (ii), (iii) and (v) of this paragraph, have been complied with.
Section 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust;
Other
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Miscellaneous Provisions.
Subject to Section 8.6 hereof, all cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Paying Agent") pursuant to Section 8.4 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Paying Agent, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any other Paying Agent as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest (and Liquidated Damages, if any), but such money
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Notes.
Section 8.6. Repayment to the Company.
(a) Anything in this Article 8 to the contrary notwithstanding, the
Trustee or the Paying Agent shall deliver or pay to the Company from time to
time upon the request of the Company any cash or U.S. Government Obligations
held by it as provided in Section 8.4 hereof which in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.3(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
(b) Any cash and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, or
interest (and Liquidated Damages, if any) on any Security and remaining
unclaimed for two years after such principal, and premium, if any, or interest
has become due and payable shall be paid to the Company on its request; and the
Holder of such Security shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case
may be, of this
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Indenture by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, or
if any event occurs at any time in the period ending on the 91st day after the
date of deposit pursuant to Section 8.4 hereof which event would constitute an
Event of Default under Section 6.1 (iv) or (v) had Legal Defeasance or Covenant
Defeasance, as the case may be, not occurred, then the Company's and the
Guarantors' obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.4 hereof
until such time as the Trustee or Paying Agent is permitted to apply such money
in accordance with Sections 8.2 and 8.3 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest (and Liquidated Damages, if any) on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the cash or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.1. Without Consent of Holders.
The Company, the Guarantors and the Trustee may amend or supplement
this Indenture and the Notes without the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to comply with Article 5 and Section 10.12 hereof;
(4) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not materially
adversely affect the legal rights hereunder or thereunder of any Holder;
(5) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(6) to release any Guarantee of the Notes permitted to be
released under Section 10.7 hereof.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee of the
documents described in Section 9.6 hereof required or requested by the Trustee,
the Trustee shall join with the Company in the execution of any supplemental
indenture or amendment authorized or permitted by the terms of this Indenture
and shall make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental
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indenture or amendment that affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 9.2. With Consent of Holders.
Subject to Sections 6.4 and 6.7 hereof, the Company, the Guarantors
and the Trustee, as applicable, may amend, or waive any provision of, this
Indenture or the Notes, with the written consent of the Holders of at least a
majority of the principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such
supplemental indenture or amendment, and upon filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6
hereof, the Trustee shall join with the Company in the execution of such
supplemental indenture or amendment unless such supplemental indenture or
amendment affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture or
amendment, but it shall be sufficient if such consent approves the substance
thereof.
After a supplemental indenture or amendment under this Section
becomes effective, the Company shall mail to the Holders of each Note affected
thereby a notice briefly describing the amendment or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture, amendment
or waiver.
Notwithstanding any other provision hereof, without the consent of
each Holder affected, an amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(3) reduce the principal of, or the premium on, or change the
fixed maturity of any Note or alter Article 3 hereof or numbered
paragraphs 5 or 6 of Exhibit A to this Indenture or the price at which the
Company shall offer to purchase such Notes pursuant to Sections 4.10 or
4.14 hereof;
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(4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on, or redemption payment
with respect to, any Note (other than a Default in the payment of an
amount due as a result of an acceleration if the Holders rescind such
acceleration pursuant to Section 6.2);
(5) make any Note payable in money other than that stated in
the Notes;
(6) make any change in Section 6.4 or 6.7 hereof or in this
Section 9.2; or
(7) make any change adversely affecting the contractual
ranking of the Obligations.
A meeting of Holders may be called at any time and from time to
time by the Company or the Trustee for the purpose of taking or consenting to
any action authorized or contemplated to be taken hereunder by the Holders,
notice of such meeting to be provided in the manner set forth herein.
Notwithstanding any other provision of this Indenture, the Trustee may make such
reasonable regulations as it may deem advisable for any action by or any meeting
of Holders.
Section 9.3. Compliance with Trust Indenture Act.
If, at the time of an amendment to this Indenture or the Notes, this
Indenture shall be qualified under the TIA, every amendment to this Indenture or
the Notes shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders furnished to the Trustee prior to such solicitation pursuant to
Section 2.5, or (ii) such other date as the Company shall designate.
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Section 9.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. The Company
in exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment or waiver.
Section 9.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.1, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it shall be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors of the Company approves it.
ARTICLE 10
COLLATERAL AND SECURITY AND GUARANTY
Section 10.1. Collateral Documents.
The due and punctual payment of the principal and premium, if any,
of, and interest on, the Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise, interest on the overdue principal of and interest (to
the extent permitted by law), if any, on the Notes and performance of all other
Obligations, shall be secured as provided in the Security Documents.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Security
Documents, to assure and confirm to the Collateral Agent the security interest
in the Collateral contemplated hereby and by the Security Documents, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein and therein expressed. The Company shall, and shall
cause each of its Restricted Subsidiaries to, take, upon request of the Trustee
or the Collateral Agent, any and all actions required to cause the Security
Documents to create and maintain, as security for the Obligations, valid and
enforceable, perfected (except as expressly provided herein or
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therein), Liens in and on all the Collateral, in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons, and subject to no
other Liens, other than as provided herein and therein.
Each Holder of a Note, by its acceptance thereof, consents and
agrees to the terms of the Security Documents and the Intercreditor Agreement
(including, without limitation, the provisions providing for foreclosure and
release of Collateral and indemnification of the Collateral Agent) as the same
may be in effect or may be amended from time to time in accordance with their
terms and authorizes and directs (i) the Collateral Agent, with respect to each
of the Security Documents to which it is a party and the Intercreditor
Agreement, and (ii) the Trustee, with respect to the Intercreditor Agreement, to
perform their respective obligations and exercise their respective rights
thereunder in accordance therewith; provided, however, that upon qualification
of this Indenture with the TIA, if any provision of the Intercreditor Agreement
limits, qualifies or conflicts with the duties imposed by the provisions of the
TIA, the TIA shall control.
Section 10.2. Opinions.
To the extent required by the TIA, the Company shall furnish to the
Trustee within three months after each anniversary of the Closing Date, an
Opinion of Counsel, dated as of such date, stating either that (i) in the
opinion of such counsel, all action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Liens of the
Security Documents and reciting the details of such action or (ii) in the
opinion of such Counsel, no such action is necessary to maintain such Liens,
which Opinion of Counsel also shall state what actions it then believes are
necessary to maintain the effectiveness of such liens during the next two years.
Section 10.3. Release and Substitution of Collateral.
(a) Subject to subsections (b) and (c) of this Section 10.3, (i) in
the event that any Collateral is sold, transferred or otherwise disposed of in
an Asset Sale or any other transaction permitted by this Indenture, such
Collateral shall, concurrently with the disposition of such Collateral or the
issuance of such Indebtedness, as the case may be, automatically be released
from the lien of the relevant Security Documents and (ii) the Company and its
Subsidiaries may from time to time substitute property or securities released
from the lien of the Security Documents in connection with the sale, transfer or
other disposition thereof for other property or securities to be subjected to
the lien of the Security Documents, in each case in accordance with the
provisions of the Security Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Securities shall have been accelerated
(whether by declaration or otherwise) and such acceleration shall not have been
rescinded or annulled, no release of Collateral pursuant to the provisions of
this Indenture or of the Security Documents shall be effective as against the
Holders of the Securities without the consent of the Collateral Agent. The
Trustee shall promptly notify the Collateral Agent of any rescission or
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annulment, pursuant to Section 6.4 hereof, of an acceleration of the Securities.
(c) The release of any Collateral from the terms of the Security
Documents will not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to the Security Documents. At all time after qualification of
this Indenture under the TIA, to the extent applicable, the Company shall cause
TIA Section 314(d) relating to the release of property or securities from the
lien of the Security Documents and relating to the substitution therefor of any
property or securities to be subjected to the lien of the Collateral Documents
to be complied with. Any certificate or opinion required by TIA Section 314(d)
may be made by an Officer of the Company, except in cases where TIA Section
314(d) requires that such certificate or opinion be made by an independent
person, which person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
Section 10.4. Certificates of the Company.
The Company shall furnish to the Trustee prior to each proposed
release of Collateral other than by reason of transactions referred to in
Section 10.3(b), all documents required by TIA ss. 314(d). The Trustee may, to
the extent permitted by Sections 7.1 and 7.2 hereof, accept as conclusive
evidence of compliance with the foregoing provisions the appropriate statements
contained in such instruments. Any certificate or opinion required by TIA ss.
314(d) may be made by an Officer of the Company except in cases where TIA ss.
314(d) requires that such certificate or opinion be made by an independent
engineer, appraiser or other expert within the meaning of TIA ss. 314(d).
Section 10.5. Authorization of Actions to be Taken by the Trustee Under the
Security Documents.
Subject to the provisions of the Security Documents and the
Intercreditor Agreement, the Trustee may, in its sole discretion and without the
consent of the Holders, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (a) enforce any of the terms of the
Security Documents and (b) collect and receive any and all amounts payable in
respect of the Obligations of the Company and the Guarantors hereunder. The
Trustee shall have the power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Security Documents or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interest and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders or the Trustee).
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Section 10.6. Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of
the Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Security Documents.
Section 10.7. Release Upon Termination of the Company's Obligations.
(a) If (i) the Company delivers an Officer's Certificate certifying
that all of its obligations under this Indenture have been indefeasibly
satisfied and discharged by complying with the provisions of Article Eight
hereof or (ii) all outstanding Securities issued under this Indenture shall be
surrendered to the Trustee for cancellation, the Trustee shall deliver to the
Collateral Agent a notice stating that the Trustee, for itself and on behalf of
the Holders, disclaims and has given up any and all rights it has in or to the
Collateral, and any rights it has under the Security Documents, and, upon and
after the receipt by the Collateral Agent of such notice, the Collateral Agent
shall no longer be deemed to hold the Lien in the Collateral on behalf of the
Trustee for the benefit of itself and the Holders.
(b) Any release of Collateral made in compliance with this Section
10.7 shall not be deemed to impair the Lien under the Security Documents or the
Collateral thereunder in contravention of the provisions of this Indenture or
the Security Documents.
Section 10.8. Guaranty.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, subject to Section 10.10 hereof, each Guarantor,
jointly and severally, hereby unconditionally guarantees (such guarantees,
together with further guarantees granted from time to time pursuant to Section
10.13, being the "Guaranty") to each Holder, the Trustee and the Collateral
Agent, irrespective of the validity or enforceability of this Indenture, the
Notes, the Security Documents or the Obligations hereunder or thereunder: (i)
the due and punctual payment of the principal and premium, if any, of, and
interest on, the Notes (including, without limitation, interest after the filing
of a petition initiating any proceedings referred to in clause (9) or (10) of
Section 6.1 hereof), whether at maturity or on an interest payment date, by
acceleration, call for redemption or otherwise; (ii) the due and punctual
payment of interest on the overdue principal and premium, if any, of, and
interest on, the Notes, if lawful; (iii) the due and punctual payment and
performance of all other Obligations, all in accordance with the terms set forth
herein and in the Notes and the Security Documents; and (iv) in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations, the due and punctual payment or performance thereof in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
Failing payment when due by the Company of any amount so guaranteed
for whatever reason, the Guarantors shall be jointly and severally obligated to
pay the same immediately.
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Each Guarantor hereby agrees that (i) its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes, this Indenture, the Security Documents or the
Obligations hereunder or thereunder, the absence of any action to enforce the
same, any waiver or consent by any Holder with respect to any provisions hereof
or thereof, any releases of Collateral, any amendment of the Indenture, the
Notes or Security Documents, any delays in obtaining or realizing upon or
failures to obtain or realize upon Collateral, the recovery of any judgment
against the Company or any of its Subsidiaries, any action to enforce the same,
or any other circumstance that might otherwise constitute a legal or equitable
discharge or defense of a guarantor and (ii) this Guaranty will not be
discharged except by complete performance of the Obligations.
Each Guarantor hereby agrees that it shall not be entitled to and
irrevocably waives (i) diligence, presentment, demand of payment, filing of
claim with a court in the event of insolvency or bankruptcy of the Company, any
Guarantor, any other Subsidiary of the Company or any other obligor under the
Notes, any right to require a proceeding first against the Company, any
Guarantor, any other Subsidiary of the Company or any other obligor under this
Indenture, the Notes or the Security Documents, protest, notice and all demands
whatsoever, (ii) any right of subrogation, reimbursement, exoneration,
contribution or indemnification in respect of any Obligations guaranteed hereby
and (iii) any claim or other rights that it may now or hereafter acquire against
the Company or any of its Subsidiaries that arise from the existence or
performance of its Obligations under this Guaranty, including, without
limitation, any right to participate in any claim or remedy of a Holder against
the Company or any of its Subsidiaries or any Collateral that a Holder now has
or hereafter acquires, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, by any payment made hereunder
or otherwise, and including, without limitation, the right to take or receive
from the Company or any of its Subsidiaries, directly or indirectly, in cash or
other property, by setoff or in any other manner, payment or security on account
of such claim or other rights.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company, any Guarantor, any other Subsidiary of the Company or
any other obligor under this Indenture, the Notes or the Security Documents,
trustee, liquidator, or other similar official, any amount paid by the Company,
any Guarantor, any other Subsidiary of the Company or any other obligor under
this Indenture, the Notes or the Security Documents to the Trustee or such
Holder, this Guaranty, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity of
the Obligations guaranteed hereby may be accelerated as provided in Section 6.2
for the purposes of this Guaranty, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Company of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
those Obligations as provided in Section 6.2, those Obligations (whether or not
due and payable) will forthwith become due and payable by each of the Guarantors
for the purpose of this Guaranty.
<PAGE> 67
66
Section 10.9. Execution and Delivery of Guaranty.
To evidence the Guaranty set forth in Section 10.8 the Company and
each Guarantor hereby agrees that (a) a notation of such Guaranty substantially
as set forth on Exhibit C hereto shall be endorsed on each Note authenticated
and delivered by the Trustee. Such endorsement shall be executed on behalf of
each Guarantor by its Chairman of the Board, President, Chief Financial Officer,
Chief Operating Officer, Treasurer, Secretary or any Vice President and (b) a
counterpart signature page to this Indenture shall be executed on behalf of each
Guarantor by its Chairman of the Board, President or one of its Vice Presidents
and attested to by another officer acknowledging such Guarantor's agreement to
be bound by the provisions hereof and thereof.
Each Guarantor hereby agrees that its Guaranty set forth in Section
10.8 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Guaranty.
If an officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates the Notes on which a Guaranty
is endorsed, the Guaranty shall nevertheless be valid.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guaranty set forth in
this Indenture on behalf of the Guarantor.
Section 10.10. Limitation on Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guaranty not constitute a fraudulent transfer or
conveyance for purposes of any Federal or state law. To effectuate the foregoing
intention, the Holders and the Guarantors hereby irrevocably agree that the
obligations of each Guarantor under its Guaranty shall be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guaranty, result in the Obligations of such Guarantor under
the Guaranty not constituting a fraudulent conveyance or fraudulent transfer
under Federal or state law.
Section 10.11. Rights under the Guaranty.
(a) No payment by any Guarantor pursuant to the provisions hereof
shall entitle such Guarantor to any payment out of any Collateral or give rise
to any claim of the Guarantors against the Trustee or any Holder.
(b) Each Guarantor waives notice of the issuance, sale and purchase
of the Notes and notice from the Trustee or the Holders from time to time of any
of the Notes of their acceptance and reliance on this Guaranty.
<PAGE> 68
67
(c) No set-off, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature (other than performance by the
Guarantors of their obligations hereunder) that any Guarantor may have or assert
against the Trustee or any Holder shall be available hereunder to such
Guarantor.
(d) Each Guarantor shall pay all costs, expenses and fees, including
all reasonable attorneys' fees, that may be incurred by the Trustee in enforcing
or attempting to enforce the Guaranty or protecting the rights of the Trustee or
the Holder, if any, in accordance with this Indenture.
Section 10.12. Primary Obligations.
The Obligations of each Guarantor hereunder shall constitute a
guaranty of payment and not of collection. Each Guarantor agrees that it is
directly liable to each Holder hereunder, that the Obligations of each Guarantor
hereunder are independent of the Obligations of the Company or any other
Guarantor, and that a separate action may be brought against each Guarantor,
whether such action is brought against the Company or any other Guarantor or
whether the Company or any other Guarantor is joined in such action. Each
Guarantor agrees that its liability hereunder shall be immediate and shall not
be contingent upon the exercise or enforcement by the Trustee or the Holders of
whatever remedies they may have against the Company or any other Guarantor, or
the enforcement of any lien or realization upon any security Trustee may at any
time possess. Each Guarantor agrees that any release that may be given by the
Trustee or the Holders to the Company or any other Guarantor shall not release
such Guarantor.
Section 10.13. Guarantee by Subsidiary.
(a) The Company shall cause each Restricted Subsidiary that is
formed or acquired after the date hereof or that otherwise becomes a Restricted
Subsidiary after the date hereof, in each case concurrently therewith, to (i)
become a Guarantor hereunder and execute and deliver to the Trustee a Guaranty
in the form of Exhibit C attached hereto and a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's Obligations as
set forth in Section 10.8 of this Indenture; and (ii) execute a Security
Agreement (substantially in the form of the Security Agreement entered into on
the Closing Date) and other Security Documents necessary or reasonably requested
by the Trustee to grant the Trustee a valid, enforceable, perfected Lien on the
Collateral described therein, subject only to Liens permitted under Section
4.12; and (iii) cause such Restricted Subsidiary to deliver to the Trustee an
Opinion of Counsel, in form reasonably satisfactory to the Trustee, that (i)
such Security Agreement, supplemental indenture and Guaranty have been duly
authorized, executed and delivered by such Restricted Subsidiary and (ii) such
Security Agreement, this Indenture and such Guaranty constitute a legal, valid,
binding and enforceable obligation of such Restricted Subsidiary, subject to
customary exceptions for bankruptcy, fraudulent transfer and equitable
principles.
Each Note issued after the date of execution by any Guarantor of a
Guaranty
<PAGE> 69
68
shall be endorsed with a form of Guaranty that has been executed by such
Guarantor. However, the failure of any Note to have endorsed thereon a Guaranty
executed by such Guarantor shall not affect the validity or enforceability of
such Guaranty against such Guarantor.
Section 10.14. Release of Guarantors.
If all of the Capital Stock of any Guarantor is sold to a Person
(other than the Company or any of its Restricted Subsidiaries), then such
Guarantor will be released and discharged from all of its obligations under its
Guarantee of the Notes and this Indenture.
ARTICLE 11
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), the imposed duties shall control.
Section 11.2. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by
first-class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' addresses:
If to the Company:
American Restaurant Group, Inc.
450 Newport Center Drive, 6th Floor
Newport Beach, California 92660
Attention: William J. McCaffrey
Telecopier No.: (714) 721-8941
If to the Trustee:
U.S. Trust Company of California, N.A.
515 South Flower Street, 28th Floor
Los Angeles, California 90071
Attention: Corporate Trust Department
Telecopier No.: (213) 488-1370
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
<PAGE> 70
69
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; upon receipt, if deposited in the mail, postage prepaid;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery. All notices and communications to
the Trustee shall be deemed to have been duly given only if actually received by
the Trustee.
Any notice or communication to a Holder shall be mailed by
first-class mail, certified or registered, return receipt requested, to his
address shown on the register kept by the Registrar. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA ss. 312(c).
Section 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
Section 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall include:
<PAGE> 71
70
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with,
provided that with respect to matters of fact, an Opinion of Counsel may rely
upon an Officers' Certificate or a certificate of a public official.
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.7. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
Section 11.8. No Recourse Against Others.
No director, officer, employee, incorporator, stockholder or
controlling person of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or any Guarantor under the Notes,
this Indenture or the Registration Rights Agreement or for any claim based on,
in respect of, or by reason of such obligations or their creation. Each Holder
by accepting a Note waives and releases all such liability. The waiver and
release shall be part of the consideration for the issuance of the Notes and the
Guarantees. Notwithstanding the foregoing, nothing in this provision shall be
construed as a waiver or release of any claims under the Federal securities
laws.
Section 11.9. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE
<PAGE> 72
71
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE TRUSTEE OR ANY NOTEHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN
ANY OTHER JURISDICTION.
Section 11.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 11.11. Successors.
All agreements of the Company and any Guarantors in this Indenture
and the Notes shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 11.12. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE> 73
72
Section 11.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.14. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE> 74
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Indenture as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.
Attest: By: /s/ William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
/s/ Patrick J. Kelvie
- -----------------------
Name: Patrick J. Kelvie
Title: Secretary
GUARANTORS
ARG ENTERPRISES, INC.
By: /s/ William J. McCaffrey, Jr.
----------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
LOCAL FAVORITE, INC. GRANDY'S. INC.
By: /s/ William J. McCaffrey, Jr. By: /s/ William J. McCaffrey, Jr.
----------------------------- ----------------------------
Name: William J. McCaffrey, Jr. Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer Title: V.P. & Chief Financial Officer
SPOONS RESTURANTS, INC. SPECTRUM FOODS, INC.
By: /s/ William J. McCaffrey, Jr. By: /s/ William J. McCaffrey, Jr.
----------------------------- ----------------------------
Name: William J. McCaffrey, Jr. Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer Title: V.P. & Chief Financial Officer
<PAGE> 75
ARG PROPERTY MANAGEMENT
CORPORATION
By: /s/ William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By: /s/ Gus Kourkoulis
-----------------
Name: Gus Kourkoulis
Title: Authorized Officer
<PAGE> 76
A-2
EXHIBIT A
(Face of Security)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO FOREIGN PERSONS THAT OCCUR IN OFFSHORE TRANSACTIONS AND
WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS OF SUCH TERMS AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
This paragraph should be included only if the Note is issued in
global form.
<PAGE> 77
AMERICAN RESTAURANT GROUP, INC.
11 1/2% SENIOR SECURED NOTE
DUE 2003
No. $___________
CUSIP NO.
American Restaurant Group, Inc., a Delaware corporation (the
"Company"), as obligor, for value received promises to pay to ______________ or
registered assigns, the principal sum of Dollars on February 15, 2003. Interest
Payment Dates: February 15 and August 15. Record Dates: February 1 and August 1
(whether or not a Business Day).
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
AMERICAN RESTAURANT GROUP, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
[ ], as Trustee
By:______________________________
Authorized Signature
<PAGE> 78
(Back of Security)
11 1/2% SENIOR SECURED NOTE
DUE 2003
1. Interest. American Restaurant Group, Inc., a Delaware corporation
(the "Company"), as obligor, promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below.
The Company shall pay, in cash, interest on the principal amount of
this Note, at the rate of 11.5% per annum. The Company shall pay interest
semi-annually on February 15 and August 15 of each year, and on the maturity
date, commencing on August 15, 1998, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date").
Interest shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from February 24,
1998. To the extent lawful, the Company shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. The Holder must surrender this Note to a Paying
Agent to collect principal payments. The Company shall pay interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. The Company, however, may pay interest by check to a
Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee shall act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without notice to any Holder. Subject to certain exceptions, the
Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of February 25, 1998 (the "Indenture") among the Company, the Guarantors
named therein and the Trustee. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "TIA") (15 U.S. Code ss.ss. 77aaa-77bbbb) as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA and thereafter as in effect on the date the Indenture is
so qualified. The Notes are subject to all such terms, and Holders are referred
to the Indenture and such act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Terms not otherwise defined herein shall have the meanings assigned in the
Indenture. The Notes are limited to $158,600,000 in aggregate outstanding
principal amount.
The Obligations under the Indenture, the Notes and the Guarantee
thereof are secured by the Collateral described in the Security Documents,
subject to the provisions of such agreement. Holders are referred to the
Security Agreement for a statement of such terms.
5. Optional Redemption. The Notes are not redeemable at the
Company's option prior to February 15, 2001. Thereafter, the Notes will be
subject to redemption at the
<PAGE> 79
2
option of the Company, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the 12-month period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001....................... 105.75%
2002 and thereafter........ 100.00%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time
prior to February 15, 2000, the Company may, at its option, redeem up to
one-third of the original principal amount of the Notes, at a redemption price
of 111.5% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the applicable redemption date, with the net cash proceeds of one or
more Qualified Equity Offerings; provided, that (a) such redemption shall occur
within 60 days of the date of closing of such public offering and (b) at least
two-thirds of the original aggregate principal amount of Notes remains
outstanding immediately after giving effect to each such redemption.
6. Mandatory Redemption. There shall be no mandatory redemption of
the Notes.
7. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar and the Company need not exchange
or register the transfer (i) of any Note or portion of a Note selected for
redemption or (ii) of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
8. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes, subject to the provisions of the
Indenture with respect to the record dates for the payment of interest.
9. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing Default or Event of Default (except certain payment
defaults) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes). Without the consent
of any Holders, the Indenture and the Notes may be amended or supplemented to
cure any ambiguity, defect or inconsistency, to provide for assumption of the
Company's obligations to the Holders in the case of a merger or consolidation,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to make any change that would provide any additional rights or benefits
to the Holders of the Notes, or that does not adversely affect the legal rights
under the Indenture of any Holder, to release any Guarantee of the Notes
permitted to be released under the terms of the Indenture or
<PAGE> 80
3
to comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA.
10. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare by written notice to the Company and the
Trustee all the Notes to be due and payable immediately, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes become due and payable immediately without further action
or notice. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Company must furnish an
annual compliance certificate to the Trustee.
11. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if
it were not Trustee.
12. No Recourse Against Others. No director, officer, employee,
incorporator, stockholder or controlling person of the Company or Guarantor, as
such, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, the Indenture or the Registration Rights Agreement or
for any claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes and the Guarantees. Notwithstanding the foregoing, nothing in this
provision shall be construed as a waiver or release of any claims under the
Federal securities laws.
13. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
14. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
15. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
16. Holders' Compliance with Registration Rights Agreement. Each
Holder of a Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of February 25, 1998,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement").
<PAGE> 81
4
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: American Restaurant Group, Inc., 450 Newport Center
Drive, 6th Floor, Newport Beach, CA 92660, Attention: Chief Financial Officer.
THIS NOTE (INCLUDING THE GUARANTY ENDORSED HEREON) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
<PAGE> 82
5
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- ---------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint______________________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
- ---------------------------------------------------------------------
Date:
-------------------
Your Signature:
--------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*
- ----------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
<PAGE> 83
6
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, as the case
may be, state the amount you elect to have purchased (if all, write "ALL"):
$
----------------
Date:
-------------------
Your Signature:
--------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*
- --------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
<PAGE> 84
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES**
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of autho-
Amount of decrease in Amount of increase in this Global Note rized signatory of
Principal Amount of Principal Amount of following such decrease Trustee
Date of Exchange this Global Note this Global Note (or increase)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
This should be included only if the Note is issued in global form.
<PAGE> 85
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: [Series A] [Series B] [ ]% Senior Notes due 2003 (the "Notes") of American
Restaurant Group, Inc.
This Certificate relates to $______ principal amount of Notes held in *
|_| book-entry or * |_| definitive form by _______________________ (the
"Transferor").
The Transferor, by written order, has requested the Trustee:
|_| to deliver in exchange for its beneficial interest in the Global Note held
by the depository, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
|_| to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the Indenture relating to
the above captioned Notes and, the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act") because such Note:
|_| is being acquired for the Transferor's own account, without transfer;
|_| is being transferred pursuant to an effective registration statement;
|_| is being transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), in reliance on such Rule 144A;
|_| is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
|_| is being transferred pursuant to Rule 144 under the Securities Act;** or
|_| is being transferred pursuant to another exemption from the registration
requirements of the Securities Act (explain: ____________________________
_____________________________________________________________________).**
------------------------------
[INSERT NAME OF TRANSFEROR]
By:___________________________
Date:_____________________
* Check applicable box.
** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
<PAGE> 86
EXHIBIT C
[FORM OF GUARANTY]
GUARANTY
For good and valuable consideration received from the Company by the
undersigned (hereinafter referred to as the "Guarantors," which term includes
any successor or additional Guarantors), the receipt and sufficiency of which is
hereby acknowledged, subject to and in accordance with, Sections 10.8 through
10.14 of the Indenture, each Guarantor, jointly and severally, hereby
unconditionally guarantees, irrespective of the validity or enforceability of
the Indenture, the Notes, the Security Documents or the Obligations, (a) the due
and punctual payment of the principal and premium, if any, of and interest on
the Notes (including, without limitation, interest after the filing of a
petition initiating any proceedings referred to in Sections 6.1(9) or (10) of
the Indenture), whether at maturity or on an interest payment date, by
acceleration, call for redemption or otherwise, (b) the due and punctual payment
of interest on the overdue principal and premium, if any, of and interest, if
any, on the Notes, if lawful, (c) the due and punctual payment and performance
of all other Obligations, all in accordance with the terms set forth in the
Indenture, the Notes and the Security Documents, and (d) in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations, the due and punctual payment or performance thereof in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No director, officer, employee, incorporator, stockholder or
controlling person of the Guarantor, as such, shall have any liability under
this Guaranty for any obligations of the Guarantor under the Notes, the
Indenture or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
the Notes by accepting a Note waives and releases all such liability.
ARG ENTERPRISES, INC.
By: ____________________________
Name: _________________________
Title: __________________________
LOCAL FAVORITE, INC. GRANDY'S, INC.
By: ____________________________ By: ____________________________
Name: _________________________ Name: _________________________
Title: __________________________ Title: __________________________
SPOONS RESTAURANTS, INC. SPECTRUM FOODS, INC.
By: ____________________________ By: ____________________________
Name: _________________________ Name: _________________________
Title: __________________________ Title: __________________________
ARG PROPERTY MANAGEMENT
CORPORATION
By: ____________________________
Name: _________________________
Title: __________________________
<PAGE> 87
2
<PAGE> 88
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
----------- -----------------
310(a)(1)....................................................... 7.10
(a)(2)...................................................... 7.10
(a)(3)...................................................... N.A.
(a)(4)...................................................... N.A.
(a)(5)...................................................... 7.10
(b)......................................................... 7.8; 7.10
(c)......................................................... N.A.
311(a).......................................................... 7.11
(b)......................................................... 7.11
(c)......................................................... N.A.
312(a).......................................................... 2.5
(b)......................................................... 11.3
(c)......................................................... 11.3
313(a).......................................................... 7.6
(b)(1)...................................................... 7.6
(b)(2)...................................................... 7.6
(c)......................................................... 7.6
(d)......................................................... 7.6
314(a).......................................................... 4.3; 4.4
(b)......................................................... N.A
(c)(1)...................................................... 11.4
(c)(2)...................................................... 11.4
(c)(3)...................................................... N.A.
(d)......................................................... N.A.
(e)......................................................... 11.5
(f)......................................................... N.A.
315(a).......................................................... 7.1(2)
(b)......................................................... 7.5
(c)......................................................... 7.1(1)
(d)......................................................... 7.1(3)
(e)......................................................... 6.11
316(a)(last sentence)........................................... 2.9
(a)(1)(A)................................................... 6.5
(a)(1)(B)................................................... 6.4
(a)(2)...................................................... N.A.
(b)......................................................... 9.2
(c)......................................................... 9.4
317(a)(1)....................................................... 6.8
(a)(2)...................................................... 6.9
(b)......................................................... 2.4
318(a).......................................................... 11.1
(b)......................................................... N.A.
(c)......................................................... 11.1
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 89
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATIONBY REFERENCE
Section 1.1. Definitions............................................ 1
Section 1.2. Other Definitions...................................... 19
Section 1.3. Incorporation by Reference of Trust Indenture Act...... 19
Section 1.4. Rules of Construction.................................. 20
ARTICLE 2 THE NOTES
Section 2.1. Form and Dating........................................ 21
Section 2.2. Execution and Authentication........................... 21
Section 2.3. Registrar, Paying Agent and Depository................. 22
Section 2.4. Paying Agent to Hold Money in Trust.................... 23
Section 2.5. Holder Lists........................................... 24
Section 2.6. Transfer and Exchange.................................. 24
Section 2.7. Replacement Notes...................................... 29
Section 2.8. Outstanding Notes...................................... 29
Section 2.9. Treasury Notes......................................... 30
Section 2.10. Temporary Notes........................................ 30
Section 2.11. Cancellation........................................... 31
Section 2.12. Defaulted Interest..................................... 31
Section 2.13. Legends................................................ 31
ARTICLE 3 REDEMPTION
Section 3.1. Notices to Trustee..................................... 32
Section 3.2. Selection of Notes to Be Redeemed...................... 33
Section 3.3. Notice of Redemption................................... 33
Section 3.4. Effect of Notice of Redemption......................... 34
Section 3.5. Deposit of Redemption Price............................ 34
Section 3.6. Notes Redeemed in Part................................. 35
Section 3.7. Optional Redemption.................................... 35
ARTICLE 4 COVENANTS
Section 4.1. Payment of Notes....................................... 36
Section 4.2. Maintenance of Office or Agency........................ 36
Section 4.3. Reports................................................ 37
Section 4.4. Compliance Certificate................................. 38
Section 4.5. Taxes.................................................. 39
Section 4.6. Stay, Extension and Usury Laws......................... 39
Section 4.7. Limitation on Restricted Payments...................... 39
Section 4.8. Limitation on Restrictions on Subsidiary Dividends..... 42
Section 4.9. Limitation on Incurrence of Indebtedness............... 44
Section 4.10. Limitation on Asset Sales.............................. 46
Section 4.11. Limitation on Transactions With Affiliates............. 49
Section 4.12. Limitation on Liens.................................... 50
Section 4.13. Corporate Existence.................................... 50
Section 4.14. Repurchase Upon a Change of Control.................... 51
Section 4.15. Maintenance of Properties.............................. 53
Section 4.16. Maintenance of Insurance............................... 53
Section 4.17. Restrictions on Sale and Issuance of Subsidiary Stock.. 53
<PAGE> 90
Page
----
Section 4.18. Line of Business....................................... 54
ARTICLE 5 SUCCESSORS
Section 5.1. When the Company May Merge, etc......................... 54
Section 5.2. Successor Substituted................................... 55
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.1. Events of Default....................................... 56
Section 6.2. Acceleration............................................ 58
Section 6.3. Other Remedies.......................................... 59
Section 6.4. Waiver of Past Defaults................................. 59
Section 6.5. Control by Majority..................................... 60
Section 6.6. Limitation on Suits..................................... 60
Section 6.7. Rights of Holders to Receive Payment.................... 61
Section 6.8. Collection Suit by Trustee.............................. 61
Section 6.9. Trustee May File Proofs of Claim........................ 61
Section 6.10. Priorities............................................. 62
Section 6.11. Undertaking for Costs.................................. 63
ARTICLE 7 TRUSTEE
Section 7.1. Duties of Trustee....................................... 63
Section 7.2. Rights of Trustee....................................... 64
Section 7.3. Individual Rights of Trustee............................ 65
Section 7.4. Trustee's Disclaimer.................................... 66
Section 7.5. Notice of Defaults...................................... 66
Section 7.6. Reports by Trustee to Holders........................... 66
Section 7.7. Compensation and Indemnity.............................. 67
Section 7.8. Replacement of Trustee.................................. 68
Section 7.9. Successor Trustee by Merger, etc........................ 69
Section 7.10. Eligibility; Disqualification........................... 69
Section 7.11. Preferential Collection of Claims Against Company....... 70
ARTICLE 8 SATISFACTION AND DISCHARGE
Section 8.1. Discharge; Option to Effect Legal Defeasance or
Covenant Defeasance .................................. 70
Section 8.2. Legal Defeasance and Discharge.......................... 70
Section 8.3. Covenant Defeasance..................................... 71
Section 8.4. Conditions to Legal or Covenant Defeasance.............. 72
Section 8.5. Deposited Cash and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions......... 73
Section 8.6. Repayment to the Company................................ 73
Section 8.7. Reinstatement........................................... 74
ARTICLE 9 AMENDMENTS
Section 9.1. Without Consent of Holders.............................. 75
Section 9.2. With Consent of Holders................................. 76
Section 9.3. Compliance with Trust Indenture Act..................... 77
Section 9.4. Revocation and Effect of Consents....................... 78
Section 9.5. Notation on or Exchange of Notes........................ 78
Section 9.6. Trustee to Sign Amendments, etc......................... 78
<PAGE> 91
Page
----
ARTICLE 10 COLLATERAL AND SECURITY AND GUARANTY
Section 10.1. Collateral Documents................................... 79
Section 10.2. Opinions............................................... 80
Section 10.3. Release and Substitution of Collateral................. 80
Section 10.4. Certificates of the Company............................ 81
Section 10.5. Authorization of Actions to be Taken by the Trustee
Under the Security Documents......................... 81
Section 10.6. Authorization of Receipt of Funds by the Trustee
Under the Security Documents......................... 82
Section 10.7. Release Upon Termination of the Company's Obligations.. 82
Section 10.8. Guaranty............................................... 82
Section 10.9. Execution and Delivery of Guaranty..................... 84
Section 10.10. Limitation on Guarantor's Liability.................... 85
Section 10.11. Rights under the Guaranty.............................. 85
Section 10.12. Primary Obligations.................................... 86
Section 10.13. Guarantee by Subsidiary................................ 86
Section 10.14. Release of Guarantors.................................. 87
ARTICLE 11 MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls........................... 87
Section 11.2. Notices................................................ 88
Section 11.3. Communication by Holders with Other Holders............ 89
Section 11.4. Certificate and Opinion as to Conditions Precedent..... 89
Section 11.5. Statements Required in Certificate or Opinion.......... 89
Section 11.6. Rules by Trustee and Agents............................ 90
Section 11.7. Legal Holidays......................................... 90
Section 11.8. No Recourse Against Others............................. 90
Section 11.9. Governing Law.......................................... 91
Section 11.10. No Adverse Interpretation of Other Agreements.......... 91
Section 11.11. Successors............................................. 92
Section 11.12. Severability........................................... 92
Section 11.13. Counterpart Originals.................................. 92
Section 11.14. Table of Contents, Headings, etc....................... 92
SIGNATURES
EXHIBIT A - FORM OF NOTE........................................A-1
EXHIBIT B - CERTIFICATE OF TRANSFEROR...........................B-1
EXHIBIT C - FORM OF GUARANTY....................................C-1
<PAGE> 1
EXHIBIT 4.2
WARRANT AGREEMENT
Dated as of
February 25, 1998
Between
AMERICAN RESTAURANT GROUP, INC.
and
U.S. Trust Company of California, N.A.
as the Warrant Agent
-----------------------------------
Warrants for
Common Stock of
American Restaurant Group, Inc.
-----------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions.............................. 2
SECTION 1.1 Definitions.................................................... 2
SECTION 1.2 Rules of Construction.......................................... 5
ARTICLE II Warrant Certificates and Client Certificates....... 5
SECTION 2.1 Form of Warrant Certificates................................... 5
SECTION 2.2 Legends........................................................ 6
SECTION 2.3 Execution and Delivery of Warrant Certificates................. 7
SECTION 2.4 Loss or Mutilation............................................. 8
ARTICLE III Exercise Terms.....................9
SECTION 3.1 Exercise Price................................................. 9
SECTION 3.2 Exercise Period................................................ 9
SECTION 3.3 Expiration..................................................... 9
SECTION 3.4 Manner of Exercise............................................. 9
SECTION 3.5 Issuance of Warrant Shares..................................... 10
SECTION 3.6 Fractional Warrant Shares...................................... 11
SECTION 3.7 Reservation of Warrant Shares.................................. 11
SECTION 3.8 Cancellation of Warrant Certificates........................... 11
SECTION 3.9 Compliance with Law............................................ 11
<PAGE> 3
Page
----
ARTICLE IV Antidilution Provisions.................... 12
SECTION 4.1 Adjustment of Exercise Price and Warrant Number............... 12
SECTION 4.2 Adjustment for Change in Capital Stock........................ 12
SECTION 4.3 Adjustment for Rights Issue................................... 13
SECTION 4.4 Adjustment for Other Distributions............................ 14
SECTION 4.5 Adjustment for Common Stock Issue............................. 15
SECTION 4.6 Adjustment for Convertible Securities Issue................... 16
SECTION 4.7 [INTENTIONALLY OMITTED.]...................................... 17
SECTION 4.8 Consideration Received........................................ 17
SECTION 4.9 When De Minimis Adjustment May Be Deferred.................... 18
SECTION 4.10 Adjustment to Exercise Price.................................. 18
SECTION 4.11 When No Adjustment Required................................... 18
SECTION 4.12 Notice of Holders............................................. 19
SECTION 4.13 Voluntary Reduction........................................... 20
SECTION 4.14 Reorganizations............................................... 21
SECTION 4.15 Form of Warrants.............................................. 22
SECTION 4.16 Miscellaneous ................................................ 21
SECTION 4.17 Non-applicability of Article IV............................... 22
ARTICLE V Transferability.................... 23
SECTION 5.1 Transfer and Exchange......................................... 23
SECTION 5.2 Registration, Registration of Transfer and Exchange........... 24
SECTION 5.3 [INTENTIONALLY OMITTED]....................................... 25
SECTION 5.4 Special Transfer Provisions................................... 25
SECTION 5.5 Surrender of Warrant Certificates............................. 27
<PAGE> 4
Page
----
ARTICLE VI Warrant Agent.................... 26
SECTION 6.1 Appointment of Warrant Agent.................................. 26
SECTION 6.2 Rights and Duties of Warrant Agent............................ 27
SECTION 6.3 Individual Rights of Warrant Agent............................ 28
SECTION 6.4 Warrant Agent's Disclaimer.................................... 28
SECTION 6.5 Compensation and Indemnity.................................... 28
SECTION 6.6 Successor Warrant Agent....................................... 28
ARTICLE VII Miscellaneous.................. 30
SECTION 7.1 [INTENTIONALLY OMITTED.]...................................... 30
SECTION 7.2 SEC Reports and Other Information............................. 30
SECTION 7.3 Rule 144A..................................................... 30
SECTION 7.4 Persons Benefitting........................................... 31
SECTION 7.5 Rights of Holders............................................. 31
SECTION 7.6 Amendment..................................................... 31
SECTION 7.7 Notices....................................................... 31
SECTION 7.8 Governing Law................................................. 32
SECTION 7.9 Successors.................................................... 33
SECTION 7.10 Multiple Originals............................................ 33
SECTION 7.11 Table of Contents............................................. 33
SECTION 7.12 Severability.................................................. 33
SECTION 7.13 Further Assurances............................................ 33
<PAGE> 5
THIS WARRANT AGREEMENT (this "Agreement"), dated as of February 25,
1998, is between AMERICAN RESTAURANT GROUP, INC., a Delaware corporation
(together with its permitted successors and assigns, the "Company"), and U.S.
Trust Company of California, N.A., as warrant agent (together with its permitted
successors and assigns, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement, dated
February 13, 1998 (the "Purchase Agreement"), with Jefferies & Company, Inc.
(the "Purchaser"), pursuant to which the Company has agreed to issue and sell to
the Purchaser, and the Purchaser has agreed to purchase from the Company, 35,000
Units (as defined below), consisting of (i) $35,000,000 aggregate initial
liquidation preference amount of 12% Senior Pay-In-Kind Exchangeable Preferred
Stock (the "Preferred Stock") and (ii) 35,000 warrants (together with the 4,375
warrants (the "Purchaser Warrants") to purchase shares of the Company's Common
Stock (as defined below) issued to the Purchaser pursuant to the letter
agreement dated November 6, 1997 between the Company and the Purchaser and to
others pursuant to the letter agreement dated as of February 25, 1998 between
the Company and TCW Asset Management Company, the "Warrants") to purchase
initially 93,150 shares (together with the shares of the Company's Common Stock
underlying the Purchaser Warrants, the "Warrant Shares") of the Company's common
stock, $0.01 par value per share (the "Common Stock"), at an initial exercise
price of $.01 per share;
WHEREAS, the Warrants are to be issued pursuant to this Agreement;
WHEREAS, the Preferred Stock and the Warrants (other than the
Purchaser Warrants) (the "Unit Warrants") will be sold in Units, each Unit
consisting of (i)$1,000 initial liquidation preference amount of Preferred Stock
and (ii) one Warrant to purchase initially 2.66143 Warrant Shares at an initial
exercise price of $.01 per share (the "Units");
WHEREAS, prior to the Separation Date, beneficial ownership of the
Preferred Stock and the Unit Warrants will be evidenced by record ownership of
the Units;
WHEREAS, the shares of Preferred Stock and the Unit Warrants
comprising the Units shall be evidenced by Preferred Stock Certificates and
Warrant Certificates that will be physically attached together with Unit
Certificates in the form of Exhibit C hereto;
WHEREAS, the Company further desires the Warrant Agent to act on
behalf of the Company in connection with the issuances, division, transfer,
exchange, substitution and exercise of the Warrants, and the Warrant Agent is
willing to so act; and
NOW, THEREFORE, each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the registered holders of
Warrants (or until the Separation Date (as defined below), the registered
holders of Preferred Stock) (each a "Holder"):
<PAGE> 6
2
ARTICLE I
Definitions
SECTION 1.1 Definitions. Capitalized terms used but not defined
herein shall have the respective meanings given to such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" of any specified Person means (i) any other Person
which, directly or indirectly, is controlling or controlled by or under direct
or indirect common control with such specified Person, or (ii) any other Person
who is a director or executive officer (A) of such Person, (B) of any subsidiary
of such specified Person, or (C) of any Person described in clause (i) above.
For purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" has the meaning given to such term in Section 5.3.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means any day other than (i) Saturday or Sunday, (ii)
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"Common Stock" has the meaning given to such term in the recitals to
this Agreement.
"Company" has the meaning given to such term in the preamble to this
Agreement.
"Current Market Value" per share of Common Stock or any other
security at any date means, on any date of determination (a) the average of the
daily closing sale prices for each of 15 trading days immediately preceding such
date (or such shorter number of days during which such security has been listed
or traded), if the security has been listed on the New York Stock Exchange, the
American Stock Exchange or other national securities exchange or the NASDAQ
National Market for at least 10 trading days prior to such date, (b) if such
security is not so listed or traded, the average of the daily closing bid prices
for each of the 15 trading days immediately preceding such date (or such shorter
number of days during which such security had been quoted), if the security has
been quoted on a national over-the-counter market for at least 10 trading days,
(c) in the case of a firm commitment underwritten public offering, the bona fide
price paid by the underwriters and (d) otherwise, the value of the security most
recently determined as of a date within the six months preceding such day by the
Board.
<PAGE> 7
3
"Definitive Warrants" has the meaning given to such term in Section
2.1.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC pursuant thereto.
"Exchange Offer" means the offer by the Company to exchange the
Company's Notes and the Preferred Stock for senior secured debt securities and
preferred stock of the Company with terms substantially identical to the Notes
and the Preferred Stock, respectively.
"Exercise Date" has the meaning given to such term in Section 3.2.
"Exercise Price" has the meaning given to such term in Section 3.1.
"Expiration Date" has the meaning given to such term in Section 3.2.
"Global Warrant" has the meaning given to such term in Section 2.1.
"Global Warrants" has the meaning given to such term in Section 2.1.
"Holders" has the meaning given to such term in the recitals to this
Agreement.
"Institutional Accredited Investor" has the meaning given to such
term in Section 2.3.
"Issue Date" means the date on which Warrants are initially issued,
which is February 25, 1998.
"Liquidation Preference" means $1,000 per share of Preferred Stock.
"Notes" means the Company's 11 1/2 Senior Secured Notes due 2003.
"Offering Circular" means the final Offering Circular of the Company
dated February 17, 1998 relating to the issuance and sale of the Units.
"Officer" means the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President or the Treasurer of the Company.
"Person" means any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof.
<PAGE> 8
4
"Preferred Stock Certificates" means stock certificates evidencing
the Perferred Stock.
"Preferred Stock Transfer Agent" means U.S. Trust Company of
California, N.A.
"Public Company Date" means the date that is 45 days after the date
upon which underwritten primary public offerings of Common Stock of the Company
pursuant to effective registration statements under the Securities Act have
resulted in 35% of the Company's Common Stock (measured on a fully diluted basis
after giving effect to such offerings) being sold to the public and in the
Company's Common Stock being listed for trading on any of the New York Stock
Exchange, the NASDAQ National Market or the American Stock Exchange.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redeemable Stock" means, with respect to any Person, any capital
stock that by its terms (or by the terms of any security into which it is
convertible or exchangeable) or otherwise (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may
become redeemable or repurchasable at the option of the holder thereof, in whole
or in part, or (iii) is convertible or exchangeable for indebtedness.
"Restricted Definitive Warrant" has the meaning given to such term
in Section 2.3.
"Restricted Warrant" means a Global Warrant or a Restricted
Definitive Warrant.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest to occur of (i) August 15,
1998, (ii) the date of commencement of the Exchange Offer (iii) such earlier
date as may be determined by the Purchaser, (iv) the date on which the Company
mails a notice of a Change of Control to holders of the Preferred Stock, (v) in
the event that the Company elects to redeem the Preferred Stock, the date on
which the Company mails notice thereof to the holders of the Preferred Stock,
and (vi) the date on which the Company consummates a public offering of Common
Stock.
"Stock Transfer Agent" has the meaning given to such term in Section
3.5.
<PAGE> 9
5
"Voting Stock" means all classes of capital stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Warrant Agent" has the meaning given to such term in the Recitals.
"Warrant Certificates" has the meaning given to such term in Section
2.1.
"Warrant Number" has the meaning given to such term in Article IV.
"Warrant Shares" means the Common Stock (and other securities)
issuable upon the exercise of the Warrants.
"Warrants" has the meaning given to such term in the Recitals.
SECTION SECTION 1.2 Rules of Construction. Unless the text otherwise
requires: (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time to time; (iii) "or" is not
exclusive; (iv) "including" means including, without limitation; (v) references
to "Section" and "Article" refer to Sections and Articles of this Agreement,
unless the context clearly requires otherwise; and (vi) words in the singular
include the plural and words in the plural include the singular.
ARTICLE ARTICLE II
Warrant Certificates and Client Certificates
SECTION 2.1 Form of Warrant Certificates. Unit Warrants shall be initially
issued together with the issuance of the Preferred Stock and shall not be
separately transferrable until the Separation Date (as defined). Prior to the
Separation Date, beneficial ownership of the Unit Warrants will be evidenced by
record ownership of the Units. The Unit Warrants and Units will be issued (a) in
global form (as applicable, the "Global Warrant" or "Global Unit"),
substantially in the form of Exhibit A and Exhibit C, respectively, attached
hereto (including the text accompanying the footnotes thereto), and (b) in
definitive form (as applicable, the "Definitive Warrants" or "Definitive
Units"), substantially in the form of Exhibit A and Exhibit C, respectively,
(excluding the text accompanying the footnotes thereto). The Purchaser Warrants
will be issued as a Definitive Warrant or Warrants. The Global Warrant shall
represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon; provided that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Warrant or Global Unit to reflect the amount of any increase or decrease in the
amount of outstanding Warrants or Units represented thereby shall be made by the
Warrant Agent in accordance with instructions given by the holder thereof.
<PAGE> 10
6
The Depository with respect to the Global Warrant and Global Unit
(the "Depository") shall be The Depository Trust Company until a successor shall
be appointed by the Company and become such Depository. The Global Warrant or
Global Unit shall be registered in the name of the Depository, or the nominee of
such Depository. So long as the Depository or its nominee is the registered
owner of such Global Warrant or Global Unit it will be deemed the sole owner and
holder of such Global Warrant or Global Unit for all purposes hereunder and
under such Global Warrant or Global Unit. The certificates (the "Warrant
Certificates") evidencing the Global Warrant and the Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto. The certificates evidencing the Units to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit C hereto (the "Unit Certificates"). Until the Separation Date,
all references herein to "Warrant Certificates," unless the context dictates
otherwise, shall also mean the related Unit Certificates. Neither the Company
nor the Warrant Agent will have any responsibility or liability for any aspects
of the records relating to beneficial ownership interest of the Global Warrant
or Units in the name of the Depository or its nominee or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
SECTION 2.2 Legends. Unless and until a Warrant or Warrant Share is
sold under an effective registration statement, each Warrant Certificate
evidencing the Global Warrants and the Definitive Warrants (and all Warrant
Certificates issued in exchange therefor or substitution thereof) and each
certificate representing the Warrant Shares shall bear a legend in substantially
the following form (with any appropriate modification for the Warrant Shares):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH AMERICAN RESTAURANT GROUP, INC. ("THE
COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
<PAGE> 11
7
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR IN OFFSHORE TRANSACTIONS AND
WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS OF SUCH TERMS AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE WARRANT AGENT.
SECTION 2.3 Execution and Delivery of Warrant Certificates. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
104,794 Warrant Shares (subject to adjustment and except as provided in Section
2.4) and Unit Certificates evidencing 35,000 Units may be issued hereunder. On
the Issue Date, subject to Section 2.1, the Company shall execute and deliver to
the Warrant Agent for countersignature, and the Warrant Agent shall thereupon
countersign and deliver such Warrant Certificates and Unit Certificates upon the
order and at the direction of the Company to the purchasers thereof on the date
of issuance. The Warrant Agent is hereby authorized to countersign and deliver
Warrant Certificates and Unit Certificates as required by this Agreement.
The Warrant Certificates and Unit Certificates shall be executed on
behalf of the Company by an Officer of the Company either manually or by
facsimile signature printed thereon. The Warrant Certificates and Unit
Certificates shall be countersigned manually by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any Officer of the
Company whose signature shall have been placed upon any of the Warrant
Certificates and Unit Certificates shall cease to be such Officer of the Company
before countersignature by the Warrant Agent and issuance and delivery thereof,
such Warrant Certificates and Unit Certificates may, nevertheless, be
countersigned by the Warrant Agent and issued and delivered with the same force
and effect as though such person had not ceased to be such Officer of the
Company.
Warrants and Units offered and sold in their initial distribution to
a limited number of institutions that are accredited investors (which are not
QIBs) within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act (and institutions in which all the equity owners are such accredited
investors) (together referred to as "Institutional Accredited Investors") in
transactions exempt from registration under the Securities Act will
<PAGE> 12
8
be delivered, in certificated fully registered form (as applicable, a
"Restricted Definitive Warrant" or a "Restricted Definitive Unit") substantially
in the form set forth in Exhibit A and Exhibit C. Such Warrants shall be
delivered to such Institutional Accredited Investors only upon the execution and
delivery to the Company and the Initial Purchaser of an institutional accredited
investor transferee compliance letter (an "Investor Letter") substantially in
the form of Annex A-1 to the Offering Circular. Restricted Definitive Warrants
and Restricted Definitive Units may not be transferred or exchanged for
interests in the Global Warrant or Global Unit or another Restricted Definitive
Warrant or Restrictive Definitive Unit, except as provided herein.
SECTION 2.4 Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership and the loss,
theft, destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Units or Warrants represented thereby have been acquired
by a bona fide purchaser, the Company shall execute and an authorized signatory
of the Warrant Agent shall manually countersign and deliver to the registered
Holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in
exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and
for a like aggregate number of Units or Warrants. Upon the issuance of any new
Warrant Certificate under this Section 2.4, the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and other expenses (including the fees and expenses
of the Warrant Agent and of counsel to the Company) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this Section
2.4 in lieu of any lost, stolen or destroyed Warrant Certificate shall
constitute a contractual obligation of the Company, whether or not the allegedly
lost, stolen or destroyed Warrant Certificates shall be at any time enforceable
under applicable law, and shall be entitled to the benefits of this Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder. The provisions of this Section 2.4 are
exclusive and shall preclude (to the extent lawful) all other rights or
remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary, with respect to the replacement of mutilated, lost, stolen or
destroyed Warrant Certificates.
ARTICLE ARTICLE III
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially entitle the
Holder thereof, subject to adjustment pursuant to the terms of this Agreement,
to purchase 2.66143 shares of Common Stock for an initial exercise price of $.01
per share of Common Stock (the "Exercise Price"). The Warrant Number and
Exercise Price are both subject to adjustment as set forth in Article IV.
<PAGE> 13
9
SECTION 3.2 Exercise Period. (a) Subject to the terms and conditions
set forth herein, the Warrants are exercisable at any time or from time to time
on any Business Day commencing on the Issue Date (the "Exercise Date").
( (b) ) No Warrant shall be exercisable after the
earlier of (i) the Public Company Date and (ii) August 15, 2008 (the "Expiration
Date").
SECTION 3.3 Expiration. A Warrant shall terminate and become void as
of the earlier of (i) the close of business on the Expiration Date or (ii) the
date such Warrant is exercised. The Company shall give notice not less than 90,
and not more than 120, days prior to the Expiration Date to the Holders of all
then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date; provided,
however, that notwithstanding that the Company may fail to give notice as
provided in this Section 3.3, the Warrants will terminate and become void on the
Expiration Date.
SECTION 3.4 Manner of Exercise. (a) Warrants may be exercised at any
time on or after th Exercise Date by surrendering to the Warrant Agent the
Warrant Certificates at any office or agency maintained for that purpose,
together with the form of election to purchase Common Stock on the reverse
thereof duly completed and signed by the Holder thereof and by paying in full
the Exercise Price for each Warrant exercised and any other amounts required to
be paid pursuant to Section 5.2 hereof to the Warrant Agent at its corporate
trust office. Payment of the Exercise Price (and any other required amounts)
shall be made in the form of cash or a certified or official bank check payable
to the order of the Company or by bank wire transfer of immediately available
funds. The date on which (i) payment in full of the Warrant Price and (ii) the
Warrant Certificate with the form of election to purchase Warrant Securities set
forth on the reverse side of the Warrant Certificate properly completed and duly
executed, are received by the Warrant Agent shall be deemed to be the date on
which the Warrant is exercised. The Warrant Agent shall deposit all funds
received by it in payment of the Warrant Price in an account of the Company
maintained with it or in such other account designated by the Company and shall
advise the Company by telephone at the end of each day on which a payment for
the exercise of Warrants is received of the amount so deposited to its account.
The Warrant Agent shall promptly confirm such telephone advice to the Company in
writing. In lieu of exercising the Warrant by paying in full the Exercise Price,
the Warrant holder may, from time to time, convert this Warrant (a "Warrant
Conversion"), in whole or in part, into a number of shares of Common Stock
determined by dividing (a) the aggregate Current Market Value of the number of
Warrant Shares represented by the Warrants converted, minus the aggregate
Exercise Price for such Warrant Shares (and any other required amounts), by (b)
the Current Market Value of one Warrant Share. For purposes of this Agreement,
such conversion shall be deemed payment in full of the Exercise Price.
(b) Subject to Section 3.2, the rights represented by the Warrants
shall be exercisable at the election of the Holders thereof either in full at
any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the expiration of the
Exercise Period, a new Warrant Certificate exercisable for the remaining
<PAGE> 14
10
Warrant Shares will be issued. The Warrant Agent shall manually countersign and
deliver the required new Warrant Certificates, and the Company, at the Warrant
Agent's request, shall supply the Warrant Agent with Warrant Certificates duly
signed on behalf of the Company for such purpose.
(c) The Warrant Agent shall, from time to time, as promptly as
practicable, advise the Company of (i) the number of Warrants exercised, (ii)
the instructions of each holder of the Warrant Certificates evidencing such
Warrants with respect to delivery of the Warrant Securities to which such holder
is entitled upon such exercise, (iii) delivery of Warrant Certificates
evidencing the balance, if any, of the Warrants remaining after such exercise
and (iv) such other information as the Company shall reasonably require.
(d) The Company shall not be required to pay any stamp or other tax
other governmental charge required to be paid in connection with any transfer
involved in the issuance of the Warrant Shares, and in the event that any such
transfer is involved, the Company shall not be required to issue or deliver any
Warrant Shares until such tax or other charge shall have been paid or it has
been established to the Company's satisfaction that no such tax or other charge
is due.
SECTION 3.5 Issuance of Warrant Shares. Upon the surrender of
Warrant Certificates, as set forth in Section 3.4, the Company shall issue and
cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock
("Stock Transfer Agent") to countersign and deliver to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants or other securities or property to which it
is entitled, registered or otherwise, to the Person or Persons entitled to
receive the same, together with cash as provided in Section 3.6 in respect of
any fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the same fraction of the Current Market Value for one share of Common
Stock less the portion of the Exercise Price attributable thereto, rounded to
the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at all
times prior to the Expiration Date keep reserved out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of all outstanding Warrants. The registrar for the Common Stock (the
"Registrar") shall at all times
<PAGE> 15
11
until the expiration of the Exercise Period reserve such number of authorized
shares as shall be required for such purpose. The Company will keep a copy of
this Agreement on file with the Stock Transfer Agent. The Company will supply
such Stock Transfer Agent with duly executed stock certificates for such purpose
and will itself provide or otherwise make available any cash which may be
payable as provided in Section 3.6. The Company will furnish to such Stock
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder.
The Company covenants that all shares of Common Stock that may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights, free from all taxes and free from all liens, charges
and security interests, created by or through the Company, with respect to the
issue thereof.
SECTION 3.8 Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be promptly canceled by it and retired. The Warrant Agent
shall cancel all Warrant Certificates properly surrendered for exchange,
substitution, transfer or exercise. The Warrant Agent shall destroy canceled
Warrant Certificates held by it and deliver a certificate of destruction to the
Company.
SECTION 3.9 Compliance with Law. (a) Notwithstanding anything in
this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant, unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective; provided, however, that in no event shall the Company be required to
file a Registration Statement in order to permit a Holder to exercise a Warrant,
or (ii) an exemption from the registration requirements is available under the
Securities Act for the issuance of the Warrant Shares (and the delivery of any
other securities for which the Warrants may at the time be exercisable) at the
time of such exercise and, if requested by the Company, an opinion of counsel
addressed to the Warrant Agent and the Company, satisfactory in form and
substance to the Company, confirms such exemption.
(b) If any shares of Common Stock required to be reserved for
purposes of exercise of Warrants require, under any other Federal or state law
or applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange before such shares may be issued upon
exercise, the Company will in good faith and as expeditiously as reasonably
possible endeavor to cause such shares to be duly registered or approved by such
governmental authority or listed on the relevant national securities exchange,
as the case may be
<PAGE> 16
12
ARTICLE IV
Antidilution Provisions
SECTION 4.1 Adjustment of Exercise Price and Warrant Number. The
number of shares of Common Stock issuable upon the exercise of each Warrant (the
"Warrant Number") is initially 2.66143. The Warrant Number is subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Article IV .
SECTION 4.2 Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a
distribution on its Common Stock in shares of its Common Stock;
(2) subdivides or reclassifies its
outstanding shares of Common Stock into a greater number of
shares;
(3) combines or reclassifies its
outstanding shares of Common Stock into a smaller number of
shares;
(4) makes a distribution on
Common Stock in shares of its capital stock other than Common
Stock; or
(5) issues by reclassification of
its Common Stock any shares of its capital stock (other than
reclassifications arising solely as a result of a change in the par
value or no par value of the Common Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which such holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
<PAGE> 17
13
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in an
adjustment under Section 4.3 or 4.4 below, no further adjustment shall be made
under this Section 4.2.
SECTION 4.3 Adjustment for Rights Issue.
If the Company distributes (and receives no consideration therefor)
any rights, options or warrants (whether or not immediately exercisable) to
holders of any class of its Common Stock (as such) entitling them to purchase
shares of Common Stock at a price per share less than the Current Market Value
per share on the record date relating to such distribution, the Warrant Number
shall be adjusted in accordance with the formula:
W' = W x O + N
-----
O + N x P
-----
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
for any such distribution.
O = the number of shares of Common Stock outstanding on the
record date for any such distribution.
N = the number of additional shares of Common Stock issuable
upon exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the
record date for any such distribution.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the adjusted Warrant Number shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
SECTION 4.4 Adjustment for Other Distributions.
If the Company distributes to holders of any class of its Common
Stock (as such) (i) any evidences of indebtedness of the Company or any of its
subsidiaries, (ii) any assets of the Company or any of its subsidiaries
(excluding cash dividends or other cash
<PAGE> 18
14
distributions from retained earnings), or (iii) any rights, options or warrants
to acquire any of the foregoing or to acquire any other securities of the
Company (any of the foregoing being hereinafter in this Section 4.4 called the
"Securities"), then, in each such case, unless the Company elects to reserve
such Securities for distribution to the holders of the Warrants so that any such
holder exercising Warrants will receive upon such exercise, in addition to the
shares of the Common Stock to which such holder is entitled, the amount and kind
of such Securities which such holder would have received if such holder had,
immediately prior to the record date for the distribution of the Securities,
exercised its Warrants, the Warrant Number shall be adjusted in accordance with
the formula:
W' = W x M
------
M - F
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
mentioned below.
M = the Current Market Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date mentioned below
of the shares, indebtedness, assets, rights, options or
warrants distributable to the holder of one share of Common
Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the adjusted Warrant Number shall
be immediately readjusted as if "F" in the above formula was the fair market
value on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants divided by the number of shares of
Common Stock outstanding on the record date.
In the event that "F" in the above formula is greater than or equal
to "M" in the above formula, then each Holder of the Warrants, notwithstanding
that such Holder's Warrants have not been exercised, shall receive the
distribution referred to in this Section 4.4 on the basis of number of Warrant
Shares underlying the Warrants held by each such Holder, unless the Company
elects to reserve such Securities for distribution to the holders of the
Warrants upon the exercise of the Warrants as described above.
This subsection does not apply to rights, options or warrants
referred to in Section 4.3.
<PAGE> 19
15
SECTION 4.5 Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Value per share on the date the Company fixes
the offering price of such additional shares, the Warrant Number shall be
adjusted in accordance with the formula:
W' = W x A
--------
O + P
--
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares
of Common Stock.
P = the aggregate consideration received for the issuance of
such additional shares of Common Stock.
M = the Current Market Value per share of Common Stock on the
date of issuance of such additional shares.
A = the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of
Common Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This Section 4.5 does not apply to any of the transactions described
in Section 4.2.
SECTION 4.6 Adjustment for Convertible Securities Issue.
If the Company issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (other than
securities issued in transactions described in Sections 4.3 or 4.4) for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the Current Market Value per
share on the date of issuance of such securities, the Warrant Number shall be
adjusted in accordance with this formula:
<PAGE> 20
16
W' = W x O + D
-----
O + P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received for the
issuance of such securities and the aggregate minimum
consideration receivable by the Company for issuance of Common
Stock upon conversion or in exchange for, or upon exercise of,
such securities.
M = the Current Market Value per share of Common Stock on the
date of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such
securities at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when the conversion, exchange or
exercise rights of such securities have expired or been terminated, then the
adjusted Warrant Number shall promptly be readjusted to the adjusted Warrant
Number which would then be in effect had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion, exchange or exercise of such securities. If the
aggregate minimum consideration receivable by the Company for issuance of Common
Stock upon conversion or in exchange for, or upon exercise of, such securities
shall be increased by virtue of provisions therein contained or upon the arrival
of a specified date or the happening of a specified event, then the Warrant
Number shall promptly be readjusted to the Warrant Number which would then be in
effect had the adjustment upon the issuance of such securities been made on the
basis of such increased minimum consideration.
This Section 4.6 does not apply to the issuance of the Warrants or
to any of the transactions described in Section 4.3.
SECTION 4.7 [INTENTIONALLY OMITTED.]
SECTION 4.8 Consideration Received.
<PAGE> 21
17
For purposes of any computation respecting consideration received
pursuant to Sections 4.5 and 4.6, the following shall apply:
(1) in the case of the issuance of
shares of Common Stock for cash, the consideration shall be the
amount of such cash (without any deduction being made for any
commissions, discounts or other expenses incurred by the Compa ny
for any underwriting of the issue or otherwise in connection
therewith);
(2) in the case of the issuance of
shares of Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed to be
the fair market value thereof (irrespective of the accounting
treatment thereof) as determined in good faith by the Board; and
(3) in the case of the issuance of
options, warrants or other securities convertible into or
exchangeable or exercisable for shares of Common Stock, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion, exchange or exercise
thereof (the consideration in each case to be determined in the same
manner as provided in clauses (1) and (2) of this subsection).
SECTION 4.9 When De Minimis Adjustment May Be Deferred.
No adjustment in the Warrant Number need be made unless the
adjustment would require an increase or decrease of at least 1.0% in the Warrant
Number. Any adjustment that is not made shall be carried forward and taken into
account in any subsequent adjustment, provided that no such adjustment shall be
deferred beyond the date on which a Warrant is exercised.
All calculations under this Article IV shall be made to the nearest
cent or to the nearest .01 of a share, as the case may be, with one-half cent
and .005 of a share, respectively, being rounded upward. Anything in this
Article IV to the contrary notwithstanding, the Company shall be entitled to
make such reductions in the Warrant Price, in addition to those required by this
Section 4.9 as it in its discretion shall determine advisable in order that any
stock dividend, subdivision of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of other assets (other than cash
dividends) hereafter made by the Company to its stockholders shall not be
taxable.
SECTION 4.10 Adjustment to Exercise Price.
Upon each adjustment to the Warrant Number pursuant to this Article
IV, the Exercise Price shall be adjusted so that it is equal to the Exercise
Price in effect immediately prior to such adjustment multiplied by a quotient,
the numerator of which is the Warrant Number in
<PAGE> 22
18
effect immediately prior to such adjustment, and the denominator of which is the
Warrant Number in effect immediately after such adjustment; provided, that the
Exercise Price shall not be adjusted below the lesser of $0.01 per share of
Common Stock and the then par value per share of Common Stock.
SECTION 4.11 When No Adjustment Required.
If an adjustment is made upon the establishment of a record date for
a distribution subject to Sections 4.2, 4.3 or 4.4 hereof and such distribution
is subsequently cancelled, the Warrant Number and Exercise Price then in effect
shall be readjusted, effective as of the date when the Board determines to
cancel such distribution, to that which would have been in effect if such record
date had not been fixed.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest will not accrue on the cash.
SECTION 4.12 Notice of Holders. Upon any adjustment pursuant
to Article IV hereof, the Company shall promptly thereafter (i) cause to be
filed with the Warrant Agent a certificate of an officer of the Company setting
forth the Warrant Number, the Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and (ii) cause to be given to each of the Holders at
its address appearing on the Warrant Register written notice of such adjustments
in accordance with the provisions of this Section 4.12. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 4.12.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants;
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of assets, including cash, evidences of
its indebtedness or other securities;
(c) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets of
the Company substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other than
a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination) or of
a tender offer or exchange offer for shares of Common Stock;
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
<PAGE> 23
19
(e) the Company proposes to take any action that would require
an adjustment to the Warrant Number or the Exercise Price pursuant to
Article IV hereof;
then the Company shall cause to be given to each of the Holders at its address
appearing on the Warrant Register, at least 30 days prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, in accordance with the provisions of
Section 14 hereof, a written notice stating (i) the date as of which the holders
of record of shares of Common Stock to be entitled to receive any such rights,
options, warrants or distribution are to be determined, (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares of
Common Stock or (iii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 4.12 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to vote, to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of Directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company; provided, however, that nothing in the foregoing provision is intended
to detract from any rights explicitly granted to any Holder hereunder.
SECTION 4.13 Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by any
amount for any period of time (including, without limitation, permanently) if
the period is at least 20 days and if the reduction is irrevocable during the
period.
Whenever the Exercise Price is reduced, the Company shall mail to
the Holders and the Warrant Agent a notice of the reduction. The Company shall
mail the notice at least 15 days before the date the reduced Exercise Price
takes effect. The notice shall state the reduced Exercise Price and the period
it will be in effect.
A reduction of the Exercise Price under this Section 4.13 (other
than a permanent reduction) does not change or adjust the Exercise Price
otherwise in effect for purposes of Sections 4.2, 4.3, 4.4, 4.5 or 4.6.
SECTION 4.14 Reorganizations.
In case of any capital reorganization, other than in the cases
referred to in Sections 4.2, 4.3, 4.4, 4.5 or 4.6 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
<PAGE> 24
20
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Common Stock theretofore deliverable) the amount of
cash, the number of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock that would otherwise have been
deliverable upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of the Company, whose determination shall
be described in a duly adopted resolution certified by the Company's Secretary
or Assistant Secretary, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement or other
acknowledgment executed and delivered to the Holder(s), the obligation to
deliver to each such Holder such cash, such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase, and all other obligations and liabilities under this
Agreement.
In the case of a consolidation, merger, sale or conveyance, the
Company shall thereupon be relieved of any further obligation hereunder or under
the Warrants, and the Company as the predecessor corporation may thereupon or at
any time thereafter be dissolved, wound up or liquidated. Such successor or
assuming corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Warrant
Certificates issuable hereunder which theretofore shall not have been signed by
the Company, and may execute and deliver Warrant Shares in its own name, in
fulfillment of its obligations to deliver Warrant Shares upon the exercise of
the Warrants. In any case of any such reclassification, change, consolidation,
merger, sale or conveyance, such changes in phraseology and form (but not in
substance) may be made in the Warrants thereafter to be issued as may be
appropriate.
SECTION 4.15 Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the number
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
<PAGE> 25
21
SECTION 4.16 Miscellaneous.
For purpose of this Article IV the term "shares of Common Stock"
shall mean (i) shares of any class of stock designated as Common Stock of the
Company as of the date of this Agreement, (ii) shares of any other class of
stock resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value and (iii) shares of Common Stock of the Company
issuable upon exercise of options, warrants or rights to purchase Common Stock
of the Company or upon conversion or exchange of securities convertible into or
exchangeable for shares of Common Stock of the Company outstanding at the date
of determination. In the event that at any time, as a result of an adjustment
made pursuant to this Article IV, the holders of Warrants shall become entitled
to purchase any securities of the Company other than, or in addition to, shares
of Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in Sections 4.2 through
4.15 of this Article IV, inclusive, and the provisions of this Agreement with
respect to the Warrant Shares or the Common Stock shall apply on like terms to
any such other securities.
SECTION 4.17 Non-applicability of Article IV.
The provisions of this Article IV do not apply to (i) a change
solely in the par value or no par value of the Common Stock, provided that the
Company shall not increase the par value to exceed the Exercise Price, (ii) the
conversion or exchange (other than pursuant to a reclassification), in any case
on a share-for-share basis, of Common Stock for non-voting or light voting
common stock that has rights (other than voting rights) identical to the Common
Stock, or of such non-voting or light voting stock for Common Stock, (iii) the
issuance to employees of the Company or any of its subsidiaries of stock or
stock options in an amount which, upon purchase or exercise, as the case may be,
would represent in the aggregate, less than 15% of the Company's Common Stock on
a fully-diluted basis, (iv) any exercise of Warrants, options, warrants or
convertible securities, or (v) any bona fide firm commitment underwritten public
offering.
ARTICLE ARTICLE V
Transferability
SECTION 5.1 Transfer and Exchange. Prior to the Separation
Date, a Unit Warrant may be exchanged or transferred only together with the
Preferred Stock to which the Unit Warrant was initially attached, and only for
the purpose of effecting or in conjunction with an exchange or transfer of such
Preferred Stock. Prior to the Separation Date, each transfer of a Unit on the
register of the Units shall operate to transfer both the Preferred Stock and the
Unit Warrant comprising such Unit.
The Company shall notify the holders of the Preferred Stock, the
Preferred Stock Transfer Agent and the Warrant Agent of the Separation Date.
<PAGE> 26
22
The Company shall cause to be kept at the office of the Warrant
Agent a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Warrant
Certificates and Unit Certificates and transfers or exchanges of Warrant
Certificates and Unit Certificates as herein provided. All Warrant Certificates
and Unit Certificates issued upon any registration of transfer or exchange of
Warrant Certificates and Unit Certificates shall be the valid obligations of the
Company, evidencing the same obligations, and entitled to the same benefit under
this Agreement, as the Warrant Certificates and Unit Certificates surrendered
for such registration of transfer or exchange.
A Holder may transfer its Warrants only by complying with the terms
of this Agreement. No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Holder only upon, final acceptance and
registration of the transfer by the Warrant Agent in the register. Prior to the
registration of any transfer of Warrants or Units by a Holder as provided
herein, the Company, the Warrant Agent, any agent of the Company or the Warrant
Agent may treat the Person in whose name the Warrants or Units are registered as
the owner thereof for all purposes and as the Person entitled to exercise the
rights represented thereby, any notice to the contrary notwithstanding.
Furthermore, any Holder of a Global Warrant or Global Unit shall, by acceptance
of such Global Warrant or Global Unit, agree that transfers of beneficial
interests in such Global Warrant or Global Unit may be effected only through a
book-entry system maintained by the Holder of such Global Warrant (or its
agent), and that ownership of a beneficial interest in the Warrants represented
thereby shall be required to be reflected in a book entry. When Warrant
Certificates or Unit Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of
Warrants or Units of other authorized denominations, subject to the provisions
of Section 5.2 below, the Warrant Agent shall register the transfer or make the
exchange in accordance with the provisions hereof.
To permit registrations of transfer and exchanges, the Company shall
make available to the Warrant Agent a sufficient number of executed Warrant
Certificates and Unit Certificates to effect such registrations of transfers and
exchanges. No service charge shall be made to the Holder for any registration of
transfer or exchange of Warrants or Units, but the Company may require from the
transferring or exchanging Holder payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.4 and exchanges in respect of portions of Warrants not exercised and
the Company may deduct such taxes from any payment of money to be made and such
transfer or exchange shall not be consummated (if such taxes are not deducted in
full) unless or until the Holder shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company and the
Warrant Agent that such tax has been paid.
SECTION 5.2 Registration, Registration of Transfer and Exchange.
(a) Transfer and Exchange of Definitive Warrants or Units. When Definitive
Warrants or Units are presented to the Warrant Agent with a request (i) to
register the transfer of the Definitive Warrant or Unit or (ii) to exchange such
Definitive Warrants or Units for an equal number of Definitive Warrants or Units
of other authorized denominations, the Warrant Agent shall register the transfer
or make the exchange as requested if its requirements for such transactions are
met; provided, however, that the Definitive Warrants or Units so presented have
<PAGE> 27
23
been duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Warrant Agent, duly executed by the holder thereof or by his
attorney, duly authorized in writing;
(b) Transfer of a Definitive Warrant or Unit for a Beneficial Interest in
Global Warrant. A Definitive Warrant or Unit may be exchanged for a beneficial
interest in the Global Warrant or Unit only upon receipt by the Warrant Agent of
a Definitive Warrant or Unit, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with written instructions directing the Warrant Agent to make an endorsement on
the Global Warrant or Unit to reflect an increase in the number of Warrants and
Warrant Shares or Units represented by the Global Warrant or Unit, and then the
Warrant Agent shall cancel such Definitive Warrant or Units and cause the number
of Warrants and Warrant Shares or Units represented by the Global Warrant or
Unit to be increased accordingly. If no Global Warrant or Unit is then
outstanding, the Company shall issue and the Warrant Agent shall countersign a
new Global Warrant or Unit representing the appropriate number of Warrants and
Warrant Shares or Units.
(c) Transfer and Exchange of Global Warrant or Unit. The transfer and
exchange of the Global Warrant or Unit or beneficial interests therein shall be
effected through the Depository, in accordance with this Warrant Agreement and
the procedures of the Depository therefor. Notwithstanding any other provisions
of this Warrant Agreement, the Global Warrant or Unit may not be transferred as
a whole except by the Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of the Depository or by
the Depository or any such nominee to a successor Depository or a nominee of
such successor Depository: provided, that:
(i) if the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository for the Global Warrant or
Unit and a successor Depository for the Global Warrant or Unit is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) if the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive
Warrants or Units under this Warrant Agreement; or
(iii) immediately following the Separation Date; the Company shall
execute and the Warrant Agent shall countersign and deliver, Definitive Warrants
or Units in an aggregate number equal to the number of Warrants or Units
evidenced by the Global Warrant or Unit, in exchange for such Global Warrant or
Unit.
(d) Transfer of a Beneficial Interest in Global Warrant or Unit for a
Definitive Warrant or Unit. Upon receipt by the Warrant Agent of written
transfer instructions (or such other form of instructions as is customary for
the Depository) from the Depository (or its nominee) on behalf of any person
having a beneficial interest in the Global Warrant or Unit, the Warrant Agent
shall cause, in accordance with the standing instructions and procedures
existing between the Depository and the Warrant Agent (the "Standing
Instructions"), the number of Warrants and Warrant Shares or Units represented
by the Global Warrant or Unit to be reduced and, following such reduction, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
transferee,
<PAGE> 28
24
as the case may be, a Definitive Warrant or Unit. Definitive Warrants or Units
issued in exchange for a beneficial interest in the Global Warrant or Unit shall
be registered in such names and in such authorized denominations as the
Depository shall instruct the Warrant Agent.
(e) Cancellation and/or Adjustment of Global Warrant or Unit. At such time
as all beneficial interests in the Global Warrant or Unit have either been
exchanged for Definitive Warrants or Units, exercised or cancelled, the Global
Warrant or Unit shall be returned to or retained and cancelled by the Warrant
Agent. At any time prior to such cancellation, if any beneficial interest in the
Global Warrant or Unit is exchanged for Definitive Warrants or Units, exercised
or cancelled, the number of Warrants and Warrant Shares represented by such
Global Warrant or Unit shall be reduced and an endorsement shall be made on such
Global Warrant or Unit by the Warrant Agent to reflect such reduction.
[INTENTIONALLY OMITTED].
SECTION 5.3 Special Transfer Provisions. The following provisions
shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. Subject
to Section 2.5, the following provisions shall apply with respect to the
registration of any proposed transfer of Warrants or Units to any Institutional
Accredited Investor that is not a QIB (excluding Non-U.S. Persons):
(i) The Warrant Agent shall register the transfer of any
Warrant Certificate, if (x)(A) the requested transfer is at
least two years after the Issue Date and such transferor is
not an affiliate of the Company or (B) the proposed transferee
has delivered to the Warrant Agent certificates substantially
in the forms of Exhibit B hereto and (y) in the case of a
transfer pursuant to clause D, E or F of the legend on the
Warrant, the proposed transferee has delivered to the Warrant
Agent and the Company, if requested, an opinion of counsel
acceptable to the Warrant Agent or the Company that such
transfer is in compliance with the Securities Act.
(b) Transfers to QIBs. Subject to Section 2.5, the following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a QIB:
(ii) If the Warrants or Units to be transferred are
represented by (x) Restricted Definitive Warrants or Units,
the Warrant Agent shall register the transfer if it has
received from such transferor a certificate substantially in
the form of Exhibit B hereto that the sale has been made in
compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of
Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is
purchasing the Warrants or Units for its own account or an
account with respect to which it exercises sole investment
discretion and that
<PAGE> 29
25
it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A and upon
the transfer referred to in this clause (x), the transferee
shall take an interest in the Global Warrant or Unit or (y) an
interest in the Global Warrant or Unit, the transfer of such
interest may be effected only through the book-entry system
maintained by DTC.
(c) General. By its acceptance of any Warrants or Units represented
by a Warrant Certificate bearing the legend in Section 2.2, each Holder of such
Warrants or Units acknowledges the restrictions on transfer of such Warrants or
Units set forth in this Agreement and in the legend and agrees that it will
transfer such Warrants or Units only as provided in this Agreement. The Warrant
Agent shall not register a transfer of any Warrants or Units unless such
transfer complies with the requirements of this Section 5.4. In connection with
any transfer of Warrants or Units, each Holder agrees by its acceptance of
Warrants or Units to furnish the Warrant Agent or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act and applicable state "blue sky" laws; provided, however,
that the Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information. The Warrant Agent's only
obligation to enforce the transfer restrictions of this Agreement shall be to
require the certifications and opinions specifically required by this Section
5.4 as a condition to a transfer.
(d) Records. The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section 5.3 hereof
or this Section 5.4. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Warrant Agent.
SECTION 5.4 Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants or Units represented thereby shall, if surrendered to the Company,
be delivered to the Warrant Agent, and all Warrant Certificates surrendered or
so delivered to the Warrant Agent shall be promptly canceled by the Warrant
Agent and shall not be reissued by the Company and, except as provided in this
Article V in case of an exchange or in Article III hereof in case of the
exercise of less than all the Warrants represented thereby or in case of a
mutilated Warrant Certificate, no Warrant Certificate shall be issued hereunder
in lieu thereof. The Warrant Agent shall deliver to the Company from time to
time or otherwise dispose of such canceled Warrant Certificates as the Company
may direct in writing.
<PAGE> 30
26
ARTICLE VI
Warrant Agent
SECTION 6.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment. The Warrant Agent shall have the powers and authority granted to
and conferred upon it in the Warrant Certificates and hereby and such further
powers and authority to act on behalf of the Company as the Company may
hereafter grant to or confer upon it. All of the terms and provisions with
respect to such powers and authority contained in the Warrant Certificates are
subject to and governed by the terms and provisions hereof.
SECTION 6.2 Rights and Duties of Warrant Agent.
(a) Agent for the Company. In acting under this Warrant Agreement
and in connection with the Warrant Certificates, the Warrant Agent is acting
solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel satisfactory
to it, and the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall incur
no liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate, notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be obligated to
perform only such duties as are herein and in the Warrant Certificates
specifically set forth and no implied duties or obligations shall be read into
this Agreement or the Warrant Certificates against the Warrant Agent. The
Warrant Agent shall not be under any obligation to take any action hereunder
which may tend to involve it in any expense or liability the payment of which
within a reasonable time is not, in its opinion, assured to it or for which it
does not receive indemnity if such indemnity is requested. The Warrant Agent
shall not be accountable or under any duty or responsibility for the use by the
Company of any of the Warrant Certificates countersigned by the Warrant Agent
and delivered by it to the Holders or on behalf of the Holders pursuant to this
Agreement or for the application by the Company of the proceeds of the Warrants.
The Warrant Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained herein
or in the Warrant Certificates or in the case of the receipt of any written
demand from a Holder with respect to such default, including any duty or
responsibility to initiate or attempt to initiate any proceedings at law or
otherwise.
<PAGE> 31
27
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the Warrant Number or the Exercise Price, or with respect to the nature or
extent of any adjustment when made, or with respect to the method employed, or
herein or in any supplemental agreement provided to be employed, in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value of any shares of Common Stock or of any securities or property which may
at any time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Article IV, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates upon the surrender of any Warrant Certificate
for the purpose of exercise or upon any adjustment pursuant to Article IV, or to
comply with any of the covenants of the Company contained in Article IV, except
for such responsibility as may arise from the failure of the Warrant Agent to
perform its obligations hereunder.
SECTION 6.3 Individual Rights of Warrant Agent. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or its
affiliates or become pecuniarily interested in transactions in which the Company
or its affiliates may be interested, or contract with or lend money to the
Company or its affiliates or otherwise act as fully and freely as though it were
not the Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
SECTION 6.4 Warrant Agent's Disclaimer. The Warrant Agent shall not
be responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Warrant Certificates and it shall not be responsible for
any statement in this Agreement or the Warrant Certificates other than its
countersignature thereon.
SECTION 6.5 Compensation and Indemnity. The Company agrees to pay
the Warrant Agent the compensation to be agreed upon with the Company for all
services to be rendered by the Warrant Agent and to reimburse the Warrant Agent
upon request for all reasonable out-of-pocket expenses incurred by it, including
the reasonable compensation and expenses of the Warrant Agent's agents and
counsel, in connection with the services rendered hereunder. The Company shall
indemnify the Warrant Agent against any loss, liability or expense (including
reasonable agents' and attorneys' fees and expenses) incurred by it without
negligence on its part arising out of or in connection with the acceptance or
performance of its duties under this Agreement. The Warrant Agent shall notify
the Company promptly of any claim for which it may seek indemnity. The Company
need not reimburse any expense or indemnify against any loss or liability
incurred by the Warrant Agent through willful misconduct or gross negligence.
The Company's payment obligations pursuant to this Section 6.5 shall survive the
termination of this Agreement.
SECTION 6.6 Successor Warrant Agent.
(a) The Company To Provide Warrant Agent. The Company agrees for the
benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
<PAGE> 32
28
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 90 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective. Any removal under this
Section 6.6 shall take effect upon the appointment by the Company as hereinafter
provided of a successor Warrant Agent (which shall be a bank or trust company
authorized under the laws of the jurisdiction of its organization to exercise
corporate trust powers) and the acceptance of such appointment by such successor
Warrant Agent.
(c) The Company To Appoint Successor. In case at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law; or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up of or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent (or, in the absence of such appointment within 60 days after the
notice of resignation or removal, either party to the underwriting agreement may
petition the appointment of a successor by a court of competent jurisdiction.)
Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by
the successor Warrant Agent of such appointment, the Warrant Agent shall cease
to be Warrant Agent hereunder; provided, however, that in the event of the
resignation of the Warrant Agent under this subsection (c), such resignation
shall be effective on the earlier of (i) the date specified in the Warrant
Agent's notice of resignation and (ii) the appointment and acceptance of a
successor Warrant Agent hereunder. As soon as practicable after appointment of
the successor Warrant Agent, the Company shall cause written notice of the
change in the Warrant Agent to be given to each of the registered holders of the
Warrants in the manner provided for in Section 7.7 hereof. However, failure to
give any notice provided for in this clause (c) or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be.
(d) Successor Expressly To Assume Duties. Any successor Warrant
Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor
<PAGE> 33
29
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights and obligations of such predecessor with like effect as if
originally named as Warrant Agent hereunder, and such predecessor, upon payment
of its charges and disbursements then unpaid, shall thereupon become obligated
to transfer, deliver and pay over, and such successor Warrant Agent shall be
entitled to receive, all monies, securities and other property on deposit with
or held by such predecessor, as Warrant Agent hereunder.
(e) Successor by Merger. Any corporation into which the Warrant
Agent hereunder may be merged or converted or any corporation with which the
Warrant Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its corporate trust business; provided that it shall be
qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE VII
Miscellaneous
SECTION 7.1 [INTENTIONALLY OMITTED.]
SECTION 7.2 SEC Reports and Other Information. Notwithstanding that
the Company may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall, for all periods ending after the
date of this Warrant Agreement, file with the SEC and thereupon provide the
Warrant Agent and Holders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections, provided however, that the Company shall not be obligated to file
such documents and reports with the SEC if the SEC will not accept them.
SECTION 7.3 Rule 144A. The Company hereby agrees with each Holder,
for so long as any Warrants or Warrant Shares remain outstanding and such
Warrants or Warrant Shares are "restricted securities" as defined in Rule 144
under the Securities Act and during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to any Holder or beneficial owner of Warrants or Warrant
Shares in connection with any sale thereof and any prospective purchaser of such
Warrants or Warrant Shares from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Warrants or Warrant Shares pursuant to Rule 144A.
SECTION 7.4 Persons Benefitting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
<PAGE> 34
30
SECTION 7.5 Rights of Holders. Except as expressly contemplated
herein, holders of unexercised Warrants are not entitled (i) to receive
dividends or other distributions with respect to the Common Stock, (ii) to
receive notice of or vote at any meeting of the stockholders, (iii) to consent
to any action of the stockholders, (iv) to exercise any preemptive right or to
receive notice of any other proceedings of the Company or (v) to exercise any
other rights whatsoever as stockholders of the Company.
SECTION 7.6 Amendment. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defects or
inconsistencies contained herein or making any other change that does not
materially adversely affect the rights of the Holders; provided, however, that
the Company determines that such change shall not materially adversely affect
the rights of the holders, which such determination may be relied upon by the
Warrant Agent. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of the Holders shall require the written consent
of the Holders of a majority of the then outstanding Warrants. The consent of
each Holder affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided in Article IV as of the Issue Date of the Warrants). In determining
whether the Holders of the required number of Warrants have concurred in any
direction, waiver or consent, Warrants owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Warrant
Agent shall be protected in relying on any such direction, waiver or consent,
only Warrants which the Warrant Agent knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
SECTION 7.7 Notices. Any notice or communication shall be in writing
and delivered in Person or mailed by first-class mail addressed as follows:
if to the Company:
American Restaurant Group, Inc.
450 Newport Center Drive
6th Floor
Newport Beach, California 92660
Attention: William J. McCaffrey
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10012
Attention: Philip T. Ruegger, III
if to the Warrant Agent:
<PAGE> 35
31
U. S. Trust Company of California, N.A.
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Department
The Company or the Warrant Agent by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to
the Holder at the Holder's address as it appears on the register in which the
Company shall provide for the registration of Warrants and Warrant Shares and of
transfers and exchanges of Warrants and Warrant Shares and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY, ON BEHALF OF
ITSELF, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY,
ON BEHALF OF ITSELF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 7.9 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.10 Multiple Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 7.11 Table of Contents. The table of contents and headings
of the Articles and Sections of this Agreement have been inserted for
convenience of reference
<PAGE> 36
32
only, are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
SECTION 7.12 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 7.13 Further Assurances. From time to time on and after the
date hereof, the Company shall deliver or cause to be delivered to the Warrant
Agent such further documents and instruments and shall do and cause to be done
such further acts as the Warrant Agent shall reasonably request (it being
understood that the Warrant Agent shall have no obligation to make such request)
to carry out more effectively the provisions and purposes of this Agreement, to
evidence compliance herewith or to assure itself that it is protected hereunder.
<PAGE> 37
33
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ William J. McCaffrey, Jr.
-------------------------------
Name: William J. McCaffrey, Jr.
-------------------------------
Title: V.P. & Chief Financial Officer
--------------------------------
U.S. TRUST COMPANY OF CALIFORNIA, N.A., as
Warrant Agent,
By: /s/ Gus Kourkoulis
--------------------
Name: Gus Kourkoulis
--------------------
Title: Authorized Officer
-------------------
<PAGE> 38
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH AMERICAN RESTAURANT GROUP, INC. ("THE
COMPANY") ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR IN OFFSHORE TRANSACTIONS AND
WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS OF SUCH TERMS AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE WARRANT AGENT.
<PAGE> 39
2
[Unless and until it is exchanged in whole or in part for Warrants
in definitive form, this Warrant may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor depository or a nominee of such successor
depository. The Depository Trust Company ("DTC") (55 Water Street, New York, New
York) shall act as the depository until a successor shall be appointed by the
Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]*
- --------
* To be included only if the Warrant is in global form.
<PAGE> 40
EXERCISABLE ONLY IF COUNTERSIGNED BY THE
WARRANT AGENT AS PROVIDED HEREIN
[Prior to the Separation Date (as defined in the Warrant Agreement),
this Warrant Certificate cannot be transferred or exchanged unless attached to
Preferred Stock.]*
WARRANTS TO PURCHASE COMMON STOCK OF
AMERICAN RESTAURANT GROUP, INC.
VOID AFTER 5 P.M. NEW YORK CITY TIME ON THE EARLIER
OF THE PUBLIC COMPANY DATE (AS DEFINED IN THE
WARRANT AGREEMENT) AND AUGUST 15, 2008
No. [ ] Certificate for ______ Warrants
THIS CERTIFIES THAT, [ ], is the registered holder of the
number of Warrants set forth above (the "Warrants"). Each Warrant entitles the
Holder thereof, at its option and subject to the provisions contained herein and
in the Warrant Agreement referred to below, to purchase from American Restaurant
Group, Inc., a Delaware corporation ("the Company"), initially 2.66143 shares of
Common Stock, $0.01 par value, of the Company (the "Common Stock") at the per
share exercise price of $ .01 (the "Exercise Price"). This Warrant Certificate
shall terminate and become void as of the close of business on the earlier of
(i) the Public Company Date (as defined in the Warrant Agreement) and (ii)
August 15, 2008 (the "Expiration Date") or upon the exercise hereof as to all
the shares of Common Stock subject hereto. The number of shares purchasable upon
exercise of the Warrants and the Exercise Price per share shall be subject to
adjustment from time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of February 25, 1998 (the "Warrant Agreement"),
between the Company and U. S. Trust Company of California, N.A. (the "Warrant
Agent," which term includes any successor Warrant Agent under the Warrant
Agreement), and is subject to the terms and provisions contained in the Warrant
Agreement, to all of which terms and provisions the Holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company, the Warrant Agent
and the Holders of the Warrants. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Warrant Agreement. A copy of the
Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Warrant Agent at U.S. Trust Company of California, N.A.,
515 S. Flower Street, Suite 2700, Los Angeles, California 90071, attention of
Corporate Trust Department.
In no event shall a Holder be entitled to exercise a Warrant, unless
(i) a registration statement filed under the Securities Act in respect of the
issuance of the Warrant Shares is then effective; provided, however, that in no
event shall the Company be required to file a Registration Statement in order to
permit a Holder to exercise a Warrant, or (ii) an exemption from the
registration requirements is available under the Securities Act for the
- --------
* To be included only if the Warrant is a Unit Warrant.
<PAGE> 41
2
issuance of the Warrant Shares (and the delivery of any other securities for
which the Warrants may at the time be exercisable) at the time of such exercise
and, if requested by the Company, an opinion of counsel, satisfactory in form
and substance to the Company, confirms such exemption.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by presentation of this Warrant Certificate.
The term "Holder" as used herein shall mean, prior to the Separation
Date (as defined in the Warrant Agreement), the registered owner of the
Company's Preferred Stock to which this Warrant Certificate is initially
attached, and after such Separation Date, the person in whose name at the time
this Warrant Certificate shall be registered upon the books to be maintained by
the Warrant Agent for that purpose pursuant to Section 5.1 of the Warrant
Agreement.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time or
from time to time on any Business Day commencing on the Issue Date; provided,
however, that no Warrant shall be exercisable after the Expiration Date.
The Holder may exercise the Warrants evidenced hereby by providing
certain information set forth on the back hereof, and by paying in full in cash
or by certified check or official bank check or by bank wire transfer, in each
case, in immediately available funds, the Warrant Price for each Warrant
exercised to the Warrant Agent and by surrendering this Warrant Certificate,
with the purchase form on the back hereof duly executed, at the corporate trust
office of Warrant Agent currently at the address specified on the reverse
hereof, and upon compliance with and subject to the conditions set forth herein
and in the Warrant Agreement.
In lieu of exercising the Warrant by paying in full the Exercise
Price, the Warrant holder may, from time to time, convert this Warrant (a
"Warrant Conversion"), in whole or in part, into a number of shares of Common
Stock determined by dividing (a) the aggregate Current Market Value of the
number of Warrant Shares represented by the Warrants converted, minus the
aggregate Exercise Price for such Warrant Shares (and any other required
amounts), by (b) the Current Market Value of one Warrant Share.
Prior to the Separation Date, this Warrant Certificate may be
exchanged or transferred only together with the Preferred Stock to which this
Warrant Certificate was initially attached, and only for the purpose of
effecting, or in conjunction with, an exchange or transfer of such Preferred
Stock. After such date, this Warrant Certificate may be registered when this
Warrant Certificate is surrendered at the corporate trust office of the Warrant
Agent by the registered owner or his assigns, in person or by any attorney duly
authorized in writing, in the manner and subject to the limitations provided in
the Warrant Agreement.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. Except as provided in the immediately preceding paragraph, and
subject to the terms of the Warrant Agreement, after countersignature
<PAGE> 42
3
by the Warrant Agent and prior to the expiration of this Warrant Certificate,
this Warrant Certificate may be exchanged at the corporate trust office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for Warrant Certificates
representing the same aggregate number of Warrants. No fractional Warrant Shares
will be issued upon the exercise of the Warrants, but the Company shall pay an
amount in cash equal to the Market Price for one Warrant Share on the trading
day immediately preceding the date the Warrant is exercised, multiplied by the
fraction of a Warrant Share that would be issuable on the exercise of any
Warrant.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 5.2 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
All shares of Common Stock issuable by the Company upon the exercise
of the Warrants shall, upon such issue, be duly and validly issued and fully
paid and nonassessable.
The Holder in whose name the Warrant Certificate is registered may
be deemed and treated by the Company and the Warrant Agent as the absolute owner
of the Warrant Certificate for all purposes whatsoever and neither the Company
nor the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the rights
of a stockholder of the Company.
<PAGE> 43
4
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
AMERICAN RESTAURANT GROUP, INC.
By:
---------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
- ---------------------
Secretary
DATED:
Countersigned:
U.S. Trust Company of California, N.A.,
as Warrant Agent
By:
----------------------
Authorized Signatory
<PAGE> 44
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS*
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
Number of
Warrants in
Amount of this Global
increase/ Warrant Signature of
decrease in Number following authorized
Date of of Warrants in such increase/ officer of
Exchange this Global Warrant decrease Warrant Agent
- --------
* To be included only if the Warrant is in global form.
<PAGE> 45
FORM OF ELECTION TO PURCHASE OR CONVERT
(To Be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive [_________ shares of Common
Stock and herewith tenders payment for such shares to the order of American
Restaurant Group, Inc. in the amount of $___________ in accordance with the
terms hereof.] [the number of shares of Common Stock determined by dividing (a)
the aggregate Current Market Value of the number of shares of Common Stock
represented by the Warrants hereby converted pursuant to a Warrant Conversion,
minus the aggregate Exercise Price for such shares (and any other required
amounts) by (b) the Current Market Price of one share of Common Stock.]
The undersigned requests that a certificate for such shares be
registered in the name of___________________, whose address is _______________
and that such shares be delivered to _______________ whose address is
________________.
If said number of shares is less than all of the shares of Common
Stock purchasable or issuable upon conversion hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of___________________________ , whose
address is___________________ , and that such Warrant Certificate be delivered
to____________________________ , whose address is _______________________.
Signature(s):
---------------------
NOTE: The above signature(s) must correspond
with the name written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever. If
this Warrant is held of record by two or
more joint owners, all such owners must
sign.
Date:
--------------------------
Signature Guaranteed*:
-------------------
NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
program:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP):
(3) The Stock Exchange Medallian Program (SEMP).
<PAGE> 46
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns
and transfers unto whose address is
and whose social security number or other identifying number is ,
the within Warrant Certificate, together with all rights, title and interest
therein and to the Warrants represented thereby, and does hereby irrevocably
constitute and appoint , attorney, to transfer said Warrant Certificate on
the books of the within-named Company, with full power of substitution in the
premises.
Signature(s):
----------------------
NOTE: The above signature(s) must correspond with the
name written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever.
If this Warrant is held of record by two or more
joint owners, all such owners must sign.
Date:
------------------
Signature Guaranteed*:
-----------------
NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
program:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP):
(3) The Stock Exchange Medallian Program (SEMP).
<PAGE> 47
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of American Restaurant
Group, Inc.
This Certificate relates to Warrants initially to purchase _________
shares of Common Stock of American Restaurant Group, Inc. held in* |_|
book-entry or * |_| definitive form by (the "Transferor").
The Transferor* by written order, has requested the Warrant Agent:
|_| to deliver, in exchange for its beneficial interest in the Global Warrant
held by the depository, a Warrant or Warrants in definitive, registered
form of authorized denominations and an aggregate amount equal to its
beneficial interest in such Global Warrant (or the portion thereof
indicated above); or
|_| to exchange or register the transfer of a Warrant or Warrants. In
connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to such Warrants and that the transfer of this
Warrant is pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or does not
require registration under the Securities Act because such Warrant:
|_| is being acquired for the Transferor's own account, without
transfer;
|_| is being transferred pursuant to an effective registration
statement;
|_| is being transferred to a qualified institutional buyer (as defined
in Rule144A under the Securities Act), in reliance on such Rule
144A;
|_| is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
|_| is being transferred pursuant to Rule 144 under the Securities Act;
**
<PAGE> 48
2
|_| is being transferred pursuant to another exemption from the
registration requirements of the Securities Act
(explain:___________________ ).**
[INSERT NAME OF TRANSFEROR]
By: Date:
--------------- ----------------
- ---------
* Check applicable box.
** If this box is check, this certificate must be accompanied by an opinion
of counsel to the effect that such transfer is in compliance with the
Securities Act.
<PAGE> 49
EXHIBIT C
[FORM OF FACE OF UNIT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH AMERICAN RESTAURANT GROUP, INC. ("THE
COMPANY") ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR IN OFFSHORE TRANSACTIONS AND
WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS OF SUCH TERMS AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE WARRANT AGENT.
[Unless and until it is exchanged in whole or in part for Units in
definitive form, this Unit may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor depository or a nominee of such successor
<PAGE> 50
2
depository. The Depository Trust Company ("DTC") (55 Water Street, New York, New
York) shall act as the depository until a successor shall be appointed by the
Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]**
- --------
* To be included only if the Unit is in global form.
<PAGE> 51
3
UNTIL THE SEPARATION DATE, THIS UNIT CERTIFICATE SHALL BE ATTACHED TO THE
PREFERRED STOCK CERTIFICATE AND WARRANT CERTIFICATE THAT EVIDENCE THE PREFERRED
STOCK AND WARRANTS THAT COMPRISE THIS UNIT.
AMERICAN RESTAURANT GROUP, INC.
UNITS
CONSISTING OF 12% SENIOR PAY-IN-KIND EXCHANGEABLE
PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS
No. [ ] [ ] Units
CUSIP [ ]
THIS CERTIFIES THAT, [ ] is the registered holder of the
number of Units set forth above (the "Units"). Each Unit consists of one share
of 12% Senior Pay-in-Kind Exchangeable Preferred Stock (the "Preferred Stock")
of American Restaurant Group, Inc., a Delaware corporation (the "Company") and
one Warrant to purchase 2.66143 shares of Common Stock, par value $0.01 per
share, of the Company for $0.01 per share (subject to adjustment) at any time
before the close of business on the earlier to occur of the Public Company Date
and August 15, 2008 (the "Expiration Date"). The Preferred Stock and the
Warrants are not separately transferable until the earlier of (i) August 15,
1998, (ii) the date of commencement of the Exchange Offer, (iii) such earlier
date as may be determined by Jefferies & Company, Inc., (iv) the date on which
the Company mails a notice of a Change of Control to holders of the Preferred
Stock, (v) in the event that the Company elects to redeem the Preferred Stock,
the date on which the Company mails notice thereof to the holders of the
Preferred Stock and (vi) the date on which the Company consummates a public
offering of Comon Stock (such earliest date being the "Separation Date"). The
terms of the Warrants are governed by a Warrant Agreement dated as of February
25, 1998 (the "Warrant Agreement") between the Company and U.S. Trust Company of
California, N.A., as Warrant Agent (the "Warrant Agent"), and are subject to the
terms and provisions contained therein, to all of which terms and provisions the
holder of this Unit consents by acceptance hereof. Capitalized terms used and
not otherwise defined herein shall have the respective meanings set forth in the
Warrant Agreement.
Reference is made to the further provisions of the Preferred Stock
and the Warrants evidenced by this Unit on the Preferred Stock Certificate and
Warrant Certificate attached hereto, which will, for all purposes, have the same
effect as if set forth at this place.
<PAGE> 52
4
IN WITNESS WHEREOF, the Company has caused this Unit to be signed
manually or by facsimile by its duly authorized officer.
AMERICAN RESTAURANT GROUP, INC.
By:
-------------------------
Attest:
- -----------------------------
Secretary
DATED:
Countersigned:
[ ],
as Warrant Agent
By:
--------------------------
Authorized Signatory
<PAGE> 53
SCHEDULE OF EXCHANGES OF DEFINITIVE UNITS*
The following exchanges of a part of this Global Unit for definitive Units have
been made:
Number of
Units in
Amount of this Global
increase/ Unit Signature of
decrease in Number following authorized
Date of of Units in such increase/ officer of
Exchange this Global Unit decrease Warrant Agent
- --------
* To be included only if the Unit is in global form.
<PAGE> 54
FORM OF ASSIGNMENT
(To be signed only upon assignment of Unit Certificate)
FOR VALUE RECEIVED, hereby sells, assigns
and transfers unto whose address is
and whose social security number or other identifying number is ,
the within Unit Certificate, together with all rights, title and interest
therein and to the Units represented thereby, and does hereby irrevocably
constitute and appoint , attorney, to transfer said Unit Certificate on
the books of the within-named Company, with full power of substitution in the
premises.
Signature(s):
---------------------------
NOTE: The above signature(s) must correspond with
the name written upon the face of this Unit
Certificate in every particular, without
alteration or enlargement or any change
whatever. If this Unit is held of record by
two or more joint owners, all such owners
must sign.
Date:
-------------------------
Signature Guaranteed*:
---------------------
NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
program:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP):
(3) The Stock Exchange Medallian Program (SEMP).
<PAGE> 1
EXHIBIT 4.3
AMERICAN RESTAURANT GROUP, INC.
$155,000,000 11 1/2 % Senior Secured Notes due 2003
$35,000,000 12 % Senior Pay-In-Kind Exchangeable Preferred Stock
REGISTRATION RIGHTS AGREEMENT
February 25, 1998
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
AMERICAN RESTAURANT GROUP, INC., a Delaware corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc. (the
"Purchaser"), upon the terms set forth in a purchase agreement, dated as of
February 25, 1998 (the "Purchase Agreement"), $155,000,000 aggregate principal
amount of its 11 1/2 % Senior Secured Notes due 2003, (the "Notes") and 35,000
units (the "Preferred Stock Units" or the "Units"), each Unit consisting of (i)
$1,000 initial liquidation preference of 12% Senior Pay-In-Kind Exchangeable
Preferred Stock (the "Preferred Stock"), and (ii) one Common Stock Purchase
Warrant (the "Warrants") initially to purchase 2.66143 shares of the common
stock, par value $.01 per share (the "Common Stock"), of the Company at an
initial exercise price of $.01 per share. As an inducement to the Purchaser to
enter into the Purchase Agreement, the Company and each of the guarantors (the
"Guarantors") named in the Indenture (defined below) agrees with the Purchaser,
for the benefit of the holders of the Securities (defined below) (including,
without limitation, the Purchaser), as follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 6.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2(f).
<PAGE> 2
2
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Class A Exchange Debentures: The Class A 12% Subordinated Exchange
Debentures due 2003 of the Company issuable in exchange for the Preferred Stock.
Class B Exchange Debentures: The Class B 12% Subordinated Exchange
Debentures due 2003 of the Company issuable in exchange for the Exchange
Preferred Stock, identical in all material respects to the Class A Subordinated
Debentures, except for references to series and restrictive legends.
Closing Date or "Issue Date": February 25, 1998.
Company: American Restaurant Group, Inc.
Confidential Information: See Section 6(a).
Effectiveness Date: The 150th day following the Closing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(a).
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Debenture Indenture: means the indenture to be dated as of
the date of issuance of either the Class A Exchange Debentures or Class B
Exchange Debentures between the Company and the Exchange Debenture Trustee.
Exchange Debenture Trustee: means a bank or trust company, as
trustee under the Exchange Debenture Indenture to be selected by the Company
prior to the Exchange Offer.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Notes: The Company's 12% Senior Secured Notes due 2003,
including the guarantees endorsed thereon, identical in all material respects to
the Notes, except for references to series and restrictive legends.
<PAGE> 3
3
Exchange Preferred Stock: The Company's 12% Senior Pay-In-Kind
Exchangeable Preferred Stock, identical in all material respects to the
Preferred Stock, except for references to series and restrictive legends.
Exchange Securities: Collectively, the Exchange Notes and the
Exchange Preferred Stock or the Class B Exchange Debentures, as the case may be.
Filing Date: The 90th day following the Closing Date.
Holder: Each holder of Registrable Securities.
Indenture: The Indenture, dated the date hereof, between the Company
and U.S. Trust Company of California, N.A., as trustee, pursuant to which the
Notes are being issued, as amended or supplemented from time to time, in
accordance with the terms thereof.
Initial Shelf Registration: See Section 3(a).
Losses: See Section 8(a).
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2(f).
Person: Any individual, corporation, partnership, joint stock
company, association joint venture, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other entity.
Private Exchange Notes: See Section 2(g)
Private Exchange Preferred Stock: See Section 2(g)
Private Exchange: See Section 2(g).
Private Exchange Securities: See Section 2(g).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: (i) Notes, (ii) Preferred Stock or Class A
Exchange Debentures, as the case may be, and (iii) Private Exchange Securities.
<PAGE> 4
4
Registration Statement: Any registration statement of the Company
that covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities: The Notes, the Preferred Stock or the Class A
Subordinated Debentures, as the case may be, the Private Exchange Securities and
the Exchange Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(i).
Shelf Registration Statement: The Initial Shelf Registration
Statement and any Subsequent Shelf Registration Statement.
Special Counsel: Counsel chosen by the holders of a majority in
aggregate principal/liquidation amount of Securities.
Subsequent Shelf Registration Statement: See Section 3(b).
Transfer Agent: U.S. Trust Company of California, NA.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if any, the trustee
under any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
<PAGE> 5
5
Weekly Liquidated Damages Amount: See Section 4(a).
2. Exchange Offer
(a) The Company and the Guarantors shall (i) prepare and file with
the SEC promptly after the date hereof, but in no event later than the Filing
Date, a registration statement, or, if applicable, a Shelf Registration
Statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer (the "Exchange Offer")
to the Holders to issue and deliver to such Holders, in exchange for the Notes
and the Preferred Stock or Class A Subordinated Debentures, as the case may be,
a like aggregate principal or liquidation amount, as the case may be, of
Exchange Securities, (ii) use their best efforts to cause the Exchange Offer
Registration Statement to become effective as promptly as practicable after the
filing thereof, but in no event later than the Effectiveness Date, (iii) keep
the Exchange Offer Registration Statement effective until the consummation of
the Exchange Offer pursuant to its terms, and (iv) unless the Exchange Offer
would not be permitted by a policy of the SEC, commence the Exchange Offer and
use their best efforts to issue, on or prior to 180 business days after the
Closing Date, Exchange Securities in exchange for all Notes and Preferred Stock
tendered prior thereto in the Exchange Offer. The Exchange Offer shall not be
subject to any conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the staff of the SEC.
(b) (i) The Exchange Notes shall be issued under, and entitled to
the benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA), (ii) the Exchange Preferred shall be issued in accordance with the
Certificate of Designation relating to the Preferred Stock and have the rights,
powers and preferences specified therein and (iii) the Class B Exchange
Debentures shall be issued under, and be entitled to the benefits of, the
Exchange Debenture Indenture.
(c) In connection with the Exchange Offer, the Company and the
Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal that is an exhibit to the Exchange Offer Registration
Statement and related documents;
(ii) keep the Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) utilize the services of a depository for the Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes and Preferred
Stock at any time prior to the close of business, New York time, on the last
Business Day on which the Exchange Offer shall remain open; and
<PAGE> 6
6
(v) otherwise comply with all laws applicable to the Exchange
Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company and the Guarantors shall:
(i) accept for exchange all Notes and Preferred Stock or Class
A Exchange Debentures, as the case may be, validly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee, Transfer Agent or Exchange
Debenture Trustee, as the case may be, for cancellation all Notes and Preferred
Stock or Class A Exchange Debentures, as the case may be, so accepted for
exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
to each Holder of Notes, Exchange Notes equal in aggregate principal amount to
the Notes of such Holder so accepted for exchange and cause the Transfer Agent
to execute and deliver to each Holder of Preferred Stock, Exchange Preferred
Stock equal in aggregate liquidation preference amount to the Preferred Stock of
such Holder so accepted for exchange or, in the event that such Preferred Stock
had previously been exchanged for Class A Exchange Debentures to cause the
Exchange Debenture Trustee to authenticate and deliver, Class B Exchange
Debentures equal in aggregate principal amount to the Class A Exchange
Debentures of such Holder so accepted for exchange.
(e) Interest on each Exchange Note and Private Exchange Note and, if
applicable, each Class B Exchange Debenture and Private Exchange Debenture, will
accrue from the last interest payment date on which interest was paid on the
Notes or Class A Exchange Debentures surrendered in exchange therefor or, if no
interest has been paid on the Notes or Class A Exchange Debentures, from the
date of original issue of the Notes or Class A Exchange Debentures. Each
Exchange Note and Private Exchange Note or Class B Exchange Debenture and
Private Exchange Debenture shall bear interest at the rate set forth thereon;
provided, that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes or Class A Exchange
Debentures from time to time during such period. Dividends on each Exchange
Preferred Stock and Private Exchange Preferred Stock will effectively accrue
from the last dividend payment date on which dividends were paid on the
Preferred Stock surrendered for exchange therefor or, if no dividends had been
paid on the Preferred Stock, from the date of original issue of the Preferred
Stock. The Exchange Preferred Stock and Private Exchange Preferred Stock shall
accrue dividends at the rate set forth thereon; provided, that dividends with
respect to the period prior to the issuance thereof shall accrue at the rate or
rates borne by the Preferred Stock from time to time during such period.
(f) The Company and the Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," containing a summary statement of the positions
taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is
<PAGE> 7
7
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including (without limitation) all
Participating Brokers-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Securities. The
Company shall use its best efforts to keep the Exchange Offer Registration
Statement effective and to amend and supplement the Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirement of the
Securities Act for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Securities; provided that such
period shall not exceed 90 days after consummation of the Exchange Offer (as
such period may be extended pursuant to the last paragraph of Section 6 hereof
(the "Applicable Period")).
(g) If, prior to consummation of the Exchange Offer, the Purchaser
holds any Notes and/or Preferred Stock or Class A Exchange Debentures, as the
case may be, acquired by it and having the status as an unsold allotment in the
initial distribution, the Company shall, upon the request of the Purchaser,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue (in the case of debt securities, pursuant to the same indentures as
the Exchange Securities) and deliver to the Purchaser, in exchange for the Notes
and/or Preferred Stock or Class A Exchange Debentures, as the case may be, held
by the Purchaser (the "Private Exchange"), a like principal amount of debt
securities (the "Private Exchange Notes") of the Company and/or a like initial
liquidation preference amount of preferred stock (the "Private Exchange
Preferred Stock") or Exchange Debentures (the "Private Exchange Debentures"), as
the case may be, of the Company that are identical to the Exchange Securities
(collectively, the "Private Exchange Securities") except that such Private
Exchange Securities shall continue to bear thereon the legend restricting
transfer. The Private Exchange Securities shall bear the same respective CUSIP
numbers as the Exchange Securities.
(h) The Company may require each Holder participating in the
Exchange Offer to represent to the Company that at the time of the consummation
of the Exchange Offer (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) if such Holder is not a broker-dealer, that it is not
engaged in and does not intend to engage in, the distribution of the Exchange
Securities, (iv) if such Holder is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Notes and/or Preferred Stock that
were acquired as a result of market-making or other trading activities and that
it will deliver a prospectus, as required by law, in connection with any resale
of such Exchange Securities, and (v) if such Holder is an affiliate of the
Company, that it will comply with the registration and prospectus delivery
requirements of the Securities Act applicable to it.
<PAGE> 8
8
(i) If (i) applicable interpretations of the staff of the SEC would
not permit the consummation of the Exchange Offer prior to the Effectiveness
Date, (ii) subsequent to the consummation of the Private Exchange but within 270
days of the Closing Date, the Purchaser so requests with respect to Securities
held by the Purchaser and having the status as an unsold allotment, (iii) the
Exchange Offer is not consummated within 180 days of the Closing Date for any
reason or (iv) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities Act)
and, in either case contemplated by this clause (iv), such Holder notifies the
Company within six months of consummation of the Exchange Offer, then the
Company shall promptly deliver to the Holders (or in the case of any occurrence
of the event described in clause (iv) hereof, to any such Holder) and the
Trustee, Transfer Agent or Exchange Debenture Trustee notice thereof (the "Shelf
Notice") and shall as promptly as possible thereafter file an Initial Shelf
Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii) or (iii), then this Section 3 shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this Section 3 shall apply solely with respect
to (i) Notes and/or Preferred Stock or Class A Exchange Debentures, as the case
may be, held by any Holder thereof not permitted to participate in the Exchange
Offer and (ii) Exchange Securities that are not freely tradeable as contemplated
by Section 2(i)(iv) hereof, provided in each case that the relevant Holder has
duly notified the Company within six months of the Exchange Offer as required by
Section 2(i)(iv).
(a) Initial Shelf Registration Statement. The Company and the
Guarantors shall prepare and file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Securities (the "Initial Shelf Registration Statement"). If the
Company and the Guarantors have not yet filed an Exchange Offer, the Company and
the Guarantors shall file with the SEC the Initial Shelf Registration Statement
on or prior to the Filing Date. Otherwise, the Company and the Guarantors shall
use their best efforts to file the Initial Shelf Registration Statements within
45 days after an obligation to file such Initial Shelf Registration arises. The
Initial Shelf Registration Statement shall be on Form S-1 or another appropriate
form permitting registration of such Registrable Securities for resale by such
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company and the Guarantors
shall (i) not permit any securities other than the Registrable Securities to be
included in any Shelf Registration, and (ii) use their best efforts to cause the
Initial Shelf Registration Statement to be declared effective as promptly as
practicable after the filing thereof and to keep the Initial Shelf Registration
Statement continuously effective until the date that is 24 months after the
Effectiveness Date (subject to extension pursuant to the last paragraph of
Section 6 hereof) (the "Effectiveness Period"), or such shorter period ending
when (i) all Registrable Securities covered by the Initial Shelf
<PAGE> 9
9
Registration Statement have been sold or (ii) a Subsequent Shelf Registration
Statement covering all of the Registrable Securities has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations Statements. If any Shelf
Registration Statement ceases to be effective for any reason at any time during
the Effectiveness Period (other than because of the sale of all of the
Registrable Securities registered thereunder), the Company and the Guarantors
shall use their best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent
Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is
filed, the Company and the Guarantors shall use their best efforts to cause the
Subsequent Shelf Registration Statement to be declared effective as soon as
practicable after such filing and to keep such Subsequent Shelf Registration
Statement continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration Statement, and any Subsequent Shelf Registration Statement,
was previously effective.
(c) Notwithstanding the foregoing provisions of this Section 3 (but
subject to Section 4 below), the Company shall not be required to amend or
supplement a Registration Statement, any related Prospectus or any document
incorporated therein by reference, for a period not to exceed an aggregate of 60
days in any calendar year if, (i) an event occurs and is continued as a result
of which the Shelf Registration Statement would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and (ii) the
Company determines in its good faith judgment that the disclosure of such event
at such time would have a material adverse effect on (a) the business,
operations or prospects of the Company or (b) a pending material business
transaction that has not yet been publicly disclosed.
4. Liquidated Damages.
(a) The Company and the Guarantors acknowledge and agree that the
holders of Registrable Securities will suffer damages, and that it would not be
feasible to ascertain the extent of such damages with precision, if the Company
and the Guarantors fail to fulfill their obligations hereunder. Accordingly, in
the event of such failure, the Company and the Guarantors jointly and severally
agree to pay liquidated damages to each Holder under the circumstances and to
the extent set forth below:
(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration Statement is declared effective by the SEC on or
prior to the Effectiveness Date; or
(ii) the Exchange Offer, if permitted, has not been consummated
within 180 days after the Closing Date; or
<PAGE> 10
10
(iii) if a Shelf Registration Statement is filed and declared
effective by the SEC but thereafter ceases to be effective without being
succeeded within 45 days by a Subsequent Shelf Registration Statement filed and
declared effective;
(each of the foregoing a "Registration Default," and the date on which the
Registration Default occurs being referred to herein as an "Event Date").
Upon the occurrence of any Registration Default, the Company shall
pay, or cause to be paid (and the Guarantors hereby guarantee the payment of),
in addition to amounts otherwise due under the Indenture, the Exchange Debenture
Indenture and the Registrable Securities, as liquidated damages, and not as a
penalty, to each holder of a Registrable Security to which such Registration
Default is applicable, an additional amount (the "Weekly Liquidated Damages
Amount") equal to (A) for each weekly period beginning on the Event Date for the
first 90-day period immediately following such Event Date, $.05 per week per
$1,000 principal or liquidation amount, as the case may be, of Registrable
Securities held by such holder, and (B) for each weekly period beginning with
the first full week after the 90-day period set forth in the foregoing clause
(A), $.10 per week per $1,000 principal or liquidation amount of Registrable
Securities, as the case may be, held by such holder; provided that such
liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Registration Default) on the date on which all
Registration Defaults have been cured. A Registration Default under clause (i)
above shall be cured on the date that either the Exchange Offer Registration
Statement or the Initial Shelf Registration Statement is declared effective by
the SEC; a Registration Default under clause (ii) above shall be cured on the
date the Exchange Offer is consummated with respect to all Notes and Preferred
Stock or Class A Exchange Debentures validly tendered; and a Registration
Default under clause (iii) above shall be cured on the earlier of (A) the date
on which the applicable Shelf Registration Statement is no longer subject to an
order suspending the effectiveness thereof or proceedings relating thereto or
(B) a Subsequent Shelf Registration Statement is declared effective.
(b) The Company shall notify the Trustee within five Business Days
after each Event Date. The Company will not be required to pay liquidated
damages in respect of more than the Registration Default in respect of any given
period of time. All accrued liquidated damages in respect of the Notes or Class
A Exchange Debentures will be paid in the same manner as interest payments on
the Notes on semiannual damages payment dates that correspond to interest
payment dates for the Notes. All accrued liquidated damages in respect of the
Preferred Stock will be paid on February 15 and August 15 in the same manner (in
cash or with the issuance of additional shares of Preferred Stock) as dividends
on the Preferred Stock.
5. Hold-Back Agreements
The Company and the Guarantors agree not to effect any public sale
pursuant to Rule 144A sale of any securities the same as or similar to those
covered by a Shelf Registration Statement filed pursuant to Section 3 hereof, or
any securities convertible into or exchangeable or exercisable for such
securities, during the 10 days prior to, and during the
<PAGE> 11
11
90-day period beginning on the commencement of a firm commitment underwritten
public distribution of Registrable Securities, where the managing underwriter so
requests.
6. Registration Procedures
In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, each of the Company and each Guarantor shall effect such
registrations to permit the sale of such Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company and each Guarantor shall:
(a) Prepare and file with the SEC on or prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and use its best efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided, that, if (i) such
filing is pursuant to Section 3 or (ii) a Prospectus contained in an Exchange
Offer Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company and the Guarantors shall, if requested, furnish to and afford the
Holders of the Registrable Securities covered by such Registration Statement,
their Special Counsel, each Participating Broker-Dealer, the managing
underwriters, if any, and their counsel, a reasonable opportunity to review and
make available for inspection by such Persons copies of all such documents
(including copies of any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed, such financial and other information
and books and records of the Company and the Guarantors, and cause the officers,
directors and employees of the Company and the Guarantors, Company counsel and
independent certified public accountants of the Company, to respond to such
inquiries, as shall be necessary, in the opinion of respective counsel to such
holders, Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act (it being understood that
a period of five business days shall be deemed to afford such reasonable
opportunity); provided that the foregoing investigation shall be coordinated on
behalf of the Holders by one representative of the Notes and one representative
of the Preferred Stock or Class A Exchange Debentures designated by and on
behalf of such Holders; provided further that the foregoing investigation shall
be conducted by the Purchaser on behalf of the Holders if the Purchaser has
Registrable Securities covered by such Registration Statement. The Company may
require each Holder to agree to keep confidential any non-public information
relating to the Company ("Confidential Information") received by such Holder and
not disclose such Confidential Information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public, other than as a result of a disclosure by such Holder, its
directors, officers, employees, agents or advisors or by any other person
subject to a confidentiality agreement, unless the release of such Confidential
Information is required by law or necessary to respond to inquiries of
regulatory authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors). The Company may
also require each Holder to agree (i) to give the Company prompt notice of any
request to disclose any Confidential Information received by such Holder so that
the
<PAGE> 12
12
Company may seek appropriate protective orders, (ii) to consult with the Company
with respect to the Company's taking steps to restrict or narrow the scope of
such requests, and (iii) if the release of the Confidential Information is
required by law or necessary to respond to inquiries of regulatory authorities,
to give specific written notice to the Company describing the Confidential
Information to be disclosed (as far in advance of its disclosure as is
practicable) and to use its reasonable best efforts to obtain assurances from
the recipient that confidential treatment will be accorded to the Confidential
Information.
(b) Provide an indenture trustee for each class of the Registrable
Securities as applicable, and cause the Indenture (or other indenture relating
to the Registrable Securities) to be qualified under the TIA not later than the
effective date of the first Registration Statement; and in connection therewith,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents required to
be filed with the SEC to enable such indenture to be so qualified in a timely
manner.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers
who so request (i) upon the Company's receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Company pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company and the Guarantors hereby consent to the use of the
Prospectus by each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by, or the sale by Participating Broker-Dealers
of the Exchange Securities pursuant to, such Prospectus and any amendment
thereto.
<PAGE> 13
13
(e) If (A) a Shelf Registration Statement is filed pursuant to
Section 3 or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, notify the selling Holders of
Registrable Securities, their Special Counsel, each Participating Broker-Dealer
and the managing underwriters, if any, promptly (but in any event within two
Business Days), and confirm such notice in writing, (i) when a Prospectus has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act, (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
Prospectus or the initiation of any proceedings for that purpose, (iii) if, at
any time when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the representations and
warranties of the Company or of any Guarantor contained in any agreement
(including any underwriting agreement) contemplated by Section 6(n) below cease
to be true and correct in any material respect, (iv) of the receipt by the
Company or any Guarantor of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration Statement or
any of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (v)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its reasonable efforts to register or qualify (to the extent
required by applicable law), and, if applicable, to cooperate with the selling
Holders of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of, Securities to be included
in a Registration Statement for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer or the managing underwriters reasonably request in
writing; and, if Securities are offered other than through an Underwritten
Offering, the Company shall cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed pursuant to this
Section 6(f) at the expense of the Company; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things which may be reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Securities covered by the applicable
Registration Statement, provided, however, that none of the Company nor the
Guarantors shall be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) to take action that would
<PAGE> 14
14
subject it to general service of process in any jurisdiction where it is not so
subject or (iii) subject it to taxation in any such jurisdiction where it is not
then subject.
(g) Use its reasonable efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Securities for sale in any
jurisdiction, and, if any such order is issued, to use its reasonable best
efforts to obtain the withdrawal of any such order at the earliest possible
time.
(h) If (A) a Shelf Registration Statement is filed pursuant to
Section 3 or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, and if requested by the managing
underwriters, if any, or the Holders of a majority in aggregate
principal/liquidation amount of the Registrable Securities, (i) promptly
incorporate in a Prospectus or post-effective amendment such information as the
managing underwriters, if any, or such Holders reasonably request to be included
therein required to comply with any applicable law and (ii) make all required
filings of such Prospectus or such post-effective amendment as soon as
practicable after the Company has received notification of such matters required
by applicable law to be incorporated in such Prospectus or post-effective
amendment.
(i) If (A) a Shelf Registration Statement is filed pursuant to
Section 3 or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, cooperate with the selling Holders and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company ("DTC"); and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriters, if any, or Holders may reasonably request.
(j) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 6(e)(v) or 6(e)(vi) above, as promptly as practicable
prepare a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities to whom
such Prospectus will be delivered by a Participating Broker-Dealer, such
Registration Statement or Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
<PAGE> 15
15
(k) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee or transfer agent
with printed certificates for the Securities in a form eligible for deposit with
DTC and (ii) provide a CUSIP number for each of the Securities.
(l) If a Shelf Registration Statement is filed pursuant to Section
3, enter into such agreements (including an underwriting agreement in form,
scope and substance as is customary in underwritten offerings of securities
similar to the Notes and the Preferred Stock or the Class A Exchange Debentures,
as the case may be, as may be appropriate in the circumstances) and take all
such other actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in aggregate
principal/liquidation amount of the Registrable Securities being sold) in order
to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, if such registration is an
Underwritten Registration, (i) make such representations and warranties to the
Holders and the underwriters, if any, with respect to the business of the
Company and its subsidiaries, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings of securities similar to the
Notes and the Preferred Stock or the Class A Exchange Debentures, as the case
may be, as may be appropriate in the circumstances, and confirm the same if and
when reasonably requested; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any, addressed to
each of the underwriters, if any, covering the matters customarily covered in
opinions of counsel to the Issuer requested in underwritten offerings of
securities similar to the Notes and the Preferred Stock or the Class A Exchange
Debentures, as the case may be, as may be appropriate in the circumstances;
(iii) obtain "cold comfort" letters and updates thereof (which letters and
updates (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters) from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters
and each selling Holder, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of securities similar to the Notes and the Preferred
Stock or the Class A Exchange Debentures, as the case may be, as may be
appropriate in the circumstances, and such other matters as reasonably requested
by underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal/liquidation
amount of the Registrable Securities being sold and the managing underwriters,
if any, to evidence the continued validity of the representations and warranties
of the Company and its subsidiaries made pursuant to clause (i) above and to
evidence compliance with any conditions contained in the underwriting agreement
or other similar agreement entered into by the Company. Nothing contained in
this clause (n) requires the Company or the Guarantors, their counsel or their
accountants to make any representations or warranties, to render any legal
opinion or to deliver any comfort letters that are not true.
<PAGE> 16
16
(m) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first day of the
fiscal quarter following each fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date of
a Registration Statement, which statements shall cover said 12-month periods.
(n) If an Exchange Offer or Private Exchange is to be consummated,
upon delivery of the Registrable Securities by such Holders to the Company (or
to such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Company
shall mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, and in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied.
(o) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(p) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such reasonable information regarding such seller or
Participating Broker-Dealer and the distribution of such Registrable Securities
or Exchange Securities as the Company may, from time to time, reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller or Exchange Securities of any Participating
Broker-Dealer who fails to furnish such information promptly after receiving
such request.
Each Holder and each Participating Broker-Dealer agrees by
acquisition of such Registrable Securities or Exchange Securities of any
Participating Broker-Dealer that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 6(e)(ii),
6(e)(iv), 6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue
disposition (in the jurisdictions specified in a notice of a 6(e)(iv) event, and
elsewhere in a notice of a 6(e)(ii), 6(e)(v) or 6(e)(vi) event) of such
Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(j), or until it is advised in writing (the "Advice")
by the Company that offers or sales in a particular jurisdiction may be resumed
or that the use of the applicable Prospectus may be resumed, as the case may be,
and
<PAGE> 17
17
has received copies of any amendments or supplements thereto. If the Company
shall give such notice, each of the Effectiveness Period and the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each seller of such Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 6(j) or (y) the Advice.
7. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company and the Guarantors shall be borne
by the Company and the Guarantors whether or not the Exchange Offer or a Shelf
Registration Statement is filed or becomes effective, including, without
limitation:
(i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Securities or Exchange Securities and determination of the eligibility of
the Registrable Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 6(f), in the
case of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period);
(ii) reasonable printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities
or Exchange Securities in a form eligible for deposit with DTC and of
printing Prospectuses if the printing of Prospectuses is requested by the
managing underwriters, if any, or, in respect of Registrable Securities or
Exchange Securities to be sold by a Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate
principal/liquidation amount of the Registrable Securities included in any
Registration Statement or of such Exchange Securities, as the case may
be);
(iii) reasonable messenger, telephone, duplication, word
processing and delivery expenses incurred by the Company in the
performance of its obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified
public accountants referred to in Section 6(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
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(vi) Securities Act liability insurance, if the Company
so desires such insurance;
(vii) fees and expenses of all other Persons retained by
the Company; internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties); and the expense of any
annual audit; and
(viii) rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to be registered
on any securities exchange.
(b) The Company and the Guarantors shall reimburse the Holders for
the reasonable fees and disbursements of not more than one counsel (in addition
to appropriate local counsel) chosen by the Holders of a majority in aggregate
principal/liquidation amount of the Registrable Securities to be included in any
Registration Statement. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of the
Exchange Securities or Private Exchange Securities in exchange for the Notes and
Preferred Stock or Class A Exchange Debentures, as the case may be; provided
that the Company shall not be required to pay taxes payable in respect of any
transfer involved in the issuance or delivery of any Exchange Security or
Private Exchange Security in a name other than that of the holder of the Note or
Preferred Stock or Class A Exchange Debenture, as the case may be, in respect of
which such Exchange Security or Private Exchange Security is being issued.
(c) Neither the Company or the Guarantors shall be liable for any
underwriting, brokerage, finder's or similar fees, discounts or commissions, if
any, attributable to the sale of the Registrable Securities which discounts,
commissions or taxes shall be paid by the Holders of such Registrable
Securities.
8. Indemnification
(a) Indemnification by the Company. In the event of a Shelf
Registration Statement or in connection with any prospectus delivery pursuant to
an Exchange Offer Registration Statement by the Purchaser or a Participating
Broker-Dealer, as applicable, the Company shall, without limitation as to time,
indemnify and hold harmless each selling Holder and each Participating
Broker-Dealer selling Exchange Securities during the Applicable Period, each
Person who controls each such selling Holder (within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act) and Participating
Broker-Dealer and controlling person, to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees as provided in this Section 8) and expenses (including, without limitation,
reasonable costs and expenses incurred in connection with investigating,
preparing, pursuing or defending against any of the foregoing) (collectively,
"Losses"), as incurred, directly or indirectly caused by, related to, based
upon, arising out of or in connection with any untrue or alleged untrue
statement of a material fact contained in
<PAGE> 19
19
any Registration Statement, Prospectus or form of prospectus, or in any
amendment or supplement thereto, or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses are based upon information relating to such selling Holder or
Participating Broker-Dealer and furnished in writing to the Company (or reviewed
and approved in writing) by such Holder or Participating Broker-Dealer expressly
for use therein; provided, however, that the Company shall not be liable to any
Indemnified Party to the extent that any such losses arise solely out of an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such Indemnified Party or related
holder of a Registrable Security failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such Indemnified Party or the related holder of a Registrable Security to the
person asserting the claim from which such Losses arise, (ii) the Prospectus
would have corrected such untrue statement or alleged untrue statement or
omission or alleged omission, and (iii) the Company has complied with their
obligations under Section 6(e) hereof.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of prospectus,
any amendment or supplement thereto, or any preliminary prospectus in which a
Holder is participating, such Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
or omitted from any information so furnished in writing by such Holder to the
Company expressly for use therein. In no event shall the liability of any
selling Holder be greater in amount than the dollar amount of the proceeds (net
of payment of all expenses) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such indemnified party.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided, that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation
<PAGE> 20
20
or liability except to the extent (but only to the extent) that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal) that the indemnifying parties have been prejudiced
materially by such failure.
The indemnifying party shall have the right, exercisable by giving
written notice to an indemnified party, within 20 business days after receipt of
written notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an indemnified party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless: (1) the
indemnifying party has agreed to pay such fees and expenses; or (2) the
indemnifying party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such indemnified party; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses available to the indemnifying party or such
affiliate or controlling person (in which case, if such indemnified party
notifies the indemnifying parties in writing that it elects to employ separate
counsel at the expense of the indemnifying parties, the indemnifying parties
shall not have the right to assume the defense and the reasonable fees and
expenses of such counsel shall be at the expense of the indemnifying party; it
being understood, however, that, the indemnifying party shall not, in connection
with any one such Proceeding or separate but substantially similar or related
Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties).
No indemnifying party shall be liable for any settlement of any such
Proceeding effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent, or if there be
a final judgment for the plaintiff in any such Proceeding, each indemnifying
party jointly and severally agrees, subject to the exceptions and limitations
set forth above, to indemnify and hold harmless each indemnified party from and
against any and all Losses by reason of such settlement or judgment. The
indemnifying party shall not consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to each indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from all liability
in respect of such Proceeding for which such indemnified party would be entitled
to indemnification hereunder (whether or not any indemnified party is a party
thereto).
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
<PAGE> 21
21
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such statement or omission. The amount paid or payable by
an indemnified party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 8(a) or 8(b) was
available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
8 are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
Each of the Company and each Guarantor covenants that it shall (a)
file the reports required to be filed by it (if so required) under the
Securities Act and the Exchange Act in a timely manner and, if at any time any
such Person is not required to file such reports for so long as the Registrable
Securities are "restricted securities" as defined in Rule 144, it will, upon the
request of any Holder, make publicly available other information necessary to
permit sales pursuant to Rule 144 and Rule 144A and (b) take such further action
as any Holder may reasonably request, all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration
under the Securities Act pursuant to the exemptions provided by Rule 144 and
Rule 144A. Upon the request of any Holder, the Company and the Guarantors shall
deliver to such Holder a written statement as to whether they have complied with
such information and requirements.
<PAGE> 22
22
10. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an Underwritten Offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal/liquidation amount of such Registrable Securities included in such
offering with the consent of the Company, which consent shall not be reasonably
withheld; it being understood that any Underwritten Offering shall include at
least $10,000,000 principal/liquidation amount of the Registrable Securities.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company or any of the
Guarantors of any of its respective obligations under this Agreement, each
Holder, in addition to being entitled to exercise all rights provided herein, in
the Indenture or, in the case of the Purchasers, in the Purchase Agreement, or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each of the
Guarantors agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered into, as
of the date hereof, and shall not enter into, after the date of this Agreement,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal/liquidation
amount of Registrable Securities; provided, that Sections 6(a) and 8 shall not
be amended, modified or supplemented, and waivers or consents to departures from
this proviso may not be given, unless the Company has obtained the written
consent of each Holder. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose securities are being sold pursuant to
a Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority in
aggregate principal/liquidation amount of the Registrable Securities being sold
by such Holders pursuant to such Registration Statement, provided that the
provisions of this sentence
<PAGE> 23
23
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, certified
first-class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by
such holder to the Company in accordance with the provisions of this
Section 11(d), which address initially is, with respect to each holder,
the address of such holder maintained by the Registrar under the
Indenture, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300
South Grand Avenue, Los Angeles, California 90071, telecopy number (213)
687-5600, Attention: Rod A. Guerra, Jr., Esq.; and
(ii) if to the Company or any of the Guarantors,
initially 450 Newport Center Drive, 6th Floor, Newport Beach, California
92660, telecopy number (714) 721-8941, Attention: William J. McCaffrey,
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 11(d), with copies to
Simpson, Thatcher & Bartlett, 425 Lexington Avenue, New York, New York
10017, telecopy number (212) 455-2502, Attention: Philip T. Ruegger, III.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
<PAGE> 24
24
THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELAT ING TO
THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
EACH OF THE COMPANY AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE COMPANY AND EACH GUARANTOR IRREVOCABLY CONSENTS,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR ANY GUARANTOR IN
ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
<PAGE> 25
25
(k) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the holders of such required
percentage.
<PAGE> 26
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
---------------------------------
Name: William J. McCaffrey, Jr.
Title:V.P. & Chief Financial Officer
ARG ENTERPRISES, INC. LOCAL FAVORITE, INC.
By: /s/William J. McCaffrey, Jr. By: /s/William J. McCaffrey, Jr.
--------------------------------- ---------------------------------
Name: William J. McCaffrey, Jr. Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer Title: V.P. & Chief Financial Officer
GRANDY'S, INC. SPOONS RESTAURANTS, INC.
By: /s/William J. McCaffrey, Jr. By: /s/William J. McCaffrey, Jr.
--------------------------------- ---------------------------------
Name: William J. McCaffrey, Jr. Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer Title: V.P. & Chief Financial Officer
SPECTRUM FOODS, INC.
By: /s/William J. McCaffrey, Jr.
---------------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
<PAGE> 27
ARG PROPERTY MANAGEMENT COR-
PORATION
By: /s/William J. McCaffrey, Jr.
---------------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By: /s/Jeffrey K. Weinhuff
---------------------------
Name: Jeffrey K. Weinhuff
Title: Executive Vice President
<PAGE> 1
EXHIBIT 4.4
AMERICAN RESTAURANT GROUP, INC.
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
February 25, 1998
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
American Restaurant Group, Inc. (the "Company"), a Delaware
corporation, proposes to issue and sell to Jefferies & Company, Inc. (the
"Purchaser"), upon the terms set forth in a purchase agreement, dated as of
February 13, 1998 (the "Purchase Agreement"), between the Purchaser and the
Company, 35,000 Units (as defined below), consisting of (i) $35,000,000
aggregate initial liquidation preference amount of 12% Senior Pay-In-Kind
Exchangeable Preferred Stock (the "Preferred Stock") and (ii) 35,000 warrants
(together with the 4,375 warrants (the "Purchaser Warrants") to purchase shares
of the Company's Common Stock (as defined below) issued to the Purchaser
pursuant to the letter agreement dated November 6, 1997 between the Company and
the Purchaser and to others pursuant to the letter agreement dated as of
February 25, 1998 between the Company and TCW Asset Management Co. the
"Warrants") to purchase initially 93,150 shares (together with the shares of
Common Stock underlying the Purchaser Warrants, the "Warrant Shares") of the
Company's common stock, $0.01 par value per share (together with any securities
issued in exchange therefor or in substitution thereof, the "Common Stock"), at
an initial exercise price of $ .01 per share. The Warrants are to be issued
pursuant to a warrant agreement (the "Warrant Agreement"), to be dated as of
February 25, 1998, between the Company and the warrant agent named therein (the
"Warrant Agent"). The Preferred Stock and the Warrants will be sold in Units,
each Unit consisting of (i) $1,000 initial liquidation preference of Preferred
Stock and (ii) one Warrant to purchase initially 2.66143 Warrant Shares at an
exercise price of $ .01 per share (the "Units"). Unless the context requires
otherwise, references herein to "Securities" shall be deemed to include the
Units, Preferred Stock, Warrants, and Warrant Shares.
As an inducement to the Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Purchaser
thereunder, the Company agrees with the Purchaser, (i) for the benefit of the
Purchaser and (ii) for the benefit of the holders from time to time of the
Warrants and the Warrant Shares, as follows:
<PAGE> 2
2
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meaning given to such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" of any specified person, means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day other than (i) Saturday or Sunday or
(ii) a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants or options to purchase
any of the foregoing, including without limitation, each class of common stock
and preferred stock of such Person, if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such Person,
if such Person is a partnership.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" means the Persons with a beneficial interest in the
Warrant Shares or other Registrable Securities.
"Initiating Holders" means one or more Holders owning individually
or in the aggregate not less than the Requisite Securities.
"Management Holders" means those employees of the Company who are
holders of securities of the Company that are or become parties to the
Management Registration Rights Agreement.
"Management Registration Rights Agreement" means the registration
rights agreement, dated as of February 25, 1998, between the Company and the
Management Holders.
"Officer's Certificate" means a certificate signed by any one of the
Chairman, any Vice Chairman, any Chief Executive Officer, any Senior Vice
President or the Chief Financial Officer.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
<PAGE> 3
3
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities.
"Public Equity Offering" means an underwritten public offering
managed by a nationally recognized member of the National Association of
Securities Dealers of Capital Stock of any Person pursuant to an effective
registration statement filed with the SEC pursuant to the Securities Act.
"Registrable Securities" means any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) or the Purchaser
Warrant Shares (whether or not the related warrants have been exercised) and
(ii) any other securities issued or issuable with respect to any Warrant Shares
or Purchaser Warrant Shares by way of stock dividends or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the offering of such securities by the
Holder thereof shall have been declared effective under the Securities Act and
such securities shall have been disposed of by such Holder pursuant to such
Registration Statement, (ii) such securities are eligible for sale to the public
pursuant to Rule 144(k) (or any similar provision then in force, but not Rule
144A) promulgated under the Securities Act, (iii) such securities shall have
been otherwise transferred by such Holder thereof and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), preparing,
printing, filing, duplicating and distributing the Registration Statement and
the related prospectus, the cost of printing stock certificates, the cost and
charges of any transfer agent, rating agency fees, printing expenses, messenger,
telephone and delivery expenses, reasonable fees and disbursements of counsel
for the Company and all independent certified public accountants, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Selling Holders), and reasonable fees and expenses of one counsel for the
Holders (which counsel shall be reasonably acceptable to the Company).
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to
<PAGE> 4
4
any such Registration Statement, including post-effective amendments in each
case including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Requisite Securities" shall mean a number of Registrable Securities
equal to not less than 25% of the Registrable Securities held in the aggregate
by all Holders.
"Rule 144" means Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 174" means Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended form time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Selling Holder" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of this Agreement.
"Special Counsel" means any special counsel to the Holders, for
which Holders will be reimbursed pursuant to this Agreement.
2. Demand Registration.
(a) From time to time after 180 days following the
completion by the Company of a Public Equity Offering, one or more Initiating
Holders owning
<PAGE> 5
5
individually or in the aggregate not less than the Requisite Securities may
request in writing that the Company effect the registration under the Securities
Act of all or part of such Initiating Holders' Registrable Securities and shall
specify the number of Registrable Securities proposed to be sold and the
intended method of disposition thereof (the "Demand Request"). The Company will
give written notice of the Demand Request to all registered holders of
Registrable Securities within fifteen (15) days of receipt thereof. Within 120
days of receipt of the Demand Request the Company will, subject to the terms of
this Agreement, file a Registration Statement and use its best efforts to effect
the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders of which
shall have made a written request to the Company for registration thereof
within 20 days after the giving of such written notice by the Company
(which request shall specify the number of Registrable Securities proposed
to be sold and the intended method of disposition of such Registrable
Securities);
(iii) all shares of securities which the management
employees of the Company may elect to register in connection with the
offering of Registrable Securities pursuant to this Section 2; and
(iv) all shares of securities which the Company may elect
to register in connection with the offering of Registrable Securities
pursuant to this Section 2,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
(b) Registrations under this Section (each, a
"Demand Registration") shall be on such appropriate registration form of the SEC
(i) as shall be selected by the Company and (ii) as shall permit the disposition
of such Registrable Securities in accordance with the intended method or methods
of disposition specified in their request for such registration.
(c) The Company will pay all Registration Expenses
in connection with any registration requested pursuant to this Section 2. The
Selling Holders shall pay the underwriting discounts, commissions, and transfer
taxes, if any, in connection with each Registration Statement requested under
this Section 2, which costs shall be allocated pro rata among all Selling
Holders on whose behalf Registrable Securities of the Company are included in
such registration on the basis of the respective amounts of the Registrable
Securities then being registered on their behalf.
(d) The Holders shall be entitled to request two (2)
registrations pursuant to this Section 2. A Registration Statement requested
pursuant to this Section 2 shall not be deemed to have been effected (i) unless
a Registration Statement with respect
<PAGE> 6
6
thereto has been declared effective by the SEC and (ii) the Company has complied
in a timely manner and in all material respects with all of its obligations
under this Agreement; provided, (i) if, after such Registration Statement has
become effective, the offering of Warrant Shares pursuant to such Registration
Statement is or becomes subject to any stop order, injunction or other order or
requirement of the SEC or other governmental or administrative agency or court
that prevents, restrains or otherwise limits the sale of Warrant Shares under
such Registration Statement for any reason, other than by reason of some act or
omission by any Holder participating in such registration, and does not become
effective within a reasonable period of time thereafter, such period not to
exceed 60 days from the date of such stop order, injunction, or other
governmental order or requirement, (ii) the Registration Statement does not
remain effective under the Securities Act until at least the earlier of (A) an
aggregate of 90 days after the effective date thereof or (B) the consummation of
the distribution by the Selling Holders of all of the Registrable Securities
covered thereby or (iii) if the Selling Holders are not able to sell at least
70% of the Registrable Securities to be included therein, less any Registrable
Securities withdrawn or excluded from such Demand Registration in accordance
with the provisions hereof, then, in each case, such Registration Statement
shall be deemed not to have been effected. For purposes of calculating the
90-day period referred to in the preceding sentence, any period of time during
which such Registration Statement was not in effect shall be excluded. The
Holders shall be permitted to withdraw all or any part of the Registrable
Securities from a Demand Registration at any time prior to the effective date of
such Demand Registration.
(e) If a requested registration pursuant to this
Section 2 involves an underwritten offering, and the managing underwriter or
underwriters shall advise the Company in writing (with a copy to each Holder
requesting registration) that, in such managing underwriter's or underwriters'
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities) is
such as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first, Registrable Securities requested to be
included in such registration by the Holders, pro rata among such holders
requesting such registration on the basis of the number of such securities
requested to be included by such Holders and (ii) second, securities held by
other Persons, including the Company.
3. Piggy-Back Registration.
(a) If at any time after the Company has completed a Public Equity
Offering (or in connection with the Company's initial Public Equity Offering if
any Management Holders are given the opportunity to register any securities in
such Public Equity Offering) the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of the holders of any class of its
Common Stock in a firmly underwritten Public Equity Offering (other than (i) a
Registration Statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or (ii) a Registration Statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
security holders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable (but in no event fewer than 10 days
before the anticipated filing date), and such notice shall offer such Holders
the
<PAGE> 7
7
opportunity to register such number of Warrant Shares as each such Holder may
request in writing within 20 days after receipt of such written notice from the
Company (which request shall specify the Warrant Shares intended to be disposed
of by such Selling Holder) (a "Piggy-Back Registration"). Upon the written
request of any such Holder made within 20 days after the receipt of any such
notice (which request shall specify the number of Registrable Securities
intended to be disposed of by such Holder and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement that
covers the securities which the Company proposes to register, provided that if,
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
either not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each Holder
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any holder or holders of Registrable Securities entitled to do so to request
that such registration be effected as a registration under Section 2, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section 3
shall relieve the Company of its obligation to effect any registration upon
request under Section 2, nor shall any such registration hereunder be deemed to
have been effected pursuant to Section 2.
(b) The Company shall use its reasonable efforts to
cause the managing underwriter or underwriters of such proposed offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included in the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Any Selling Holder
shall have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to these provisions by giving
written notice to the Company of its request to withdraw prior to the effective
date of such registration statement.
(c) The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 3 and the Selling Holders shall pay the underwriting
discounts, commissions, and transfer taxes, if any, relating to the sale of such
Selling Holders' Registrable Securities pursuant to this Section 3, such costs
being allocated pro rata among all Selling Holders on whose behalf Registrable
Securities of the Company are included in such registration on the basis of the
respective amounts of Registrable Securities then being registered on their
behalf.
(d) Priority in Piggy-Back Registrations. If a
registration pursuant to this Section 3 involves an underwritten offering of the
securities so being registered,
<PAGE> 8
8
whether or not for sale for the account of the Company, the Company will, if
requested by any Holder and subject to the provisions of this Section 3, use its
reasonable efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such Holder among the
securities to be distributed by such underwriters. Notwithstanding anything to
the contrary, if the managing underwriter of such underwritten offering shall,
in writing, inform the Holders requesting such registration and the holders of
any of the Company's other securities which shall have exercised registration
rights in respect of such underwritten offering of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in (or during the time of) such offering, then the Company
will be required to include in such registration statement only the amount of
securities that it is so advised should be included in such registration. In
such event, (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the securities that the
Company proposes to register, (ii) second, the securities that have been
requested to be included in such registration by Holders and Management Holders
(pro rata on the amount of securities sought to be registered by such Holders
and Management Holders), and (iii) third, the securities that have been
requested to be included in such registration by Persons (other than Holders and
Management Holders) entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments of the Company (pro rata on the amount of
securities sought to be registered by such Persons); and (y) in cases not
initially involving the registration for sale of securities for the Company's
own account, securities shall be registered in such offering as follows: (i)
first, the securities of any person whose exercise of a "demand" registration
right pursuant to a contractual commitment of the Company is the basis for the
registration (provided that if such person is a Holder, there shall be no
priority as among Holders and Warrant Shares sought to be included by Holders
shall be included pro rata based on the amount of securities sought to be
registered by such persons), (ii) second, the securities that have been
requested to be included in such registration by Holders and Management Holders
(pro rata on the amount of securities sought to be registered by such Holders
and Management Holders), (iii) third, securities of other persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
persons) and (iv) fourth, the securities which the Company proposes to register.
4. Registration Procedures. In connection with any Demand
Registration or Piggy-back Registration, the Company shall (provided that it
will not be required to take any action pursuant to this Section 4 that would,
in the written opinion of counsel for the Company, violate applicable law):
(a) No fewer than five Business Days prior to the
initial filing of a Registration Statement or Prospectus and no fewer than two
Business Days prior to the filing of any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), if requested, furnish to the Holders, their Special
Counsel and the managing underwriters, if any, copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such underwriters, if any, and cause the officers and
directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such
<PAGE> 9
9
inquiries as shall be necessary, in the opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act, and shall use reasonable efforts to reflect in
each such document filed pursuant to a Demand Registration, when so filed with
the SEC, such reasonable comments as the Holders, their Special Counsel and the
managing underwriters, if any, may propose in writing; provided, however, that
the Company shall not be deemed to have kept a Registration Statement effective
during the applicable period if it voluntarily takes or fails to take any action
that results in Selling Holders covered thereby not being able to sell such
Registrable Securities pursuant to Federal securities laws during that period;
provided, further, the Company shall not file any such Registration Statement or
related Prospectus or any amendments or supplements thereto in connection with a
Demand Registration to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or the managing underwriters, if any, shall
reasonably object on a timely basis;
(b) Take such action as may be necessary so that (i)
any Registration Statement and any amendment thereto and any Prospectus forming
part thereof and any amendment or supplement thereto (and each report or other
document incorporated herein by reference in each case) complies in all material
respects with the Securities Act and the Exchange Act and the respective rules
and regulations thereunder, (ii) any Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any Prospectus
forming part of any Registration Statement, and any amendment or supplement to
such Prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading.
(c) Prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for the
applicable time period; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented;
(d) Notify the Selling Holders, their Special
Counsel and the managing underwriters, if any, promptly (and in any case within
2 Business Days), and (if requested by any such Person), confirm such notice in
writing, (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, (B) with respect to a Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information, (iii) of the issuance by the SEC, any state
securities commission, any other governmental agency or any court of any stop
order, order or injunction suspending or enjoining the use or the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (iv) if at any time any of the representations and warranties of either
the Company
<PAGE> 10
10
contained in any agreement (including any underwriting agreement) contemplated
hereby cease to be true and correct in all material respects, (v) of the receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any event that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (vii) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be appropriate;
(e) Use its reasonable efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of any order enjoining or suspending
the use or effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment;
(f) If requested by the managing underwriters, if
any, or the Holders of a majority in aggregate number of the Registrable
Securities being sold in connection with such offering reasonably in advance of
the filing thereof, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters, if any,
and such Holders reasonably agree should be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment and (iii) supplement or make amendments to such Registration
Statement;
(g) Furnish to Special Counsel and each managing
underwriter, if any, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested as
soon as practicable after the filing of such documents with the SEC;
(h) Deliver to each Selling Holder, their Special
Counsel, and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Selling Holders and the underwriters, if any,
in connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto;
<PAGE> 11
11
(i) Prior to any public offering of Registrable
Securities, use its reasonable efforts to register or qualify or cooperate with
the Holders of Registrable Securities to be sold or tendered for, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any Holder or underwriter reasonably requests in writing; provided, however,
that where Registrable Securities are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform "blue sky"
investigations and file registrations and qualifications required to be filed
pursuant to this Section 4(i); to use its reasonable best efforts to keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and to use
its reasonable best efforts do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by such Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where they are not then so qualified or to take any action that
would subject them to general service of process in any such jurisdiction where
they are not then so subject or subject the Company to any tax in any such
jurisdiction where it is not then so subject;
(j) In connection with any sale or transfer of
Registrable Securities that will result in such securities no longer being
Registrable Securities, cooperate with the Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (with appropriate CUSIP numbers) representing Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with the DTC, and to enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriters, if any, or Holders may request at least two
Business Days prior to any sale of Registrable Securities;
(k) Use its best efforts to cause the offering of
the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
within the United States, except as may be required as a consequence of the
nature of such Selling Holder's business, in which case the Company will
cooperate in all reasonable respects at the expense of such Selling Holder with
the filing of such Registration Statement and the granting of such approvals as
may be necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Registrable Securities; provided,
however, that the Company shall not be required to register the Registrable
Securities in any jurisdiction that would subject them to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject or
to require the Company to qualify to do business in any jurisdiction where it is
not then so qualified;
(l) Upon the occurrence of any event contemplated by
Section 4(d)(vi) or 4(d)(vii), as promptly as practicable, prepare a supplement
or amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact
<PAGE> 12
12
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If the
Company notifies the Holders of the occurrence of any event contemplated by
paragraph 4(d)(vi) or 4(d)(vii) above, the Holders shall suspend the use of the
Prospectus until the requisite changes to the Prospectus have been made;
(m) Enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing underwriters, if
any, or the Holders of a majority in aggregate number of the Registrable
Securities being sold) in order to expedite or facilitate the disposition of
such Registrable Securities, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters, if any, with
respect to the business of the Company (including with respect to businesses or
assets acquired or to be acquired by it), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing or sole underwriters, if any,
addressed to the underwriters, if any, covering the matters customarily covered
in opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters (iii) obtain customary "comfort"
letters and updates thereof (including, if such registration includes an
underwritten public offering, a "bring down" comfort letter dated the date of
the closing under the underwriting agreement) from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any business which may hereafter be acquired by
the Company for which financial statements and financial data are required to be
included in the Registration Statement), addressed to each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "comfort" letters in connection with underwritten
offerings and such other matters as reasonably required by the managing
underwriter or underwriters and as permitted by the Statement of Auditing
Standards No. 72; (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less favorable to the
Selling Holders and the underwriters, if any, than those set forth in Section 8
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate number of Registrable Securities covered by such
Registration Statement and the managing underwriters); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority in aggregate number of the Registrable Securities being sold, their
Special Counsel and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties made pursuant to clause 4(n)(i)
above and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;
(n) Make available for inspection by one
representative of the Selling Holders, the managing underwriter participating in
any such disposition of Registrable
<PAGE> 13
13
Securities, if any, and any attorney, consultant or accountant retained by such
Selling Holders or underwriter (collectively, the "Inspectors"), at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company (including
with respect to business and assets acquired or to be acquired to the extent
that such information is available to the Company, and cause the officers,
directors, agents and employees of the Company (including with respect to
business and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all information in each case
reasonably requested by any such Inspector in connection with such Registration,
provided, however, the Company may first require that such Persons agree to keep
confidential any non-public information relating to the Company received by such
Person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 4(n)) until such information has been made generally available to
the public (other than as a result of a disclosure or failure to safeguard by
such Inspector) unless the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors); without limiting the foregoing, no such information shall be
used by such Inspector as the basis for any market transactions in securities of
the Company or its subsidiaries in violation of law;
(o) Use its best efforts to cause the Warrant Shares
issuable upon exercise of the Warrants to be quoted or listed on any exchange
upon which the Company's Common Stock is then quoted or listed;
(p) Comply with all applicable rules and regulations
of the SEC and make generally available to their security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act),
no later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or reasonable efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158; and
(q) Use its best efforts to take all other steps
reasonably necessary to effect the registration, offering and sale of the
Registrable Securities covered by the Registration Statement.
The Company may require each Selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement and the Company may
exclude from such registration the Registrable Securities of any Selling Holder
who unreasonably fails to furnish such information promptly after receiving such
request.
<PAGE> 14
14
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Holder agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(d)(ii), 4(d)(iii), 4(d)(v) or 4(d)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(l) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
90-day period referred to in Section 2(d) shall be extended by the number of
days during such period from and including the date of the giving of such notice
to and including the date when each seller of Registrable Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 3(l) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
5. Certain Limitations, Conditions and Qualifications to the
Company's Obligations Under Sections 2 and 3.
The obligations of the Company described in Sections 2 and 3 of this
Agreement are subject to each of the following limitations, conditions and
qualifications:
(a) Subject to the next sentence of this paragraph, the Company
shall be entitled to postpone, for a reasonable period of time, the filing or
effectiveness of, or suspend the rights of any Holder to make sales pursuant to,
any Registration Statement otherwise required to be prepared, filed and made and
kept effective by it under the registration covenants described in Sections 2
hereof; provided, however, that the duration of such postponement or suspension
may not exceed the earlier to occur of (A) 30 days after the cessation of the
circumstances described in the next sentence of this paragraph on which such
postponement or suspension is based or (B) 120 days after the date of the
determination of the Board of Directors of the Company referred to in the next
sentence, and the duration of such postponement or suspension shall be excluded
from the calculation of the 90-day period described in Section 2(d) hereof. Such
postponement or suspension may only be effected if the Board of Directors of the
Company determines in good faith that the filing or effectiveness of, or sales
pursuant to, such registration
<PAGE> 15
15
statement would materially impede, delay or interfere with any financing, offer
or sale of securities, acquisition, corporate reorganization or other
significant transaction involving the Company or any of its affiliates (whether
or not planned, proposed or authorized prior to the exercise of demand
registration rights hereunder or any other registration rights agreement) or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential. If the Company shall so
postpone the filing or effectiveness of, or suspend the rights of any Holders to
make sales pursuant to, a Registration Statement it shall, as promptly as
possible, notify any Selling Holders of such determination, and the Selling
Holders shall (y) have the right, in the case of a postponement of the filing or
effectiveness of a Registration Statement, upon the affirmative vote of the
Selling Holders of not less than a majority of the Registrable Securities to be
included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of such notice, or (z) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the number of
days of the suspension. Any Demand Registration as to which the withdrawal
election referred to in the preceding sentence has been effected shall not be
counted for purposes of the two Demand Registrations referred to in Section 2(d)
hereof.
(b) The Company shall not be required by this Agreement to include
securities in a Registration Statement relating to a Piggy-back Registration
above if (i) in the written opinion of counsel to the Company, addressed to the
Holders seeking registration and delivered to them, the Holders of such
securities seeking registration would be free to sell all such securities within
the succeeding three-month period, without registration, under Rule 144 under
the Securities Act, which opinion may be based in part upon the representation
by the Holders of such securities seeking registration, which registration shall
not be unreasonably withheld, that each such Holder is not an affiliate of the
Company within the meaning of the Securities Act, and (ii) all requirements
under the Securities Act for effecting such sales are satisfied at such time.
(c) The Company's obligations shall be subject to the obligations of
the Selling Holders to furnish all information and materials and not to take any
and all actions as may be required under Federal and state securities laws and
regulations to permit the Company to comply with all applicable requirements of
the SEC and to obtain any acceleration of the effective date of such
Registration Statement.
(d) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this Agreement
unless such audit is requested by the underwriters with respect to such
registration.
6. Indemnification
(a) The Company agrees to indemnify and hold harmless (i) each
Selling Holder, (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any of the foregoing
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person"), and (iii) the respective officers, directors,
partners, employees, representatives and agents of the Purchaser, each Selling
<PAGE> 16
16
Holder, each broker-dealer participating in an offering subject to this
Agreement or any controlling person (any person referred to in clause (i), (ii)
or (iii) may hereinafter be referred to as an "Indemnified Person"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including, without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of Prospectus or in
any amendment or supplement thereto or in any preliminary Prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary Prospectus
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities and judgments purchased
securities if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary Prospectus is eliminated or remedied in the
Prospectus and a copy of the Prospectus shall not have been furnished to such
person in a timely manner due to the wrongful action or wrongful inaction of
such Indemnified Person or the Underwriter.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all reasonable fees and expenses; provided, however, that the failure
to so notify the Company shall not relieve it of any obligation or liability
which it may have hereunder or otherwise (unless and only to the extent that
such failure directly results in the loss or compromise of any material rights
or defenses by the Company and the Company was not otherwise aware of such
action or claim). Any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person,
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the Company, (ii) the Company shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such Indemnified Person
and the Company and such Indemnified Person shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to assume the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or
<PAGE> 17
17
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all such
Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred). The Company shall not be liable for any settlement of any
such action effected without its written consent but if settled with the written
consent of the Company, the Company agrees to indemnify and hold harmless any
Indemnified Person from and against any loss or liability by reason of such
settlement. The Company shall not, without the prior written consent of the
Indemnified Person, which consent shall not be unreasonbly withheld, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(c) In connection with any Registration Statement in which a Holder
is participating, such Holder agrees, severally and not jointly, to indemnify
and hold harmless each of the Company, its directors, its officers, agents and
employees and any person controlling the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and the directors, officers,
agents or employees of such controlling persons, to the same extent as the
foregoing indemnity from the Company to each Indemnified Person but only with
reference to information relating to such Indemnified Person furnished in
writing by or on behalf of such Indemnified Person expressly for use in such
Registration Statement or any Prospectus (or any amendment or supplement
thereto) or any preliminary Prospectus. In case any action shall be brought
against the Company, any of their directors, any such officer, agent or employee
or any person controlling the Company based on such Registration Statement and
in respect of which indemnity may be sought against any Indemnified Person, the
Indemnified Person shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such Indemnified
Person shall not be required to do so, but may employ separate counsel therein
and participate in defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person), and the Company, its
directors, any such officers and any person controlling the Company shall have
the rights and duties given to the Indemnified Person, by Sections 6(b) and 6(d)
hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Person or is insufficient to hold such Indemnified
Person harmless in respect of any losses, claims, damages, liabilities or
judgments referred to therein, then the Company, in lieu of indemnifying such
Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and each Indemnified Person on
the other hand from the offering of the Warrant Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and each such
Indemnified Person in connection with the statements or omissions (or alleged
statements or omissions) which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and each such Indemnified
Person shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement
<PAGE> 18
18
of a material fact or the omission or the alleged omission to state a material
fact relates to information supplied by the Company or such Indemnified Person
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation (even if the Indemnified Person were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an the Company as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other fees or expenses reasonably incurred by such
indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6, no Indemnified
Person shall be required to contribute any amount in excess of the amount by
which the total net proceeds received by it in connection with the sale of the
Warrant Shares pursuant to this Agreement exceeds the amount of any damages
which such Indemnified Person has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
6 will be in addition to any liability which the Company may otherwise have to
the Indemnified Persons referred to above. The Indemnified Persons' obligations
to contribute pursuant to this Section 6(d) are several in proportion to the
respective amount of Warrant Shares included in any such Registration Statement
by each Indemnified Person and not joint.
7. Rules 144 and 144A
The Company shall use its best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act in a timely
manner and, if at any time it is not required to file such reports but in the
past had been required to or did file such reports, it will, upon the request of
any Holder, make available other information as required by, and so long as
necessary to permit, sales of its Registrable Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations
(a) If any of the Registrable Securities covered by
any Registration Statement pursuant to a Demand Registration are to be sold in
an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate number of such Registrable Securities
included in such offering, subject to the consent of the Company (which will not
be unreasonably withheld or delayed).
<PAGE> 19
19
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
(b) Each Holder of a Warrant or Warrant Shares agrees, if requested
(pursuant to a timely written notice) by the managing underwriter or
underwriters in an underwritten offering, not to effect any public sale or
distribution of any of the issue being registered or a similar security of the
Company or any securities convertible or exchangeable or exercisable for such
securities including a sale pursuant to Rule 144 or Rule 144A (except as part of
such underwritten offering), during the period beginning 10 days prior to, and
ending 90 days after, the closing date of each underwritten offering made
pursuant to such registration statement (or such shorter period as the managing
underwriter or underwriters may agree), to the extent timely notified in writing
by the Company or by the managing underwriter or underwriters.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company, or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any person the right to request it to register any of
its equity securities under the Securities Act (other than pursuant to the
Management Registration Rights Agreement) unless the rights so granted are
subject in all respects to the prior rights of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the written consent of the Holders of a majority of the
then outstanding Registrable Securities is obtained; provided, however, that,
for the purposes of this Agreement, Registrable Securities that are owned,
directly or indirectly, by the Company or an Affiliate of the Company are not
deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate number of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement;
<PAGE> 20
20
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, or facsimile:
(i) if to the Company:
American Restaurant Group, Inc.
450 Newport Center Drive
Newport Beach, California 92660
Fax: (714) 721-8941
Attention: Chief Financial Officer
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Philip T. Rugger, III
(ii) if to the Purchaser:
Jefferies & Company, Inc.
111 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Fax: (310) 575-5299
Attention: Jerry M. Gluck
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Fax: (213) 687-5600
Attention: Rod A. Guerra
(iii) if to any other person who is then a registered
Holder, to the address of such Holder as it appears in
the share register of the Company.
<PAGE> 21
21
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Notwithstanding the foregoing, no transferee shall have any of the
rights granted under this Agreement until such transferee shall acknowledge its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(g) Governing Law; Submission to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(h) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this
<PAGE> 22
22
Agreement to "Section" and "paragraph" refer to such Section or paragraph of
this Agreement, unless expressly stated otherwise.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(k) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Warrant Agreement, and the Indenture, is intended by the parties
as a final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement, the
Purchase Agreement, the Warrant Agreement, and the Indenture supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE> 23
23
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-------------------------------
Name: William J. McCaffrey, Jr.
Title: V.P. & Chief Financial Officer
The foregoing Securityholders' and Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
JEFFERIES & COMPANY, INC.
By: /s/Jeffrey K. Weinhuff
-------------------------------
Name: Jeffrey K. Weinhuff
Title: Executive Vice President
<PAGE> 24
<PAGE> 1
EXHIBIT 4.5
AMERICAN RESTAURANT GROUP, INC.
MANAGEMENT REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of February 25, 1998, between AMERICAN
RESTAURANT GROUP, INC., a Delaware corporation (the "Company"), and ANWAR S.
SOLIMAN, PATRICK J. KELVIE, WILFRED H. PARTRIDGE, WILLIAM J. McCAFFREY,
JR., MEREDITH R. TAYLOR and RALPH ROBERTS (together with any subsequent
member of management who purchases common stock of the Company pursuant to a
subscription agreement, the "Management Stockholders").
WHEREAS, the Company will enter into common stock subscription
agreements (the "Subscription Agreements"), to be dated the date hereof, with
the Management Stockholders pursuant to which the Company will issue and sell
shares of the Company's common stock, $0.01 par value per share (the "Common
Stock") (together with any securities issued in exchange therefor or in
substitution thereof, the "Management Shares") to the Management Stockholders;
and
WHEREAS, in order to induce the Management Stockholders to acquire
the Management Shares the Company has agreed to provide the Management
Stockholders with certain registration rights with respect to the Management
Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Management Stockholders and the Company hereby
agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall have
the respective meanings given to such terms in the Purchase Agreement, dated as
of February 13, 1998 , between Jefferies & Company, Inc. (the "Purchaser") and
the Company,. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" of any specified person, means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day other than (i) Saturday or Sunday or
(ii) a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants or options to purchase
any of the foregoing, including without limitation, each class
<PAGE> 2
2
of common stock and preferred stock of such Person, if such Person is a
corporation, and each general or limited partnership interest or other equity
interest of such Person, if such Person is a partnership.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" means the Persons with a beneficial interest in the
Management Shares or other Registrable Securities.
"Initiating Holders" means one or more Holders owning individually
or in the aggregate not less than the Requisite Securities.
"Officer's Certificate" means a certificate signed by any one of the
Chairman, any Vice Chairman, any Chief Executive Officer, any Senior Vice
President or the Chief Financial Officer.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities.
"Public Equity Offering" means an underwritten public offering
managed by a nationally recognized member of the National Association of
Securities Dealers of Capital Stock of any Person pursuant to an effective
registration statement filed with the SEC pursuant to the Securities Act.
"Purchaser Warrant Shares" means the 9,315 shares of Common Stock
issuable upon exercise of certain warrants issued to the Purchaser (the
"Purchaser Warrants").
"Registrable Securities" means any of (i) the Management Shares or
any other Shares ("Other Shares") of Common Stock issuable to Management
Stockholders, including pursuant to any stock option plan, and (ii) any other
securities issued or issuable with respect to any Management Shares or Other
Shares by way of stock dividends or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities are eligible for sale to the public pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
promulgated under
<PAGE> 3
3
the Securities Act, (iii) such securities shall have been otherwise transferred
by such Holder thereof and new certificates for such securities not bearing a
legend restricting further transfer shall have been delivered by the Company or
its transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any similar
state law then in force or (iv) such securities shall have ceased to be
outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), preparing,
printing, filing, duplicating and distributing the Registration Statement and
the related prospectus, the cost of printing stock certificates, the cost and
charges of any transfer agent, printing expenses, messenger, telephone and
delivery expenses, reasonable fees and disbursements of counsel for the Company
and all independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Selling Holders), and
reasonable fees and expenses of one counsel for the Holders (which counsel shall
be reasonably acceptable to the Company).
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such Registration Statement,
including post-effective amendments in each case including the prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Requisite Securities" shall mean a number of Registrable Securities
equal to not less than 25% of the Registrable Securities held in the aggregate
by all Holders.
"Rule 144" means Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
<PAGE> 4
4
"Rule 174" means Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended form time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Securityholders and Registration Rights Agreement" means the
securityholders and registration rights agreement , to be dated the date hereof,
providing the Purchaser and its direct and indirect transferees with, among
other things, certain registration rights and tag-along rights for the Warrants
and the Warrant Shares.
"Selling Holder" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of this Agreement.
"Special Counsel" means any special counsel to the Holders, for
which Holders will be reimbursed pursuant to this Agreement.
"Voting Trust Agreement" means the Voting Trust and Transfer
Agreement, dated as of the date hereof, among the Company, Anwar S. Soliman, as
Trustee, and the Management Stockholders, as amended, supplemented or otherwise
modified from time to time.
"Warrant Holders" means Persons with a beneficial interest in the
Warrant Shares, the Purchaser Warrant Shares or any other securities issued in
exchange for or in substitution for the Warrant Shares or the Purchaser Warrant
Shares.
"Warrant Shares" the Purchaser Warrant Shares together with the
shares issuable upon exercise of the Warrants.
<PAGE> 5
5
"Warrants" means the 35,000 Common Stock Purchase Warrants to
purchase initially 93,150 shares of Common Stock, at an initial exercise price
of $ .01 per share, sold to the Purchaser pursuant to the Purchase Agreement.
2. Demand Registration. (a) From time to time after 180 days
following the completion by the Company of a Public Equity Offering, one or more
Initiating Holders owning individually, or in the aggregate not less than the
Requisite Securities may request in writing that the Company effect the
registration under the Securities Act of all or part of such Initiating Holders'
Registrable Securities and shall specify the number of Registrable Securities
proposed to be sold and the intended method of disposition thereof (the "Demand
Request"). The Company will give written notice of the Demand Request to all
registered holders of Registrable Securities within fifteen (15) days of receipt
thereof. Within 120 days of receipt of the Demand Request the Company will,
subject to the terms of this Agreement, file a Registration Statement and use
its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof within
20 days after the giving of such written notice by the Company (which
request shall specify the number of Registrable Securities proposed to be
sold and the intended method of disposition of such Registrable
Securities);
(iii) all shares of securities which the Warrant Holders may elect
to register in connection with the offering of Registrable Securities
pursuant to this Section 2; and
(iv) all shares of securities which the Company may elect to
register in connection with the offering of Registrable Securities
pursuant to this Section 2,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
(b) Registrations under this Section (each, a "Demand Registration")
shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Company and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration.
(c) The Company will pay all Registration Expenses in connection
with any registration requested pursuant to this Section 2. The Selling Holders
shall pay the underwriting discounts, commissions, and transfer taxes, if any,
in connection with each Registration Statement requested under this Section 2,
which costs shall be allocated pro rata
<PAGE> 6
6
among all Selling Holders on whose behalf Registrable Securities of the Company
are included in such registration, on the basis of the respective amounts of the
Registrable Securities then being registered on their behalf.
(d) The Holders shall be entitled to request two (2) registrations
pursuant to this Section 2. A Registration Statement requested pursuant to this
Section 2 shall not be deemed to have been effected (i) unless a Registration
Statement with respect thereto has been declared effective by the SEC and (ii)
the Company has complied in a timely manner and in all material respects with
all of its obligations under this Agreement; provided, (i) if, after such
Registration Statement has become effective, the offering of Registrable
Securities pursuant to such Registration Statement is or becomes subject to any
stop order, injunction or other order or requirement of the SEC or other
governmental or administrative agency or court that prevents, restrains or
otherwise limits the sale of Registrable Securities under such Registration
Statement for any reason, other than by reason of some act or omission by any
Holder participating in such registration, and does not become effective within
a reasonable period of time thereafter, such period not to exceed 60 days from
the date of such stop order, injunction, or other governmental order or
requirement, (ii) the Registration Statement does not remain effective under the
Securities Act until at least the earlier of (A) an aggregate of 90 days after
the effective date thereof or (B) the consummation of the distribution by the
Selling Holders of all of the Registrable Securities covered thereby or (iii) if
the Selling Holders are not able to sell at least 70% of the Registrable
Securities to be included therein, less any Registrable Securities withdrawn or
excluded from such Demand Registration in accordance with the provisions hereof,
then, in each case, such Registration Statement shall be deemed not to have been
effected. For purposes of calculating the 90-day period referred to in the
preceding sentence, any period of time during which such Registration Statement
was not in effect shall be excluded. The Holders shall be permitted to withdraw
all or any part of the Registrable Securities from a Demand Registration at any
time prior to the effective date of such Demand Registration.
(e) If a requested registration pursuant to this Section 2 involves
an underwritten offering, and the managing underwriter or underwriters shall
advise the Company in writing (with a copy to each Holder requesting
registration) that, in such managing underwriter's or underwriters' opinion, the
number of securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities) is such as to
adversely affect the success of such offering, including the price at which such
securities can be sold, then the Company will include in such registration, to
the extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the Holders, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such Holders and (ii) second, securities held by other Persons,
including the Company.
3. Piggy-Back Registration. (a) If at any time after the Company has
completed a Public Equity Offering the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of the holders of any class of its
Common Stock in a firmly
<PAGE> 7
7
underwritten Public Equity Offering (other than (i) a Registration Statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the SEC) or (ii)
a Registration Statement filed in connection with an exchange offer or offering
of securities solely to the Company's existing security holders), then the
Company shall give written notice of such proposed filing to the Holders as soon
as practicable (but in no event fewer than 10 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of Registrable Securities as each such Holder may request in writing
within 20 days after receipt of such written notice from the Company (which
request shall specify the Registrable Securities intended to be disposed of by
such Selling Holder) (a "Piggy-Back Registration"). Upon the written request of
any such Holder made within 20 days after the receipt of any such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Holder and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement that covers the
securities which the Company proposes to register, provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2, and (ii) in the case
of a determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 3 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 2.
(b) The Company shall use its reasonable efforts to cause the
managing underwriter or underwriters of such proposed offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included in the same terms and conditions as any similar securities of the
Company or any other security holder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to these provisions by giving written notice to
the Company of its request to withdraw prior to the effective date of such
registration statement.
(c) The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3 and the Selling Holders shall pay the underwriting discounts,
commissions, and transfer taxes, if any, relating
<PAGE> 8
8
to the sale of such Selling Holders' Registrable Securities pursuant to this
Section 3, such costs being allocated pro rata among all Selling Holders on
whose behalf Registrable Securities of the Company are included in such
registration on the basis of the respective amounts of Registrable Securities
then being registered on their behalf.
(d) Priority in Piggy-Back Registrations. If a registration pursuant
to this Section 3 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, the Company
will, if requested by any Holder and subject to the provisions of this Section
3, use its reasonable efforts to arrange for such underwriters to include all
the Registrable Securities to be offered and sold by such Holder among the
securities to be distributed by such underwriters. Notwithstanding anything to
the contrary, if the managing underwriter of such underwritten offering shall,
in writing, inform the Holders requesting such registration and the holders of
any of the Company's other securities which shall have exercised registration
rights in respect of such underwritten offering of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in (or during the time of) such offering, then, the Company
will be required to include in such registration statement only the amount of
securities that it is so advised should be included in such registration. In
such event, (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the securities that the
Company proposes to register, (ii) second, the securities that have been
requested to be included in such registration by Management Stockholders and
Warrant Holders (pro rata on the amount of securities sought to be registered by
such Holders and Management Holders), and (iii) third, the securities that have
been requested to be included in such registration by Persons (other than
Management Stockholders and Warrant Holders) entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro rata
on the amount of securities sought to be registered by such Persons); and (y) in
cases not initially involving the registration for sale of securities for the
Company's own account, securities shall be registered in such offering as
follows: (i) first, the securities of any person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the Company is the
basis for the registration (provided that if such person is a Holder, there
shall be no priority as among Holders and securities sought to be included by
Holders shall be included pro rata based on the amount of securities sought to
be registered by such persons), (ii) second, the securities that have been
requested to be included in such registration by Holders and Warrant Holders
(pro rata on the amount of securities sought to be registered by such Holders
and Warrant Holders), (iii) third, securities of other persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
persons) and (iv) fourth, the securities which the Company proposes to register.
4. Registration Procedures. In connection with any Demand
Registration or Piggy-back Registration, the Company shall (provided that it
will not be required to take any action pursuant to this Section 4 that would,
in the opinion of counsel for the Company, violate applicable law):
<PAGE> 9
9
(a) No fewer than five Business Days prior to the initial filing of
a Registration Statement or Prospectus and no fewer than two Business Days
prior to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein
by reference), if requested, furnish to the Holders, their Special Counsel
and the managing underwriters, if any, copies of all such documents
proposed to be filed, which documents (other than those incorporated or
deemed to be incorporated by reference) will be subject to the review of
such Holders, their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Company, counsel to the Company
and independent certified public accountants to the Company to respond to
such inquiries as shall be necessary, in the opinion of respective counsel
to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act, and shall use
reasonable efforts to reflect in each such document filed pursuant to a
Demand Registration, when so filed with the SEC, such reasonable comments
as the Holders, their Special Counsel and the managing underwriters, if
any, may propose in writing; provided, however, that the Company shall not
be deemed to have kept a Registration Statement effective during the
applicable period if it voluntarily takes or fails to take any action that
results in Selling Holders covered thereby not being able to sell such
Registrable Securities pursuant to Federal securities laws during that
period;
(b) Take such action as may be necessary so that (i) any
Registration Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement thereto (and each
report or other document incorporated herein by reference in each case)
complies in all material respects with the Securities Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) any
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part of
any Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading;
(c) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance
with the intended methods of disposition by the sellers thereof set forth
in such Registration Statement as so amended or in such Prospectus as so
supplemented;
<PAGE> 10
10
(d) Notify the Selling Holders, their Special Counsel and the
managing underwriters, if any, promptly (and in any case within 15
Business Days), and (if requested by any such Person), confirm such notice
in writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, (B) with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC or any other Federal or
state governmental authority for amendments or supplements to a
Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop order,
order or injunction suspending or enjoining the use or the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (iv) if at any time any of the representations and warranties of
either the Company contained in any agreement (including any underwriting
agreement) contemplated hereby cease to be true and correct in all
material respects, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (vi) of the happening of any event that makes any statement made
in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading and (vii)
of the Company's reasonable determination that a post-effective amendment
to such Registration Statement would be appropriate;
(e) Use its reasonable efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of any order enjoining or suspending the use
or effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any
of the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment;
(f) If requested by the managing underwriters, if any, or the
Holders of a majority in aggregate number of the Registrable Securities
being sold in connection with such offering reasonably in advance of the
filing thereof, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters, if
any, and such Holders reasonably agree should be included therein, (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment and (iii) supplement or make
amendments to such Registration Statement;
<PAGE> 11
11
(g) Furnish to Special Counsel and each managing underwriter, if
any, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein
by reference, and all exhibits to the extent requested as soon as
practicable after the filing of such documents with the SEC;
(h) Deliver to each Selling Holder, their Special Counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Selling Holders and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto;
(i) Prior to any public offering of Registrable Securities, use its
reasonable efforts to register or qualify or cooperate with the Holders of
Registrable Securities to be sold or tendered for, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
blue sky laws of such jurisdictions within the United States as any Holder
or underwriter reasonably requests in writing; provided, however, that
where Registrable Securities are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform
"blue sky" investigations and file registrations and qualifications
required to be filed pursuant to this Section 4(i); to use its reasonable
best efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and to use its reasonable best efforts do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
such Registration Statement; provided, however, that the Company shall not
be required to qualify generally to do business in any jurisdiction where
they are not then so qualified or to take any action that would subject
them to general service of process in any such jurisdiction where they are
not then so subject or subject the Company to any tax in any such
jurisdiction where it is not then so subject;
(j) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Holders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall
not bear any restrictive legends and shall be in a form eligible for
deposit with the DTC, and to enable such Registrable Securities to be in
such denominations and registered in such names as the managing
underwriters, if any, or Holders may request at least two Business Days
prior to any sale of Registrable Securities;
(k) Use its best efforts to cause the offering of the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other
<PAGE> 12
12
governmental agencies or authorities within the United States; provided,
however, that the Company shall not be required to register the
Registrable Securities in any jurisdiction that would subject them to
general service of process in any such jurisdiction where it is not then
so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject or to require the Company to qualify to do
business in any jurisdiction where it is not then so qualified;
(l) Upon the occurrence of any event contemplated by Section
4(d)(vi) or 4(d)(vii), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered,
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Company notifies the Holders of the
occurrence of any event contemplated by paragraph 4(d)(vi) or 4(d)(vii)
above, the Holders shall suspend the use of the Prospectus until the
requisite changes to the Prospectus have been made;
(m) Enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings)
and take all such other reasonable actions in connection therewith
(including those reasonably requested by the managing underwriters, if
any, or the Holders of a majority in aggregate number of the Registrable
Securities being sold) in order to expedite or facilitate the disposition
of such Registrable Securities, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration, (i) make such representations and
warranties to the Holders of such Registrable Securities and the
underwriters, if any, with respect to the business of the Company
(including with respect to businesses or assets acquired or to be acquired
by it), and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing or sole underwriters, addressed
to the underwriters, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such and underwriters (iii) obtain customary
"comfort" letters and updates thereof (including, if such registration
includes an underwritten public offering, a "bring down" comfort letter
dated the date of the closing under the underwriting agreement) from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
business which may hereafter be acquired by the Company for which
financial statements and financial data are required to be included in the
Registration Statement), addressed to each of the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "comfort"
<PAGE> 13
13
letters in connection with underwritten offerings and such other matters
as reasonably required by the managing underwriter or underwriters and as
permitted by the Statement of Auditing Standards No. 72; (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the Selling
Holders and the underwriters, if any, than those set forth in Section 8
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate number of Registrable Securities covered by such
Registration Statement and the managing underwriters); and (v) deliver
such documents and certificates as may be reasonably requested by the
Holders of a majority in aggregate number of the Registrable Securities
being sold, their Special Counsel and the managing underwriters, if any,
to evidence the continued validity of the representations and warranties
made pursuant to clause 4(n)(i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company;
(n) Make available for inspection by the Selling Holders, the
managing underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, consultant or accountant retained by
such Selling Holders or underwriter (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and properties
of the Company (including with respect to business and assets acquired or
to be acquired to the extent that such information is available to the
Company, and cause the officers, directors, agents and employees of the
Company (including with respect to business and assets acquired or to be
acquired to the extent that such information is available to the Company)
to supply all information in each case reasonably requested by any such
Inspectors in connection with such Registration, provided, however, the
Company may first require that such Persons agree to keep confidential any
non-public information relating to the Company received by such Person and
not disclose such information (other than to an Affiliate or prospective
purchaser who agrees to respect the confidentiality provisions of this
Section 4(o)) until such information has been made generally available to
the public (other than as a result of a disclosure or failure to safeguard
by such Inspector), unless the release of such information is required by
law or necessary to respond to inquiries of regulatory authorities
(including the National Association of Insurance Commissioners, or similar
organizations or their successors); without limiting the foregoing, no
such information shall be used by such Inspector as the basis for any
market transactions in securities of the Company or its subsidiaries in
violation of law;
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to their security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act),
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering,
<PAGE> 14
14
commencing on the first day of the first fiscal quarter after the
effective date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158; and
(p) Use its best efforts to take all other steps reasonably
necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Registration Statement.
The Company may require each Selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement and the Company may
exclude from such registration the Registrable Securities of any Selling Holder
who unreasonably fails to furnish such information promptly after receiving such
request.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Holder agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(d)(ii), 4(d)(iii), 4(d)(v) or 4(d)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(l) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
90-day period referred to in Section 2(d) shall be extended by the number of
days during such period from and including the date of the giving of such notice
to and including the date when each seller of Registrable Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 3(l) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
<PAGE> 15
15
5. Certain Limitations, Conditions and Qualifications to the Company's
Obligations Under Sections 2 and 3.
The obligations of the Company described in Sections 2 and 3 of this
Agreement are subject to each of the following limitations, conditions and
qualifications:
(a) Subject to the next sentence of this paragraph, the Company
shall be entitled to postpone, for a reasonable period of time, the filing or
effectiveness of, or suspend the rights of any Holder to make sales pursuant to,
any Registration Statement otherwise required to be prepared, filed and made and
kept effective by it under the registration covenants described in Sections 2
hereof; provided, however, that the duration of such postponement or suspension
may not exceed the earlier to occur of (A) 30 days after the cessation of the
circumstances described in the next sentence of this paragraph on which such
postponement or suspension is based or (B) 120 days after the date of the
determination of the Board of Directors of the Company referred to in the next
sentence, and the duration of such postponement or suspension shall be excluded
from the calculation of the 90-day period described in Section 2(d) hereof. Such
postponement or suspension may only be effected if the Board of Directors of the
Company determines in good faith that the filing or effectiveness of, or sales
pursuant to, such registration statement would materially impede, delay or
interfere with any financing, offer or sale of securities, acquisition,
corporate reorganization or other significant transaction involving the Company
or any of its affiliates (whether or not planned, proposed or authorized prior
to the exercise of demand registration rights hereunder or any other
registration rights agreement) or require disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential. If the Company shall so postpone the filing or effectiveness of,
or suspend the rights of any Holders to make sales pursuant to, a Registration
Statement it shall, as promptly as possible, notify any Selling Holders of such
determination, and the Selling Holders shall (y) have the right, in the case of
a postponement of the filing or effectiveness of a Registration Statement, upon
the affirmative vote of the Selling Holders of not less than a majority of the
Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice, or (z) in the case of a suspension
of the right to make sales, receive an extension of the registration period
equal to the number of days of the suspension. Any Demand Registration as to
which the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the two Demand Registrations
referred to in Section 2(d) hereof.
(b) The Company shall not be required by this Agreement to include
securities in a Registration Statement relating to a Piggy-back Registration
above if, in the written opinion of counsel to the Company addressed to the
Holders seeking registration and delivered to them, the Holders of such
securities seeking registration would be free to sell all such securities within
the next succeeding three-month period, without registration under Rule 144
under the Securities Act, which opinion may be based in part upon the
representation by the Holders of such securities seeking registration, which
representation shall not be unreasonably withheld, that all requirements under
the Securities Act for effecting such sales are satisfied at such time.
<PAGE> 16
16
(c) The Company's obligations shall be subject to the obligations of
the Selling Holders to furnish all information and materials and not to take any
and all actions as may be required under Federal and state securities laws and
regulations to permit the Company to comply with all applicable requirements of
the SEC and to obtain any acceleration of the effective date of such
Registration Statement.
(d) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this Agreement
unless such audit is requested by the underwriters with respect to such
registration.
6. Indemnification. (a) The Company agrees to indemnify and hold
harmless (i) each Selling Holder (ii) each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) any of
the foregoing (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person"), and (iii) the respective
officers, directors, partners, employees, representatives and agents of each
Selling Holder, each broker-dealer participating in an offering subject to this
Agreement or any controlling person (any person referred to in clause (i), (ii)
or (iii) may hereinafter be referred to as an "Indemnified Person"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including, without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of Prospectus or in
any amendment or supplement thereto or in any preliminary Prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary Prospectus
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities and judgments purchased
securities if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary Prospectus is eliminated or remedied in the
Prospectus and a copy of the Prospectus shall not have been furnished to such
person in a timely manner due to the wrongful action or wrongful inaction of
such Indemnified Person or the Underwriter.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to
<PAGE> 17
17
such Indemnified Person and payment of all reasonable fees and expenses;
provided, however, that the failure to so notify the Company shall not relieve
it of any obligation or liability which it may have hereunder or otherwise
(unless and only to the extent that such failure directly results in the loss or
compromise of any material rights or defenses by the Company and the Company was
not otherwise aware of such action or claim). Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any impleaded parties) include both
such Indemnified Person and the Company and such Indemnified Person shall have
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Person, it being understood, however,
that the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Persons, which firm
shall be designated in writing by such Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without its written
consent but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Indemnified Person from and against
any loss or liability by reason of such settlement. The Company shall not,
without the prior written consent of the Indemnified Person, which consent shall
not be unreasonably withheld, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
(c) In connection with any Registration Statement in which a Holder
is participating, such Holder agrees, severally and not jointly, to indemnify
and hold harmless each of the Company, its directors, its officers, agents and
employees and any person controlling the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and the directors, officers,
agents or employees of such controlling persons, to the same extent as the
foregoing indemnity from the Company to each Indemnified Person but only with
reference to information relating to such Indemnified Person furnished in
writing by or on behalf of such Indemnified Person expressly for use in such
Registration Statement or any Prospectus (or any amendment or supplement
thereto) or any preliminary Prospectus. In case any action shall be brought
against the Company, any of their directors, any such officer, agent or employee
or any person controlling the Company based on such Registration Statement and
in respect of which indemnity may be sought against any Indemnified Person, the
Indemnified Person shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such Indemnified
Person shall not be required to do so, but may employ separate counsel therein
<PAGE> 18
18
and participate in defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person), and the Company, its
directors, any such officers and any person controlling the Company shall have
the rights and duties given to the Indemnified Person, by Sections 6(b) and 6(d)
hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Person or is insufficient to hold such Indemnified
Person harmless in respect of any losses, claims, damages, liabilities or
judgments referred to therein, then the Company, in lieu of indemnifying such
Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and each Indemnified Person on
the other hand from the offering of the securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and each such
Indemnified Person in connection with the statements or omissions (or alleged
statements or omissions) which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and each such Indemnified
Person shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or the
alleged omission to state a material fact relates to information supplied by the
Company or such Indemnified Person and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation (even if the Indemnified Persons were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an the Company as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other fees or expenses reasonably incurred by such
indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6, no Indemnified
Person shall be required to contribute any amount in excess of the amount by
which the total net proceeds received by it in connection with the sale of the
securities pursuant to this Agreement exceeds the amount of any damages which
such Indemnified Person has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
6 will be in addition to any liability which the Company may otherwise have to
the Indemnified Persons referred to above. The Indemnified Persons' obligations
to contribute pursuant to this Section 6(d) are several in proportion to the
respective amount of securities included in any such Registration Statement by
each Indemnified Person and not joint.
<PAGE> 19
19
7. Rules 144 and 144A
The Company shall use its best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act in a timely
manner and, if at any time it is not required to file such reports but in the
past had been required to or did file such reports, it will, upon the request of
any Holder, make available other information as required by, and so long as
necessary to permit, sales of its Registrable Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations
(a) If any of the Registrable Securities covered by any Registration
Statement pursuant to a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Company, subject to
the consent of the Holders of a majority in aggregate number of such Registrable
Securities included in such offering (which will not be unreasonably withheld or
delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
(b) Each Holder agrees, if requested (pursuant to a timely written
notice) by the managing underwriter or underwriters in an underwritten offering,
not to effect any public sale or distribution of any of the issue being
registered or a similar security of the Company or any securities convertible or
exchangeable or exercisable for such securities including a sale pursuant to
Rule 144 or Rule 144A (except as part of such underwritten offering), during the
period beginning 10 days prior to, and ending 90 days after, the closing date of
each underwritten offering made pursuant to such registration statement (or such
shorter period as the managing underwriter or underwriters may agree), to the
extent timely notified in writing by the Company or by the managing underwriter
or underwriters.
9. Miscellaneous. (a) Remedies. In the event of a breach by the
Company, or by a Holder, of any of their obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
and each Holder agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
<PAGE> 20
20
(b) No Inconsistent Agreements. Without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any person the right to request it to register any of
its equity securities under the Securities Act (other than pursuant to the
Securityholders and Registration Rights Agreement) unless the rights so granted
are subject in all respects to the prior rights of the Holders set forth herein,
and are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the written consent of the Holders of a majority of the
then outstanding Registrable Securities is obtained; provided, however, that,
for the purposes of this Agreement, Registrable Securities that are owned,
directly or indirectly, by the Company or an Affiliate of the Company are not
deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate number of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, or facsimile:
(i) if to the Company:
American Restaurant Group, Inc.
450 Newport Center Drive
Newport Beach, California 92660
Fax: (714) 721-8941
Attention: Chief Financial Officer
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Philip T. Rugger, III
<PAGE> 21
21
(ii) if to the Holders, to their addresses as set forth below
their signatures hereto.
(iii) if to any other person who is then a registered Holder,
to the address of such Holder as it appears in the share
register of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Notwithstanding the foregoing, no transferee shall have any of the
rights granted under this Agreement until such transferee shall acknowledge its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(g) Governing Law; Submission to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(h) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by
<PAGE> 22
22
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(k) Entire Agreement. This Agreement, together with the Subscription
Agreements and the Voting Trust Agreement, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the
Subscription Agreement, and the Voting Trust Agreement, supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/Wilfred H. Partridge
--------------------------------
Name: Wilfred H. Partridge
Printed Address:
1211 Sun Valley Road
Solana Beach, CA 92075
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/Patrick J. Kelvie
---------------------------------
Name: Patrick J. Kelvie
Printed Address:
36 Jennings Lane
Atherton, CA 94027
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/William J. McCaffrey, Jr.
---------------------------------
Name: William J. McCaffrey, Jr.
Printed Address:
2525 Ocean Boulevard, Apt. G-4
Corona Del Mar, CA 92625
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/Meredith R. Taylor
---------------------------------
Name: Meredith R. Taylor
Printed Address:
13830 Skyline Boulevard
Woodside, CA 94062
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/Ralph S. Roberts
---------------------------------
Name: Ralph S. Roberts
Printed Address:
880 Hillsborough Avenue
Hillsborough, CA 94010
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Management
Registration Rights Agreement as of the date first above written.
AMERICAN RESTAURANT GROUP, INC.
By: William J. McCaffrey, Jr.
-----------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
/s/Anwar Soliman
---------------------------------
Name: Anwar Soliman
Printed Address:
375 Camden Place
Laguna Beach, CA 92651
<PAGE> 1
EXHIBIT 4.6
CERTIFICATE OF THE DESIGNATION OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF THE
12% SERIES A SENIOR PAY-IN-KIND EXCHANGEABLE PREFERRED STOCK AND
THE 12% SERIES B SENIOR PAY-IN-KIND EXCHANGEABLE PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
American Restaurant Group, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware ("GCL"), does hereby certify that, pursuant to authority conferred upon
the Board of Directors of the Company by its Certificate of Incorporation, as
amended, (hereinafter referred to as the "Certificate of Incorporation") and
pursuant to the provisions of Section 151 of the GCL, said Board of Directors,
by written consent dated February 24, 1998, duly approved and adopted the
following resolution (the "Resolution"):
RESOLVED, that pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors hereby
creates, authorizes and provides for the issuance of two series of Preferred
Stock of the Company, designated as 12% Series A Senior Pay-In-Kind Exchangeable
Preferred Stock of the Company, par value $0.01 per share, and 12% Series B
Senior Pay-In-Kind Exchangeable Preferred Stock of the Company, par value $0.01
per share, having the designations, preferences, relative, participating,
optional and other special rights of the shares of each such series, and the
qualifications, limitations and restrictions thereof that are set forth in this
Resolution, as follows:
SECTION 1. Designation and Amount. The designations for the two
series of Preferred Stock authorized by this Resolution shall be the 12% Series
A Senior Pay-In-Kind Exchangeable Preferred Stock, par value $0.01 per share
(the "Series A Senior Preferred Stock") and the 12% Series B Senior Pay-In-Kind
Exchangeable Preferred Stock, par value $0.01 per share (the "Series B Senior
Preferred Stock" and, together with the Series A Senior Preferred Stock, the
"Senior Exchangeable Preferred Stock"). The liquidation preference of the Senior
Exchangeable Preferred Stock is $1,000.00 per share (the "Liquidation
Preference") and the original issue price for each such share is $1,000.00. The
Liquidation Preference or the issue price per share of the Senior Exchangeable
Preferred Stock shall not for any purpose be considered to be a determination by
the Board of Directors with respect to the capital and surplus of the Company.
The number of shares constituting such Series A Senior Preferred Stock shall be
80,000, consisting of an initial issuance of 35,000 shares of Series A Senior
Preferred Stock and
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45,000 shares of Series A Senior Preferred Stock, if the Company elects to pay
dividends in additional shares of Series A Senior Preferred Stock. The number of
shares constituting such Series B Senior Preferred Stock shall be 80,000, to be
registered under the Securities Act and exchanged for the outstanding Series A
Senior Preferred Stock and to be issued as dividends if the Company elects to
pay dividends in additional shares of Series B Senior Preferred Stock.
SECTION 2. Dividends. (a) Beginning on the Issuance Date, Holders of
the outstanding shares of Senior Exchangeable Preferred Stock (the "Holders")
will be entitled to receive, when, as and if declared by the Board of Directors,
out of funds legally available therefor, dividends on the Senior Exchangeable
Preferred Stock at an annual rate of 12% of the Liquidation Preference per
share, subject to increase as provided below (the "Dividend Rate"). All
dividends will be cumulative and accrue daily, whether or not earned or
declared, and will be payable semi-annually in arrears on February 15 and August
15 of each year, commencing on August 15, 1998, to Holders of record on the
February 1 and August 1 immediately preceding the relevant Dividend Payment
Date. The Company may, at its option, pay dividends in cash or in additional
fully paid and non-assessable shares of Senior Exchangeable Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends; provided, however, that if the Company pays dividends in additional
shares of Senior Exchangeable Preferred Stock, Holders of Series A Senior
Preferred Stock shall be paid in additional shares of Series A Senior Preferred
Stock and Holders of Series B Senior Preferred Stock shall be paid in additional
shares of Series B Senior Preferred Stock. Dividends on the Series B Senior
Preferred Stock will accrue from the last dividend payment date on which
dividends were paid on the Series A Senior Preferred Stock surrendered for
exchange therefor or, if no dividends had been paid on the Series A Senior
Preferred Stock, from the date of original issue of the Series A Senior
Preferred Stock. Dividends shall cease to accrue in respect of the shares of
Senior Exchangeable Preferred Stock on the Exchange Date or on the Redemption
Date unless the Company shall have failed, as applicable, to issue the
appropriate aggregate principal amount of Exchange Debentures in respect of the
Senior Exchangeable Preferred Stock on the Exchange Date or shall have failed to
pay the relevant redemption price on the Redemption Date. For all purposes
hereunder, the Dividend Rate shall be automatically increased in the following
events: (i) if at the end of any fiscal quarter of the Company, the Maintenance
Test Ratio exceeds the Maximum Test Ratio (each as defined in Section 8(e)
hereof) for that fiscal quarter, then for the period during the immediately
succeeding quarter, the Dividend Rate shall be 13.5% for the first two quarters
for which the Maximum Test Ratio is exceeded (whether or not such fiscal
quarters are consecutive) and 15% for any other quarter thereafter for which the
Maximum Test Ratio is exceeded or (ii) if a Voting Rights Triggering Event
(other than a Voting Rights Triggering Event occurring
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<PAGE> 3
solely because of the breach of the Maintenance Test Ratio set forth in Section
8(e) hereof) occurs, then the Dividend Rate shall be 15% for the period during
which the voting rights relating to such Voting Rights Triggering Event continue
in accordance with the provisions of Section 5(b) hereof.
(b) All dividends paid with respect to shares of the Senior
Exchangeable Preferred Stock pursuant to Section 2(a) of this Certificate of
Designation shall be paid pro rata to the
Holders entitled thereto.
(c) Holders shall be entitled to receive the dividends provided for
in Section 2(a) of this Certificate of Designation (including any accrued and
unpaid cash dividends on the Senior Exchangeable Preferred Stock) in preference
to and in priority over any cash dividends (including accrued and unpaid
dividends) upon any of the Junior Securities.
(d) Dividends on account of arrears for any past dividend period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to Holders of
record of the Senior Exchangeable Preferred Stock on such date, not more than 30
days prior to the payment thereof, as may be fixed by the Board of Directors.
(e) Each fractional share of Senior Exchangeable Preferred Stock
outstanding, if any, shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Senior Exchangeable
Preferred Stock pursuant to Section 2(a), and all such dividends with respect to
such outstanding fractional shares shall accrue at the Dividend Rate and shall
be payable in the same manner and at such times as provided for in Section 2(a)
with respect to dividends on each outstanding share of Senior Exchangeable
Preferred Stock.
(f) Dividends payable on the Senior Exchangeable Preferred Stock for
any period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period for
which dividends are payable.
(g) In addition, in the event that the Company is required by the
terms of the Registration Rights Agreement to be entered into between the
Company, its Subsidiaries and Jefferies & Company, Inc. (the "Initial
Purchaser"), contemplated by the Purchase Agreement dated as of February 13,
1998 between the Company and the Initial Purchaser, and approved by the Board of
Directors of the Company, to pay liquidated damages, the Company may pay such
liquidated damages in the form of additional dividends on the Series A Senior
Exchangeable Preferred Stock in accordance with this Section 2.
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<PAGE> 4
SECTION 3. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, Holders will be entitled
to be paid, out of the assets of the Company legally available for distribution
to stockholders, 110% of the then effective Liquidation Preference per share of
Senior Exchangeable Preferred Stock, plus, without duplication, an amount in
cash equal to all accrued and unpaid dividends, if any, thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to the date
fixed for liquidation, dissolution or winding-up), before any distribution is
made on any Junior Securities. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the Senior Exchangeable Preferred Stock are not paid in full, the
Holders of the Senior Exchangeable Preferred Stock will share equally and
ratably in any distribution of assets of the Company based on 110% of the
Liquidation Preference of the Senior Exchangeable Preferred Stock, together,
with all accrued and unpaid dividends. For the purposes of this Section 3,
neither the sale, conveyance, lease or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Company nor the consolidation or merger of the Company with one
or more entities shall be deemed to be a liquidation, dissolution or winding-up
of the Company. Any liquidation payment with respect to each outstanding
fractional share of Senior Exchangeable Preferred Stock, if any, shall be equal
to a ratably proportionate amount of the liquidation payments with respect to
each outstanding full share of Senior Exchangeable Preferred Stock.
SECTION 4. Exchange. (a) The Company may, at its option, subject to
the conditions described below, on any scheduled Dividend Payment Date occurring
on or after February 15, 1999, exchange the Senior Exchangeable Preferred Stock,
in whole but not in part, for the Exchange Debentures. At least 30 and not more
than 60 days prior to the date fixed for exchange, the Company shall send a
written notice (the "Exchange Notice") of exchange by mail to each Holder, which
notice shall state:
(i) that the Company has elected to exchange the Senior Exchangeable
Preferred Stock into Exchange Debentures pursuant to this Certificate of
Designation;
(ii) the date of such exchange (the "Exchange Date");
(iii) that the Holder is to surrender to the Company, at the place or
places and in the manner designated in the Exchange Notice, its
certificate or certificates representing the shares of Senior Exchangeable
Preferred Stock;
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<PAGE> 5
(iv) that dividends on the shares of Senior Exchangeable Preferred
Stock to be exchanged shall cease to accrue at the close of business on
the day prior to the Exchange Date, whether or not certificates for shares
of Senior Exchangeable Preferred Stock are surrendered for exchange on the
Exchange Date, unless the Company shall default in the delivery of
Exchange Debentures; and
(v) that interest on the Exchange Debentures shall accrue from the
Exchange Date whether or not certificates for shares of Senior
Exchangeable Preferred Stock are surrendered for exchange on the Exchange
Date.
On the Exchange Date, if the conditions set forth in clauses (A)
through (F) below are satisfied and if the exchange is then permitted under the
Exchange Indenture, the Company shall issue Exchange Debentures in exchange for
the Senior Exchangeable Preferred Stock as provided in the next paragraph;
provided that: (A) on the Exchange Date there are no accrued and unpaid
dividends on the Senior Exchangeable Preferred Stock (including the dividend
payable on such date) or other contractual impediments to such exchange; (B)
there shall be legally available funds sufficient for the exchange to occur
(including, without limitation, legally available funds sufficient therefor
under Section 160 and 170 (or any successor provisions) of the GCL; (C) no
Voting Rights Triggering Event has occurred and is continuing at the time of
such exchange; (D) immediately after giving effect to such exchange, no Default
or Event of Default (each as defined in the Exchange Indenture) would exist
under the Exchange Indenture, and no Default or Event of Default would exist
under any material instrument governing Indebtedness outstanding of the Company
at the time of such exchange, including without limitation the Senior Secured
Notes and the New Credit Facility; (E) the Exchange Indenture shall have been
qualified under the Trust Indenture Act, if qualification is required; and (F)
the Company shall have delivered to the Debenture Trustee, an Officers'
Certificate, dated the Exchange Date, regarding the satisfaction of the
conditions set forth in clauses (A) through (E). In the event that any of the
conditions set forth in clauses (A) through (F) of the preceding sentence are
not satisfied on the Exchange Date, then no shares of Senior Exchangeable
Preferred Stock shall be exchanged, and in order to effect an exchange as
provided for in this Section 4, the Company shall be required to fix another
date for the exchange and issue a new Exchange Notice and the Company shall use
its best efforts to satisfy such conditions and effect such exchange as soon as
practicable.
(b) Upon any exchange pursuant to this Section 4, Holders shall be
entitled to receive for each share of Senior Exchangeable Preferred Stock,
subject to the provisions hereof, a principal amount of Exchange Debentures
equal to 100% of the Liquidation Preference of such share, plus all accrued and
unpaid dividends thereon to the Exchange Date; provided that the Company
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<PAGE> 6
shall pay cash to Holders in lieu of issuing an Exchange Debenture in a
principal amount of less than $1,000 (or, at the option of the Company, $100)
and provided further that the Exchange Debentures will be issuable only in
denominations of $1,000 (or, at the option of the Company, $100) and integral
multiples thereof.
(c) On or before the Exchange Date, each Holder shall surrender the
certificate or certificates representing such shares of the Senior Exchangeable
Preferred Stock, in the manner and at the place designated in the Exchange
Notice. The Company shall cause the Exchange Debentures to be executed on the
Exchange Date and, upon surrender in accordance with the Exchange Notice of the
certificates for any shares of the Senior Exchangeable Preferred Stock so
exchanged (properly endorsed or assigned for transfer, if the Exchange Notice
shall so state), such shares shall be exchanged by the Company into Exchange
Debentures as aforesaid. The Company shall pay interest on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange
Date.
(d) If the Exchange Notice has been mailed as aforesaid, and if
before the Exchange Date all Exchange Debentures necessary for such exchange
shall have been duly executed by the Company and delivered to the Debenture
Trustee with irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders as stockholders of
the Company shall cease (except the right to receive the Exchange Debentures and
cash in lieu of any Exchange Debenture that is in a principal amount less than
$1,000 (or, if denominations of $100 are issued by the Company, $100), and the
person or persons entitled to receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as a registered holder or holders of
such Exchange Debentures as of the Exchange Date.
SECTION 5. Voting Rights. (a) Holders, except as otherwise required
under the laws of the State of Delaware or as set forth below, shall not be
entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Company.
(b) If (i) dividends on the Senior Exchangeable Preferred Stock are
in arrears and unpaid for any quarterly period; (ii) the Company fails to
discharge its obligation to redeem the Senior Exchangeable Preferred Stock on
the Mandatory Redemption Date or fails to otherwise discharge any redemption
obligation with respect to the Senior Exchangeable Preferred Stock; (iii) the
Maintenance Test Ratio exceeds the applicable Maximum Test Ratio (each as
defined herein) for a period of eight (8) consecutive fiscal quarters; (iv) the
Company breaches any of the covenants in Section 8 concerning Restricted
Payments, sales of assets, affiliate transactions, mergers and sales of assets;
or (v) a breach or violation of any other provision contained in
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<PAGE> 7
this Certificate of Designation occurs which materially affects the Holders and
such breach or violation continues for a period of 30 days or more after receipt
of notice from a majority of the Holders of the Senior Exchangeable Preferred
Stock, then (A) the number of members comprising the Company's Board of
Directors shall automatically increase by two and (B) the holders of the
majority of the then outstanding Senior Exchangeable Preferred Stock, voting or
consenting, as the case may be, as one class, will be entitled to elect two
directors to the Board of Directors to fill the vacancies created by such
increase. Such voting rights will continue until such time as, in the case of a
dividend default, all dividends in arrears on the Senior Exchangeable Preferred
Stock are paid in full and, in all other cases, any failure, breach or default
giving rise to such voting rights is remedied (which in the case of the
Maintenance Test Ratio exceeding the Maximum Test Ratio, shall be the first
quarter when the Maintenance Test Ratio does not exceed the Maximum Test Ratio)
or waived by the holders of at least a majority of the shares of Senior
Exchangeable Preferred Stock then outstanding, at which time the term of the
directors elected pursuant to the provisions of this paragraph shall terminate.
Each such event described in clauses (i) through (v) above is referred to herein
as a "Voting Rights Triggering Event."
(c) Immediately after voting power to elect directors shall have
become vested and be continuing in the Holders pursuant to Section 5(b) or if
vacancies shall exist in the offices of directors elected by the Holders, a
proper officer of the Company shall call a special meeting of the Holders for
the purpose of electing the directors which such Holders are entitled to elect.
Any such meeting shall be held at the earliest practicable date, and the Company
shall provide Holders with access to the lists of Holders, pursuant to the
provisions of this Section 5(c). At any meeting held for the purpose of electing
directors at which the Holders shall have the right, voting separately as a
class, to elect directors, the presence in person or by proxy of the Holders of
at least a majority of the outstanding shares of Senior Exchangeable Preferred
Stock shall be required to constitute a quorum of such Holders.
(d) Any vacancy occurring in the office of a director elected by the
Holders pursuant to Section 5(b) may be filled by the remaining director elected
by the Holders unless and until such vacancy shall be filled by the Holders.
(e) The Company shall not modify, change, affect or amend the
Certificate of Incorporation or this Certificate of Designation to affect
materially and adversely the specified rights, preferences or privileges of the
Holders of the Senior Exchangeable Preferred Stock, or authorize the issuance of
any additional shares of Senior Exchangeable Preferred Stock, without the
affirmative vote or consent of Holders of at least a majority of the shares of
Senior Exchangeable Preferred Stock then
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<PAGE> 8
outstanding, voting or consenting, as the case may be, as one class.
(f) In any case in which the Holders shall be entitled to vote
pursuant to this Section 5 or pursuant to the laws of the State of Delaware,
each Holder shall be entitled to one vote for each share of Senior Exchangeable
Preferred Stock held.
(g) In lieu of voting at a meeting, Holders may act by written
consent in accordance with Section 228 of the GCL.
(h) Except as otherwise required by the GCL, Holders of at least a
majority of the then outstanding shares of Senior Exchangeable Preferred Stock,
voting or consenting, as the case may be, separately as a class, may waive
compliance with any provision of this Certificate of Designation.
SECTION 6. Redemption.
(a) Optional Redemption.
(i) The Senior Exchangeable Preferred Stock will be redeemable
(subject to restrictions with respect to the legal availability of funds
therefor) at the election of the Company, as a whole or from time to time
in part, at any time on not less than 30 nor more than 60 days' prior
notice, at 110% of the then effective Liquidation Preference, plus,
without duplication, all accrued and unpaid dividends, if any, to the date
of redemption (the "Redemption Date").
(ii) No optional redemption may be authorized or made unless on or
prior to such redemption full unpaid cumulative dividends shall have been
paid, or a sum set apart in cash or in shares of Senior Exchangeable
Preferred Stock for such payment, on all shares of Senior Exchangeable
Preferred Stock then outstanding. If less then all the Senior Exchangeable
Preferred Stock is to be redeemed, the particular shares to be redeemed
will be determined pro rata. If any Senior Exchangeable Preferred Stock is
to be redeemed in part, the Redemption Notice that relates to such Senior
Exchangeable Preferred Stock shall state the portion of the liquidation
preference to be redeemed. New shares of the same Series of Senior
Exchangeable Preferred Stock having an aggregate liquidation preference
equal to the unredeemed portion will be issued in the name of the holder
thereof upon cancellation of the original shares of Senior Exchangeable
Preferred Stock and, unless the Company fails to pay the redemption price
on the Redemption Date, after the Redemption Date dividends will cease to
accrue on the Senior Exchangeable Preferred Stock called for redemption.
(b) Mandatory Redemption. The Company shall redeem all outstanding
Senior Exchangeable Preferred Stock (subject to
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<PAGE> 9
the legal availability of funds therefor) in whole on the redemption date of
August 15, 2003 (the "Mandatory Redemption Date"), at a redemption price equal
to 110% of the Liquidation Preference thereof, plus all accrued and unpaid
dividends, if any, to the date of redemption.
(c) Procedure for Redemption. (i) Not more than 60 and not less then
30 days prior to any Redemption Date, written notice (the "Redemption Notice")
shall be given by first-class mail, postage prepaid, to each Holder of record of
shares to be redeemed on the record date fixed for such redemption of the Senior
Exchangeable Preferred Stock at such Holder's address as the same appears on the
stock register of the Company. The Redemption Notice shall state:
(A) the Redemption Price;
(B) whether all or less than all of the outstanding shares of the
Senior Exchangeable Preferred Stock are to be redeemed and the total
number of shares of such Senior Exchangeable Preferred Stock being
redeemed;
(C) the number of shares of Senior Exchangeable Preferred Stock held
by the Holder that the Company intends to redeem;
(D) the Redemption Date;
(E) that the Holder is to surrender to the Company, at the place or
places, which shall be designated in such Redemption Notice, its
certificates representing the shares of Senior Exchangeable Preferred
Stock to be redeemed;
(F) that dividends on the shares of the Senior Exchangeable
Preferred Stock to be redeemed shall cease to accrue on such Redemption
Date unless the Company defaults in the payment of the redemption price;
and
(G) the name of any bank or trust company performing the duties
referred to in subsection (c)(v) below.
(ii) On or before the Redemption Date, each Holder of Senior
Exchangeable Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares of Senior
Exchangeable Preferred Stock to the Company, in the manner and at the
place designated in the Redemption Notice, and on the Redemption Date the
full redemption price for such shares shall be payable in cash to the
person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be returned to authorized
but unissued shares. In the event that less than all of the shares
represented by any such certificate are redeemed, a new
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<PAGE> 10
certificate shall be issued representing the unredeemed shares.
(iii) Unless the Company defaults in the payment in full of the
redemption price, dividends on the Senior Exchangeable Preferred Stock
called for redemption shall cease to accrue on the Redemption Date, and
the Holders of such shares shall cease to have any further rights with
respect thereto on the Redemption Date, other than the right to receive
the redemption price, without interest.
(iv) If a Redemption Notice shall have been duly given, and if, on or
before the Redemption Date specified therein, all funds necessary for such
redemption shall have been set aside by the Company, separate and apart
from its other funds, in trust for the pro rata benefit of the Holders of
the Senior Exchangeable Preferred Stock called for redemption so as to be
and continue to be available therefor, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for redemption shall no
longer be deemed outstanding, and all rights with respect to such shares
shall forthwith on such Redemption Date cease and terminate, except only
the right of the Holders thereof to receive the amount payable on
redemption thereof, without interest.
(v) If a Redemption Notice shall have been duly given or if the
Company shall have given to the bank or trust company hereinafter referred
to irrevocable authorization promptly to give such notice, and if on or
before the Redemption Date specified therein the funds necessary for such
redemption shall have been deposited by the Company with such bank or
trust company in trust for the pro rata benefit of the Holders of the
Senior Exchangeable Preferred Stock called for redemption, then,
notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation, from and after the time
of such deposit, all shares so called, or to be so called pursuant to such
irrevocable authorization, for redemption shall no longer be deemed to be
outstanding and all rights with respect of such shares shall forthwith
cease and terminate, except only the right of the Holders thereof to
receive from such bank or trust company at any time after the time of such
deposit the funds so deposited, without interest. The aforesaid bank or
trust company shall be organized and in good standing under the laws of
the United States of America or of the State of New York, shall be doing
business in the Borough of Manhattan, The City of New York, shall have
capital, surplus and undivided profits aggregating at least $100,000,000
according to its last published statement of condition, and shall be
identified in the Redemption Notice. Any interest accrued on such funds
shall be paid to the Company from time to time. Any funds
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<PAGE> 11
so set aside or deposited, as the case may be, and unclaimed at the end of
three years from such Redemption Date shall, to the extent permitted by
law, be released or repaid to the Company, after which repayment the
Holders of the shares so called for redemption shall look only to the
Company for payment thereof.
SECTION 7. Ranking. The Senior Exchangeable Preferred Stock shall,
with respect to dividends and distributions upon liquidation, winding-up and
dissolution of the Company, rank senior to all classes of Common Stock and to
each other class of Capital Stock or series of preferred stock of the Company
existing on, or established after, the Issuance Date by the Board of Directors
(collectively referred to, together with all classes of Common Stock of the
Company, as "Junior Securities").
SECTION 8. Covenants and Certain Additional Provisions.
(a) Limitations on Restricted Payments. The Company shall not, and,
with respect to clause (ii) below, shall not permit any Subsidiary to, directly
or indirectly, take any of the following actions:
(i) declare, set aside for payment or pay any dividend on, or make any
distribution to the holders of any Junior Securities (other than dividends
or distributions payable solely in shares of a class or series upon which
such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Securities other than Common Stock, together with
cash in lieu of fractional shares); or
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any Junior Securities
(such payments or other actions described in (but not excluded from) clauses (i)
and (ii) are collectively referred to as "Restricted Payments"), unless at the
time of, and immediately after giving effect to, the proposed Restricted Payment
(1) no Voting Rights Triggering Event shall have occurred and be continuing, and
(2) all accrued dividends on the Senior Exchangeable Preferred Stock shall have
been paid in full, or funds (or shares of Senior Exchangeable Preferred Stock)
sufficient for payment thereof have been set apart for payment.
(b) Limitation on Asset Sales. The Company will not, and will not
permit any Subsidiary to, make any Asset Sale unless (i) the Company or such
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value (as determined in good faith by the Board of Directors
as evidenced by a Board Resolution) of the assets subject to such Asset Sale;
(ii) at least 75% of the consideration for such Asset
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Sale is in the form of cash, Cash Equivalents or liabilities of the Company or
any Subsidiary that are assumed by the transferee of such assets (provided, that
following such Asset Sale there is no further recourse to the Company and its
Subsidiaries with respect to such liabilities); and (iii) within 12 months of
such Asset Sale, the Net Proceeds thereof, at the Company's election, are (A)
invested in assets related to the business of the Company or its Subsidiaries,
or (B) used to repay, purchase or otherwise acquire any Indebtedness of the
Company or its Subsidiaries, including Indebtedness under the New Credit
Facility or the Senior Secured Notes, or (C) used during such 12 months, or
within 60 days after such 12 month period, to purchase or otherwise acquire
shares of Senior Exchangeable Preferred Stock or (D) to the extent not used as
provided in clauses (A) through (C), applied to make an offer to purchase the
Senior Exchangeable Preferred Stock (an "Excess Proceeds Payment") pursuant to
the offer described below (the "Excess Proceeds Offer") and the other procedures
set forth herein; provided, that if the amount of the Net Proceeds from any
Asset Sale not invested or used pursuant to clauses (A), (B) or (C) above is
less than $5.0 million, the Company will not be required to make an offer
pursuant to clause (D) until the aggregate amount of Excess Proceeds from all
Asset Sales exceeds $5.0 million. Pending final application of any such Net
Proceeds, the Company or any Subsidiary may temporarily reduce Indebtedness
under the New Credit Facility or temporarily invest such Net Proceeds in Cash
Equivalents.
For the purpose of this Section 8(b), the following are deemed to be
cash: (y) securities received by the Company or any Subsidiary from the
transferee that are promptly converted by the Company or such Subsidiary into
cash and (z) assets related to the business of the Company or its Subsidiaries
received in an exchange of assets transaction; provided that (i) in the event
such exchange of assets transaction or series of related exchange of assets
transactions (each an "Exchange Transaction") involves an aggregate value in
excess of $2.5 million, the terms of such Exchange Transaction shall have been
approved by a majority of the disinterested members of the Board of Directors of
the Company as evidenced by a Board Resolution, (ii) in the event such Exchange
Transaction involves an aggregate value in excess of $5.0 million, the Company
shall have received a written opinion from a nationally recognized independent
investment banking firm that the Company has received consideration equal to the
fair market value of the assets disposed of and (iii) any assets to be received
shall be comparable to those being exchanged as determined in good faith by the
Board of Directors of the Company as evidenced by a Board Resolution.
The amount of Net Proceeds not invested, used or applied as set
forth in the preceding clauses (A) through (C) constitutes "Excess Proceeds." If
the Company elects, or becomes obligated to make an Excess Proceeds Offer, the
Company will offer to purchase, with such Excess Proceeds, shares of Senior
Exchangeable Preferred Stock at a purchase price equal to 110% of
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the Liquidation Preference thereof, plus accrued and unpaid dividends, if any,
to the purchase date (the "Purchase Amount"). The Company must commence such
Excess Proceeds Offer not later than 90 days after the expiration of the
12-month period following the Asset Sale that produced Excess Proceeds. If the
aggregate purchase price for the shares of Senior Exchangeable Preferred Stock
tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds,
the Company and its Subsidiaries may use the portion of the Excess Proceeds
remaining after payment of such purchase price for general corporate purposes.
Each Excess Proceeds Offer will remain open for a period of 20
Business Days and no longer, unless a longer period is required by law (the
"Excess Proceeds Offer Period"). Promptly after the termination of the Excess
Proceeds Offer Period (the "Excess Proceeds Payment Date"), the Company will
purchase and mail or deliver payment for the Purchase Amount for the shares of
Senior Exchangeable Preferred Stock tendered, pro rata or by such other method
as may be required by law, or, if less shares than the Purchase Amount has been
tendered, all shares tendered pursuant to the Excess Proceeds Offer. The shares
to be purchased pursuant to an Excess Proceeds Offer may be reduced by the
Liquidation Preference of shares acquired by the Company through purchase or
redemption subsequent to the date of the Asset Sale and surrendered to the
transfer agent for cancellation.
Each Excess Proceeds Offer will be conducted in compliance with
applicable regulations under the federal securities laws, including Exchange Act
Rule 14e-1. To the extent that the provisions of any securities laws or
regulations conflict with this Section 8(b), the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 8(b) by virtue thereof.
(c) Limitation on Transactions with Affiliates. the Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), except
for (i) Affiliate Transactions, which together with all Affiliate Transactions
that are part of a common plan, have an aggregate value of not more than $1.0
million; provided, that such transactions are conducted in good faith and on
terms that are no less favorable to the Company or the relevant Subsidiary than
those that would have bene obtained in a comparable transaction at such time on
a arms-length basis from a Person that is not an Affiliate of the Company or
such Subsidiary; (ii) Affiliate Transactions, which together with all Affiliate
Transactions that are part of a common plan, have an aggregate value of not more
than
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<PAGE> 14
$2.5 million; provided, that a majority of the disinterested members of the
Board of Directors of the Company, as evidenced by a Board Resolution, determine
that such transactions are conducted in good faith and on terms that are no less
favorable to the Company or the relevant Subsidiary than those that would have
been obtained in a comparable transaction at such time on an arms-length basis
from a Person that is not an Affiliate of the Company or such Subsidiary; (iii)
Affiliate Transactions for which the Company delivers to the Holders an opinion
as to the fairness to the Company or such Subsidiary from a financial point of
view, issued by an investment banking firm of national standing; and (iv)
Permitted Affiliate Transactions and other "Restricted Payments" (as defined in
the Senior Secured Notes) permitted by the provisions on the "Limitations on
Restricted Payments" covenant contained in the Senior Secured Notes.
(d) Consolidation, Merger and Sale of Assets. The Company shall not,
in a single transaction or through a series of transactions, consolidate with or
merge with or into any other Person (whether or not the Company is the surviving
corporation) or sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of its properties and assets (determined on a
consolidated basis for the Company and its Subsidiaries) to any other Person or
Persons, unless at the time and immediately after giving effect thereto:
(i) either (a) the Company shall be the continuing corporation or (b)
the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or the Person that acquires by sale,
assignment, conveyance, transfer, lease or disposition all or
substantially all the properties and assets of the Company and its
Subsidiaries on a consolidated basis (the "Surviving Entity") shall be a
corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia;
(ii) the Senior Exchangeable Preferred Stock shall be converted into or
exchanged for and shall become shares of the Surviving Entity having in
respect of the Surviving Entity the same rights and privileges that the
Senior Exchangeable Preferred Stock had immediately prior to such
transaction with respect to the Company;
(iii) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, no Voting Rights Triggering Event, and
no event that after the giving of notice or lapse of time or both would
become a Voting Rights Triggering Event, shall have occurred and be
continuing;
(iv) the Company (or the Surviving Entity as the case may be) has (A) a
Consolidated Net Worth (immediately after giving effect to such
transaction, but prior to any purchase
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<PAGE> 15
accounting adjustments from such transaction) not less than 100% of the
Consolidated Net Worth of the Company immediately before such transaction
and (B) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (on the
assumption that the transaction or series of transactions occurred on the
first day of the four-quarter period immediately prior to the consummation
of such transaction or series of transactions with the appropriate
adjustments with respect to the transaction or series of transactions
being included in such pro forma calculation), could incur at least $1.00
of additional Indebtedness pursuant to the "Interest Coverage Ratio" test
set forth in the Senior Secured Notes; and
(v) the Company or the Surviving Entity shall have delivered to the
Holders an Officers' Certificate, each stating that such consolidation,
merger, sale, assignment conveyance, transfer, lease or other disposition
comply with this Certificate of Designation.
The Surviving Entity shall file an appropriate certificate of
designation with respect to the preferred stock referred to in clause (ii) above
with the secretary of state (or similar public official) of the jurisdiction
under whose laws it is organized. In such event, the Company shall be released
from its obligations under this Certificate of Designation.
(e) Maintenance Test Ratio. The Company will calculate whether the
Maintenance Test Ratio exceeds any of the following respective amounts at the
end of the fiscal quarter (the "Maximum Test Ratio") set forth opposite such
Maximum Test Ratio:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Maximum Test Ratio
-------------------- ------------------
<S> <C>
March, June, September, 1998 6.75
December 1998 6.50
March, June, September,
December 1999 6.00
March, June, September,
December 2000 5.50
March, June, September,
December 2001 5.25
March, June, September,
December 2002 and each quarter
thereafter 5.00
</TABLE>
(f) Reports and Other Information. The Company shall file on a
timely basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the
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<PAGE> 16
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company shall also (i) file with the transfer agent, and provide to each Holder
of Senior Exchangeable Preferred Stock, without cost to such holder, copies of
such reports and documents within fifteen days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if the
Company were so required, and (ii) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and documents to any
prospective holder of Senior Exchangeable Preferred Stock promptly upon written
request together with an Officers' Certificate.
SECTION 9. No Reissuance of Senior Exchangeable Preferred Stock.
None of the shares of Senior Exchangeable Preferred Stock acquired by the
Company by reason of redemption, purchase, or otherwise shall be reissued,
except shares of Series A Senior Exchangeable Preferred Stock acquired by the
Company in exchange for Series B Senior Exchangeable Preferred Stock which are
reissued in payment of dividends on the Series B Senior Exchangeable Preferred
Stock.
SECTION 10. Business Day. If any payment or redemption shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment or redemption shall be made on the immediately succeeding Business
Day and dividends shall accrue on any such payment or redemption so deferred
from the payment date or redemption date to the next succeeding Business Day and
be paid on such payment date or redemption date.
SECTION 11. Transfer Restrictions. (a) The Series A Senior Preferred
Stock will bear a legend to the following effect (as applicable) unless
otherwise agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) AS
PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES
WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST
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<PAGE> 17
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF SUCH SECURITY, EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO FOREIGN PERSONS THAT OCCUR IN
OFFSHORE TRANSACTIONS AND WITHOUT DIRECTED SELLING EFFORTS WITHIN
THE MEANINGS OF SUCH TERMS AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT, (E) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRANSFER AGENT.
(b) Except as provided in this Section 11, the transfer agent shall
refuse to register any transfer of Series A Senior Preferred Stock in violation
of the restrictions contained in the legend provided for in Section 11(a).
(c) The legend provided for in Section 11(a) may be removed if the
Series A Senior Preferred Stock has been registered pursuant to a Preferred
Stock Shelf Registration Statement under the Securities Act. Unlegended Series B
Senior Preferred Stock may be issued in exchange for Series A Senior Preferred
Stock pursuant to a Preferred Stock Exchange Offer.
(d) In connection with proposed transfers of Series A Senior
Preferred Stock described in Exhibit A, the transfer agent or the Company may
require the transferor or transferee, as the case may be, to deliver the letter
attached hereto as Exhibit A. Each Holder of Series A Senior Preferred Stock
shall notify the Company or the transfer agent in the event of any transfer by
such Holder of any shares of Series A Senior Preferred Stock to a foreign
transferee.
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<PAGE> 18
SECTION 12. Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" means, any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, will mean (i) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; (ii) in the case of a
corporation, beneficial ownership of 10% or more of any class of Capital Stock
of such Person; and (iii) in the case of an individual (A) members of such
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (B) trusts, any trustee or
beneficiaries of which are such Person or members of such Person's immediate
family. Notwithstanding the foregoing, neither Jefferies & Company, Inc. nor any
of its Affiliates will be deemed to be Affiliates of the Company.
"Affiliate Transaction" has the meaning set forth in Section 8(c)
hereof.
"Asset Sale" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock or a Subsidiary (other than directors' qualifying shares),
property or other assets, including by way of a sale/leaseback transaction (each
referred to for the purposes of this definition as a "disposition"), by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or by the Company or a Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of property or assets in the ordinary course of
business, (iii) dispositions of inventory in the ordinary course of business,
(iv) for purposes of Section 8(b) hereof only, a disposition that constitutes a
"Restricted Payment" (as defined in the Senior Secured Notes) permitted by the
provisions of the "Limitation on Restricted Payments" covenant contained in the
Senior Secured Notes, (v) the sale, lease, transfer or other disposition of all
or substantially all the assets of the Company as permitted under Section 8(d)
hereof, (vi) the grant of Liens permitted by the covenant "Limitation on Liens"
contained in the Senior Secured Notes and (vii) sales of obsolete or worn-out
equipment.
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<PAGE> 19
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any duly authorized committee of such board.
"Board Resolution" means a resolution of the Company's Board of
Directors and, if requested by a majority of the Holders, certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company and to be in full force and effect on the
date of such certification and delivered to the Holders.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participation, rights or other
equivalents (however designated) of corporate stock of such Person; and (ii)
with respect to any other Person, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP, and the amount of such
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"Cash Equivalents" means: (i) securities issued by the United States
of America or any agency or instrumentality thereof; (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250,000,000 and commercial paper issued by others rated at least
A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition; and (iii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) and (ii) above.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act.
"Common Stock" means any and all shares, interests or other
participations in, and other equivalents (however designated, whether voting or
non-voting) of the Company's common stock, whether outstanding on the Issuance
Date or issued after the Issuance Date, and includes, without limitation, all
series and classes of such common stock.
-19-
<PAGE> 20
"Company" means the Person named as the "Company" in the first
paragraph of this Certificate of Designation until a successor Person shall have
become such pursuant to the applicable provisions of this Certificate of
Designation, and thereafter "Company" shall mean such successor Person.
"Consolidated EBITDA" means, with respect to any Person (the
referent Person) for any period, consolidated operating profit of such Person
and its subsidiaries for such period, determined in accordance with GAAP, plus
(to the extent such amounts are deducted in calculating such operating profit
(loss) of such Person for such period, and without duplication) amortization,
depreciation and other non-cash charges (including, without limitation, non-cash
impairment charges, amortization of goodwill, deferred financing fees and other
intangibles but excluding non-cash charges incurred after the date of the
Indenture that require an accrual of or a reserve for cash charges for any
future period); provided, that the operating profit (loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or distributions
paid during such period to the referent Person or a Wholly Owned Subsidiary of
the referent Person.
"Consolidated Net Worth" means, with respect to any Person, the
total stockholders' equity of such Person determined on a consolidated basis in
accordance with GAAP adjusted to exclude (to the extent included in calculating
such equity) (i) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock of such Person and its consolidated subsidiaries;
(ii) all upward revaluations and other write-ups in the book value of any asset
of such person or a consolidated subsidiary of such person subsequent to the
Issuance Date; and (iii) all Investments in persons that are not consolidated
Subsidiaries.
"Debenture Trustee" means the trustee under the Exchange Debenture,
which is a bank or trust company organized and in good standing under the laws
of the United States of America or of the State of New York, doing business in
the Borough of Manhattan, The City of New York, and having capital, surplus and
undivided profits aggregating at least $100,000,000 according to its last
published statement of condition.
"Disqualified Capital Stock" means any Equity Interest that either
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable) is or upon the happening of an event would be
required to be redeemed or repurchased prior to the final stated maturity of the
Senior Secured Notes or is redeemable at the option of the holder thereof at any
time prior to such final stated maturity.
"Dividend Payment Date" means each February 15 and August 15 of each
year on which dividends shall be paid or are
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<PAGE> 21
payable, any Redemption Date and any other date on which dividends in arrears
may be paid.
"Dividend Rate" has the meaning specified in Section 2(a) hereof.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Excess Proceeds," "Excess Proceeds Offer," "Excess Proceeds Offer
Period," "Excess Proceeds Payment," and "Excess Proceeds Payment Date" have the
respective meanings specified in Section 8(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" has the meaning specified in Section 4(a) hereof.
"Exchange Debentures" means the 12% Subordinated Exchange Debentures
due 2003 of the Company issuable in exchange for the Senior Exchangeable
Preferred Stock, at the option of the Company, plus any additional Exchange
Debentures issued in lieu of cash interest, pursuant to the Exchange Indenture.
"Exchange Indenture" means the Indenture among the Company and the
Debenture Trustee thereunder, relating to the Exchange Debentures in the form
filed with the Secretary of the Company.
"Exchange Notice" has the meaning specified in Section 4(a) hereof.
"Exchange Transaction" has the meaning specified in Section 8(b)
hereof.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and in the rules and regulations of the Commission, that
are in effect on the Issuance Date.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and
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<PAGE> 22
reimbursement agreement in respect thereof), of all or any part
of any Indebtedness.
"Holder" has the meaning specified in Section 2(a) hereof.
"Indebtedness" of any Person means (without duplication) (1) all
liabilities and obligations, contingent or otherwise, of such Person (a) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (b) evidenced
by bonds, debentures, notes or other similar instruments, (c) representing the
deferred purchase price of property or services (other than trade payables and
other liabilities incurred in the ordinary course of business which are not more
than 90 days past due), (d) created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) as lessee under Capitalized Lease Obligations, (f) under bankers'
acceptance and letter of credit facilities, (g) to purchase, redeem, retire,
defease or otherwise acquire for value any Disqualified Capital Stock, or (h) in
respect of hedging obligations, (2) all liabilities and obligations of others of
the type described in clause (1), above, that are Guaranteed by such Person, and
(3) all liabilities and obligations of others of the type described in clause
(1), above, that are secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person; provided, that the amount of such Indebtedness shall (to the extent
such Person has not assumed or become liable for the payment of such
Indebtedness in full) be the lesser of (x) the fair market value of such
property at the time of determination and (y) the amount of such Indebtedness.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding (i) commission, travel
and similar advances to officers and employees of such Person made in the
ordinary course of business; and (ii) bona fide accounts receivable arising from
the sale of goods or services in the ordinary course of business consistent with
past practice), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, and any other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
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<PAGE> 23
"Issuance Date" means the date on which the Series A Senior
Exchangeable Preferred Stock is originally issued under this Certificate of
Designation.
"Junior Securities" has the meaning specified in Section 7 hereof.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Maintenance Test Ratio" means, at any time, the ratio of (i) the
result of (x) the aggregate amount of Indebtedness of the Company and its
Subsidiaries (on a consolidated basis) as of the time of determination plus (y)
110% of the then applicable Liquidation Preference of the Senior Exchangeable
Preferred Stock, and the liquidation preference of any other shares of preferred
stock of the Company or any Subsidiary of the Company (other than preferred
stock owned by the Company or a Wholly Owned Subsidiary), plus, in each case,
accrued and unpaid dividends as of the time of determination, to (ii) the result
of (a) the Consolidated EBITDA of the Company for the last four fiscal quarters
from the time of determination less (b) the aggregate amount of the cash charges
in such four quarter period against the reserve established by the Company and
its Subsidiaries on a consolidated basis relating to the elimination of costs
associated with restaurants closed in 1997 and prior years as set forth in
"Unaudited Selected Consolidated Pro Forma Condensed Financial Data" contained
in the Offering Circular plus (c) $3.3 million for the four quarter period ended
March 1998, $2.2 million for the four quarter period ended June 1998 and $1.6
million for the four quarter period ended September 1998.
"Mandatory Redemption Date" has the meaning specified in Section
6(b) hereof.
"Maximum Test Ratio" has the meaning specified in Section 8(e)
hereof.
"Net Proceeds" means the aggregate proceeds received in the form of
cash or Cash Equivalents in respect of any Asset Sale (including payments in
respect of deferred payment obligations when received), net of (a) the
reasonable and customary direct out-of-pocket costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sale commissions), other than any such costs payable to an Affiliate of the
Company, (b) taxes actually payable directly as a result of such Asset Sale
(after taking into account any available net operating loss carryovers, tax
credits or
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<PAGE> 24
deductions and any tax sharing arrangements), (c) amounts required to be applied
to the permanent repayment of Indebtedness in connection with such Asset Sale,
and (d) appropriate amounts provided as a reserve by the Company or any
Subsidiary, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or such Subsidiary, as the case may
be, after such Asset Sale, including without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations arising from such
Asset Sale.
"New Credit Facility" means the New Credit Facility, entered into on
the Issuance Date between the Company, certain of its subsidiaries and the
agents for the lenders named therein as the same may be amended, modified,
renewed, refunded, replaced or refinanced from time to time, including (i) any
related notes, letters of credit, guarantees, collateral documents, instruments
and agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time; and (ii)
any notes, guarantees, collateral documents, instruments and agreements executed
in connection with such amendment, modification, renewal, refunding, replacement
or refinancing.
"Offering Circular" means the Final Offering Circular, dated
February 17, 1998, prepared by the Company relating to, among other offerings,
the original offering of the Series A Senior Exchangeable Preferred Stock.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial officer or a Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Holders.
"Opinion of Counsel" means a written opinion of legal counsel, which
and who may be counsel for the Company, including an employee of the Company,
and who shall be reasonably acceptable to the Holders and their counsel.
"Permitted Affiliate Transactions" means (i) employment agreements,
stockholder agreements, stock options or other incentive plans existing on the
Issuance Date or thereafter entered into by the Company or any Subsidiary in the
ordinary course of business with the approval of a majority of the disinterested
members of the Company's Board of Directors as evidenced by a Board Resolution;
(ii) transactions between, among or for the benefit of the Company and/or its
Subsidiaries; (iii) reasonable and customary fees and compensation paid to and
indemnity, loans or advances provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary as determined in good
faith by a majority of the
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<PAGE> 25
disinterested members of the Company's Board of Directors as evidenced by a
Board Resolution and (iv) payments made to affiliates of the TCW Shared
Opportunities Fund or the TCW Leverage Income Trust in connection with any tax
liability for withholding, which payments shall not exceed $125,000 per year.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"Preferred Stock Exchange Offer" means an offer by the Company to
exchange the Series A Senior Preferred Stock for the Series B Senior Preferred
Stock pursuant to an effective registration statement.
"Preferred Stock Shelf Registration Statement" means a shelf
registration statement which becomes effective and covers resales of the Series
A Senior Preferred Stock.
"Redemption Date" has the meaning specified in Section 6(a)(i)
hereof.
"Redemption Notice" has the meaning specified in Section 6(c)(i)
hereof.
"Redemption Price" means the price at which the Senior Exchangeable
Preferred Stock may be redeemed.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Senior Exchangeable Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Senior Secured Notes" means the Company's 11 1/2% Senior Secured
Notes in the aggregate principal amount of $155 million together with the
related Indenture under which such 11 1/2% Senior Secured Notes were issued, as
the same exist on February 25, 1998 without regard to any subsequent amendment,
modification, supplement or waiver.
"Series A Senior Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Series B Senior Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned or controlled, directly or
indirectly, by the Company or by one or
-25-
<PAGE> 26
more other Subsidiaries or by the Company and one or more other
Subsidiaries.
"Surviving Entity" has the meaning set forth in Section 8(d) hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force on the date on which this Certificate of Designation was filed.
"Voting Rights Triggering Event" has the meaning set forth above in
Section 5(b) hereof.
"Voting Stock" means, with respect to any Person (i) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency); and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
of which (other than directors' qualifying shares) is owned by the Company or
one or more Wholly Owned Subsidiaries.
-26-
<PAGE> 27
IN WITNESS WHEREOF, the Company has caused the Certificate of
Designation to be duly executed in its corporate name on this __th day of
February, 1998.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
-----------------------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
By: /s/ PATRICK J. KELVIE
-----------------------------------------------
Name: Patrick J. Kelvie
Title: Secretary
This instrument was acknowledged before me on February __, 1998 by
Patrick J. Kelvie as Secretary of American Restaurant Group, Inc.
/s/ JANE KROPP
----------------------------------------------
Notary Public
(Seal, if any)
<PAGE> 28
EXHIBIT A
Form of Certificate to be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
or Transfers Pursuant to Regulation S
[Date]
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Suite 1100
Los Angeles, California 90025
American Restaurant Group, Inc.
450 Newport Center Dr.
Newport Beach, California 92660
Ladies and Gentlemen:
In connection with our proposed purchase of
Senior Pay-in-kind Exchangeable Preferred Stock
(the "Preferred Stock") of American Restaurant Group, Inc.
(the "Company"), the undersigned confirms that:
1. We understand and acknowledge that the Preferred Stock has not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any other applicable securities law, is being sold
to us in a transaction not requiring registration under the Securities Act
or any other securities law, and may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act or any other applicable securities law, pursuant to an
exemption therefrom and in each case in compliance with the conditions for
transfer set forth below.
2. We have received a copy of the Offering Circular relating to the
offering of the Preferred Stock, dated February 17, 1998 (the "Offering
Circular"), upon which we are relying in making our investment decision
with respect to the Preferred Stock. In addition, we have had access to
such financial and other information concerning the Company and the
Preferred Stock as we have deemed necessary in connection with our
decision to purchase any of the Preferred Stock, including an opportunity
to ask questions of and request information from Jefferies & Company, Inc.
(the "Initial Purchaser") and the Company. We acknowledge that neither the
Company nor the Initial Purchaser, nor any person representing the Company
or the Initial Purchaser has made any representation to us with respect to
the Company or the offering or sale of any Preferred Stock.
<PAGE> 29
3. We are a corporation, partnership or other entity that invests in
or purchases securities similar to the Preferred Stock during the normal
course of our business and having such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of purchasing any of the Preferred Stock; and we are (or any
account for which we are purchasing under paragraph 4 below is) an
institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act, able to bear the economic risk of an
investment in the Preferred Stock for an indefinite period of time.
4. We are acquiring the Preferred Stock for our own account (or for
accounts as to which we exercise sole investment discretion and have full
power to make, and do make, the statements contained in this letter on
behalf of each such account) for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution of the
Preferred Stock in violation of the Securities Act, subject, nevertheless,
to the understanding that the disposition of our property or the property
of such investor account or accounts shall at all times be and remain
within our control.
5. We confirm that neither the Company nor any person acting on its
behalf has offered to sell the Preferred Stock, and that we have not been
made aware of the offering of the Preferred Stock by, any form of general
solicitation or general advertising, including, but not limited to, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or
radio.
6. We understand that (a) the Preferred Stock will be delivered to
us in registered form only and that the certificates delivered to us in
respect of the Preferred Stock will bear a legend substantially to the
following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) AS
PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES
WITHOUT RESTRICTION) AFTER THE
A-2
<PAGE> 30
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DAY ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH
SECURITY, EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO FOREIGN PERSONS THAT OCCUR IN OFFSHORE
TRANSACTIONS AND WITHOUT DIRECTED SELLING EFFORTS WITHIN THE
MEANINGS OF SUCH TERMS AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT, (E) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRANSFER AGENT.
and (b) such certificate will be reissued without the foregoing legend
only in the event of a disposition of the Preferred Stock in accordance
with the provisions of paragraph 7(e) or (f) below, or at our request at
such time as we would be permitted to dispose of the Preferred Stock in
accordance with paragraph 7(e) below.
7. We agree that in the event that at some future time we wish to
dispose of any of the Preferred Stock, we will not do so unless:
(a) the Preferred Stock is sold to the issuer thereof;
(b) the Preferred Stock is sold to a qualified institutional
buyer in compliance with Rule 144A under the Securities Act that
purchases for its own account or for the account of a qualified
institutional buyer
A-3
<PAGE> 31
and to whom notice is given that the transfer is being made in
reliance of Rule 144A;
(c) the Preferred Stock is sold to an institutional accredited
investor, as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, that prior to such transfer furnishes to the
transfer agent, a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the
Preferred Stock (the form of which letter can be obtained from the
transfer agent);
(d) the Preferred Stock is sold to non-U.S. persons in
offshore transactions in compliance with Rule 903 or rule 904 of
Regulation S under the Securities Act;
(e) the Preferred Stock is sold pursuant to Rule 144 under the
Securities Act; or
(f) the Preferred Stock is sold pursuant to an effective
registration statement under the Securities Act.
8. Upon purchase, the Preferred Stock would be registered in the
name of the undersigned:
Name:
Address:
Taxpayer ID Number:
We acknowledge that the Initial Purchaser and the Company and others will
rely upon the truth and accuracy of the foregoing acknowledgements,
representations and agreements and agree that, if any of the acknowledgements,
representations and agreements made by us are no longer accurate, we shall
promptly notify the Initial Purchaser.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CHOICE OF LAW.
Very truly yours,
[PURCHASER]
By:_____________________________
(Authorized Officer)
A-4
<PAGE> 1
EXHIBIT 4.7
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF DESIGNATION
OF
AMERICAN RESTAURANT GROUP, INC.
-----------------------------------------
Pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware
-----------------------------------------
American Restaurant Group, Inc. (the "Company"), does hereby certify as
follows:
FIRST: On February 24, 1998, the Company filed with the Secretary of State
of Delaware a Certificate of Designation of the 12% Series A Senior Pay-In-Kind
Exchangeable Preferred Stock and the 12% Series B Senior Pay-In-Kind
Exchangeable Preferred Stock (the "Certificate of Designation").
SECOND: The inaccuracies contained in the Certificate of Designation are
as follows: Paragraph (a) of Section 2 incorrectly specified the date on which
dividends commence to accrue in two locations. Section 12 omitted language
required to accurately define the term "Exchange Indenture." Accordingly, the
text of Paragraph (a) of Section 2 should be corrected to read in its entirety
as follows:
SECTION 2. Dividends. (a) Beginning on February 24, 1998, holders of the
outstanding shares of Senior Exchangeable Preferred Stock (the "Holders") will
be entitled to receive, when, as and if declared by the Board of Directors, out
of funds legally available therefor, dividends on the Senior Exchangeable
Preferred Stock at an annual rate of 12% of the Liquidation Preference per
share, subject to increase as provided below (the "Dividend Rate"). All
dividends will be cumulative and
<PAGE> 2
accrue daily, whether or not earned or declared, and will be payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
on August 15, 1998, to Holders of record on the February 1 and August 1
immediately preceding the relevant Dividend Payment Date. The Company may, at
its option, pay dividends in cash or in additional fully paid and non-assessable
shares of Senior Exchangeable Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends; provided, however, that if the
Company pays dividends in additional shares of Senior Exchangeable Preferred
Stock, Holders of Series A Senior Preferred Stock shall be paid in additional
shares of Series A Senior Preferred Stock and Holders of Series B Senior
Preferred Stock shall be paid in additional shares of Series B Senior Preferred
Stock. Dividends on the Series B Senior Preferred Stock will accrue from the
last dividend payment date on which dividends were paid on the Series A Senior
Preferred Stock surrendered for exchange therefor or, if no dividends had been
paid on the Series A Senior Preferred Stock, from February 24, 1998. Dividends
shall cease to accrue in respect of the shares of Senior Exchangeable Preferred
Stock on the Exchange Date or on the Redemption Date unless the Company shall
have failed, as applicable, to issue the appropriate aggregate principal amount
of Exchange Debentures in respect of the Senior Exchangeable Preferred Stock on
the Exchange Date or shall have failed to pay the relevant redemption price on
the Redemption Date. For all purposes hereunder, the Dividend Rate shall be
automatically increased in the following events: (i) if at the end of any fiscal
quarter of the Company, the Maintenance Test Ratio exceeds the Maximum Test
Ratio (each as defined in Section 8(e) hereof) for that fiscal quarter, then for
the period during the immediately succeeding quarter, the Dividend Rate shall be
13.5% for the first two quarters for which the Maximum Test Ratio is exceeded
(whether or not such fiscal quarters are consecutive) and 15% for any other
quarter thereafter for which the Maximum Test Ratio is exceeded or (ii) if a
Voting Rights Triggering Event (other than a Voting
2
<PAGE> 3
Rights Triggering Event occurring solely because of the breach of the
Maintenance Test Ratio set forth in Section 8(e) hereof) occurs, then the
Dividend Rate shall be 15% for the period during which the voting rights
relating to such Voting Rights Triggering Event continue in accordance with the
provisions of Section 5(b) hereof.
AND FURTHER, the definition of the term "Exchange Indenture" in Section 12
should be corrected to read in its entirety as follows:
"Exchange Indenture" means the Indenture, relating to the Exchange
Debentures, to be entered into among the Company and the Debenture Trustee
thereunder, substantially on the terms set forth in the "Description of Exchange
Debentures" set forth in the Offering Circular.
THIRD: This Certificate of Correction has been prepared in accordance with
the provisions of Section 103(f) of the General Company Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate of Correction
to the Certificate of Designation to be executed in its corporate name this 25th
day of February, 1998.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
------------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and Chief
Financial Officer
3
<PAGE> 1
EXHIBIT 9.1
COMMON STOCK VOTING TRUST AND TRANSFER AGREEMENT
COMMON STOCK VOTING TRUST AND TRANSFER AGREEMENT (the "Agreement"),
dated as of February 24, 1998, among the stockholders named on
Schedule I hereto (individually, a "Stockholder" and collectively, the
"Stockholders") as holders of shares of common stock, par value $.01 per share
(the "Common Stock"), of American Restaurant Group, Inc., a Delaware corporation
(the "Company"), and Anwar S. Soliman, as voting trustee (in such capacity and
his successor(s) in such capacity being referred to as the "Trustee") in the
voting trust created hereunder.
WHEREAS, the Stockholders are the owners of shares of Common Stock
and desire to (i) grant to the Trustee the right to vote their shares of Common
Stock, (ii) to create a voting trust in respect of all of such shares and any
additional shares of Common Stock hereafter acquired by the Stockholders during
the term of this Agreement, (iii) limit the free disposition of such shares of
Common Stock by the Stockholder and such Stockholder's permitted transferees for
designated periods and (iv) provide Anwar S. Soliman (together with his
successors, "Soliman") (and Soliman's designees) under certain circumstances
described herein, with the option to acquire the shares of Common Stock at a
price determined in a designated manner applicable to the particular
circumstances, all upon the terms hereinafter provided.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Stockholders, the Company (for the purposes of
paragraphs 10 and 13 hereof) and the Trustee hereby agree as follows:
1. Transfer of Stock to Trustee. Each of the Stockholders agrees
that by executing this Agreement, it is subjecting such Stockholder's shares of
Common Stock to the voting trust described herein and the other terms and
conditions of this Agreement. Each Stockholder who shall become a party to this
Agreement subsequent to the date hereof agrees that by executing this Agreement
such Stockholder subjects its shares of Common Stock to the voting trust
described herein and to the other terms and conditions of this Agreement. Each
Stockholder agrees that such Stockholder will subject any shares of Common Stock
that such Stockholder may acquire from the Company in a transaction not
registered under the Securities Act of 1933, as amended (the "Act"), while this
Agreement shall be in effect, to the voting trust described herein and to the
terms and conditions of this Agreement. The shares of Common Stock subject to
the voting trust and this Agreement are collectively referred to herein as the
"Shares".
2. Creation of Voting Trust; Legends on Share Certificates. There is
hereby created a voting trust with respect to all of the Shares. All
certificates of Shares now issued or in the future are issued which are subject
to this Agreement shall bear an appropriate legend reflecting that the Shares
represented by each such certificate are subject to the terms of this Agreement,
and that any transfer of ownership or voting rights with respect to such Shares
must be made in compliance with this Agreement.
<PAGE> 2
2
3. Powers and Duties of Trustee. (a) The Trustee shall have the full
and unqualified right and power in his discretion, as long as any Shares are
subject to the provisions of this Agreement, (i) to vote the Shares either in
person or by proxy, for every purpose for which the Shares may be voted
according to the Company's Certificate of Incorporation, or to give written
consent in lieu of voting thereon to any corporate act of the Company
(including, without limitation, the election of the directors of the Company who
may be elected by holders of the Shares, any amendment or amendments of the
Certificate of Incorporation of the Company, the merger or consolidation of the
Company into or with any other corporation or corporations, the sale of all or
any part of the assets of the Company and the liquidation or dissolution of the
Company), (ii) to waive notice of any regular or special meeting of stockholders
of the Company, (iii) to call meetings of stockholders, (iv) to subject the
voting of the Shares to the terms of any stockholder agreement with other
stockholders of the Company and (v) to exercise all stockholders' rights and
powers with respect to the Shares; provided, however, that if the Company shall
be party to a merger, consolidation or other transaction as the result of which
the holders of its Common Stock are entitled by law to surrender their shares of
stock and receive in exchange therefor the fair market value thereof, the
Trustee will, as soon as he is notified by the Company of the existence of such
rights, notify the Stockholders of the transaction and of the existence of such
rights and take appropriate steps to perfect and preserve such rights for those
of the Stockholders who desire to exercise the same. The right to vote the
Shares and the manner of voting them shall be determined by the Trustee in his
sole discretion.
(b) Nothing herein contained shall disqualify the Trustee from
serving as such if he does any of the following, nor shall anyone serving in
such capacity be incapacitated from doing any of the following: (i) dealing or
contracting with the Company or any of its affiliates, either as a vendor, or
purchaser, or (ii) serving the Company or any of its affiliates as an officer or
director, or in any other capacity, and receiving compensation therefor.
4. Dividends and Distributions. All dividends on and distributions
in respect of any of the Shares (other than dividends, distributions or other
payments made in shares of any voting stock of the Company) shall be paid to the
Stockholders. Dividends, distributions or other payments made in shares of any
voting stock of the Company shall be subject to the voting trust described
herein and the other terms and conditions of this Agreement.
5. Transfer of Shares. (a) No Stockholder shall, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (herein a "Transfer") any of the Shares or any beneficial interest in
any of the Shares, and no such Transfer shall be valid or effective, unless such
Transfer is made subject to the terms of this Agreement and the transferee of
such Restricted Shares agrees in writing to be bound by the provisions of this
Agreement.
(b) If the Stockholder receives a bona fide offer to purchase any or
all of the Shares held by him from a third party for cash consideration (any
such offer to purchase being referred to herein as an "Offer" and any such third
party making an Offer being referred to herein as an "Offeror") and the
Stockholder wishes to accept such Offer, the Stockholder shall cause the Offer
to be reduced to writing and shall notify Soliman in writing
<PAGE> 3
3
of his wish to accept the Offer and otherwise comply with the provisions of this
Section. The Stockholder's notice shall contain an irrevocable offer to sell
such Shares to Soliman (in the manner set forth below) at a purchase price equal
to the price contained in and on the same terms and conditions of, the Offer and
shall be accompanied by a true copy of the Offer (which shall identify the
Offeror). At any time within 30 days after the date of the receipt by Soliman of
the Stockholder's notice, Soliman may give notice of his election to purchase
(or to have his designee purchase) all of the Shares covered by the Offer and 10
days after the giving of such notice, Soliman (or his designee) shall have the
right and option to purchase all of the Shares covered by the Offer at the same
price and on the same terms and conditions as the Offer by delivering a
certified bank check or checks in the appropriate amount to the Stockholder
against delivery of certificates representing the Shares so purchased,
appropriately endorsed by the Stockholder. If at the end of a 30-day period
following the giving of such notice by Soliman, Soliman has not tendered the
purchase price for such Shares in the manner set forth above, the Stockholder
may during the succeeding 45-day period sell not less than all of the Shares
covered by the Offer to the Offeror on terms no less favorable to the
Stockholder than those contained in the Offer. No sale may be made to any
Offeror unless the Offeror agrees in writing with Soliman to be bound by the
provisions of this Agreement. Promptly after such sale, the Stockholder shall
notify Soliman of the consummation thereof and shall furnish such evidence of
the completion and time of completion of such sale and of the terms thereof as
may reasonably be requested by Soliman. If, within 45 days following the
expiration of the 30-day period for Soliman to give notice of his intention to
purchase the Shares as set forth in this paragraph, the Stockholder has not
completed the sale of such Shares pursuant to the Offer as aforesaid, all the
restrictions on Transfer contained in this Agreement shall again be in effect
with respect to such Shares.
(c) If Soliman is entitled to purchase Shares pursuant to an Offer,
Soliman may designate a third party to purchase such Shares.
(d) The restrictions on Transfer set forth in this Section 5,
including without limitation, the Stockholder's obligation pursuant to paragraph
(b) above to give Soliman a right of first refusal prior to selling its Shares,
shall automatically terminate with respect to Shares upon the closing of a
Public Offering of Common Stock.
(e) As used herein, the term "Public Offering" shall mean a public
offering by the Company of shares of Common Stock held by Anwar Soliman (or if
Anwar Soliman is no longer the Chairman of the Board of Directors and Chief
Executive Officer of the Company, his successor in such capacity) pursuant to a
registration statement (other than with respect to an employee benefit plan)
effective under the Act.
6. Options Effective Upon the Termination of Employment of the
Stockholder. (a) If, at any time prior to the earlier of August 15, 2005 or the
closing of a Public Offering of Common Stock, the Stockholder's active
employment with the Company is voluntarily or involuntarily terminated by the
Company or the Stockholder for any reason whatsoever (including by reason of
death or Disability), Soliman (or his designee) shall have the option (any such
option being referred to herein as a "Call"), subject to the terms and
conditions hereof, to acquire not less than all of the Shares of the
Stockholder. Soliman shall give the
<PAGE> 4
4
Stockholder written notice within 90 days of the date of the Stockholder's
termination of employment of his intention to exercise his Call. The purchase
price to be paid for the Shares to be purchased pursuant to the Call shall be
determined in accordance with the provisions of Section 7(a) hereof. The closing
of the purchase pursuant to the Call shall take place at the principal office of
the Company on a business day designated by Soliman which shall be no later than
90 days following the date on which Soliman gave the Stockholder notice of his
intention to exercise the Call (or, if applicable, such later date as the Fair
Market Value of the Stock subject to the Call shall have been determined in
accordance with the definition thereof in Section 7(d)). The purchase price
shall be paid by delivering a certified or official bank check or checks to the
Stockholder, against delivery of certificates representing the Shares so
purchased, appropriately endorsed by the Stockholder.
(b) If Soliman is entitled to purchase Shares pursuant to a Call,
Soliman may designate a third party to purchase such Shares.
7. Purchase Price. (a) The purchase price (which shall be determined
on the date the Call is exercised) for any Shares purchased by Soliman pursuant
to Section 6 shall be the greater of (x) Stockholder Cost, (y) Adjusted Book
Value and (z) Fair Market Value.
(b) Soliman may satisfy his obligation to make any payments
hereunder, including payments for the purchase of Shares upon the exercise of
any Call or otherwise hereunder, with cash or by certified or bank check.
(c) As used in this paragraph 7, the term "Adjusted Book Value" of a
Share shall mean, as of any date of determination, (i) the consolidated book
value of the Company applicable to the Company's Common Stock on such date as
determined in accordance with generally accepted accounting principles divided
by (ii) the number of outstanding shares of Common Stock plus the number of
shares of Common Stock issuable in respect of outstanding options, warrants and
convertible securities but such shares shall only be added if including shares
relating to any option, warrant or convertible security would cause the Adjusted
Book Value of a Share to decrease after adding to the amount in clause (i) the
aggregate exercise or conversion price per share of Common Stock, as the case
may be, of any such option, warrant or convertible security, which amount shall
be added to the amount in clause (i) to the extent such warrant, option or
convertible security is so included.
(d) As used herein, the term "Fair Market Value" of a Share means,
as of any date of determination, (i) the average of the daily market prices
(determined as set forth in the next sentence) for a share of Common Stock, if
any, for 30 consecutive business days commencing 45 business days before such
date or (ii) if no such market exists, the fair market value of a share of
Common Stock as determined by an opinion of an investment banking firm
reasonably acceptable to the Company. The market price for each such business
day shall be the average of the last sale prices on such date on all domestic
stock exchanges on which the Common Stock may then be listed, or, if no sale
takes place on such day on any such exchange, the average of the closing bid and
asked prices on such day as officially quoted on such exchanges, or, if the
Common Stock is not then listed or admitted to trading on any domestic stock
exchange, the last sale price on the National Association of Securities
<PAGE> 5
5
Dealers Automatic Quotation Systems ("NASDAQ") market, or, if the Common Stock
is not then listed on the NASDAQ market, the market price for each such business
day shall be the average of the reported bid and asked prices on such day in the
over-the-counter market, as furnished by the National Quotation Bureau, Inc.,
or, if such firm at the time is not engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business and
selected by the Company or, if there is no such firm, as furnished by any member
of the National Association of Securities Dealers, Inc., selected by the
Company.
(e) As used in this paragraph 7, the term "Stockholder Cost" shall
mean the purchase price paid by the Stockholder for such Shares.
8. Termination. Upon the earlier of (i) August 15, 2005 or (ii) the
date on which there shall have been no Trustee in office and no successor
Trustee elected or serving for a period of 120 days in accordance with paragraph
11 hereof, this Agreement shall terminate and be of no further force and effect.
9. Merger, Dissolution or Liquidation. If the Company shall merge
into or be consolidated with another Company or substantially all of the assets
of the Company should be transferred to another corporation, and such other
corporation is a subsidiary or affiliate of the Company, this Agreement shall
continue in effect and the term "Company" shall be deemed to refer to such
successor corporation, and each Stockholder shall hold in accordance with this
Agreement any securities received by him from such successor corporation on
account of his ownership of the Shares and subject such securities to the voting
trust described herein.
10. Compensation of Trustee. The Trustee shall not be entitled to
any compensation for services rendered as such but shall be entitled to
reimbursement as hereinafter set forth for reasonable expenses and charges which
may be incurred as Trustee, including but not limited to the employment of such
agents, attorneys and counsel as the Trustee may deem necessary and proper for
the carrying out of this Agreement, and all taxes or other governmental charges
actually paid as a result of the transfer or issuance of any Common Stock or in
respect of any dividends, distributions or other rights in respect of such
stock. Any such charges or expenses incurred shall be reimbursed to the Trustee
by the Company.
11. Trustee. (a) The Trustee may resign at any time by mailing to
the Company and to each of the registered holders of Shares a written
resignation to take effect twenty days thereafter or upon the prior acceptance
thereof. The Trustee shall have the right to designate a successor trustee to
succeed him effective upon his resignation by notice in writing sent by
certified mail, return receipt requested, to the Company and to each of the
registered holders of the Shares. Such successor trustee shall, by acceptance of
such trust, become party hereto with like effect as though an original party
hereto and shall be deemed to be the Trustee hereunder.
(b) Upon the death or other incapacity of the Trustee or his
inability or refusal to serve hereunder or his resignation without designating a
successor Trustee, Ralph S.
<PAGE> 6
6
Roberts, or his designee, shall be the Trustee. If for any reason whatsoever
there is no Trustee hereunder and Ralph S. Roberts is not willing or able to
serve as Trustee, then the Stockholders holding a beneficial interest in a
majority of the Shares shall designate the Trustee.
12. Amendment. This Agreement may be amended from time to time by a
written instrument executed by the Trustee and Stockholders (or their
successors) holding a beneficial interest in at least 66-2/3% of the Shares held
by all Stockholders, provided that any amendment to the first sentence of
paragraph 4 hereof and any amendment which extends the date on which this
agreement shall terminate pursuant to paragraph 8 hereof shall require the
consent of the Trustee and each of the Stockholders (or his successor). Upon any
Transfer, pursuant to paragraphs 5(a) and 5(c) hereof, by a Stockholder of his
beneficial interest in Restricted Shares, the transferee of such beneficial
interest and the Trustee shall execute a supplement hereto by which such
transferee agrees to be bound by the terms of this Agreement, and from and after
the execution of such supplement the transferee shall be deemed to be a
Stockholder.
13. Liability of Trustee. The Trustee shall not be liable by reason
of any matter arising out of or in relation to this Agreement, except for such
loss or damage as the holders of Shares may suffer by reason of the Trustee's
willful misconduct, and, without limiting the foregoing, the Trustee shall not
be liable for any action taken, or omitted to be taken, by him in reliance upon
and in conformity with, the advice of counsel. The Trustee shall be indemnified
and held harmless by the Company from and against any and all liabilities,
costs, claims, suits and proceedings (including reasonable attorneys' fees)
arising out of the Trustee's actions pursuant to this Agreement, except for such
Trustee's willful misconduct. The Trustee shall not be required to give a bond
or other security for the faithful performance of his duties as such.
14. Benefits. This agreement shall inure to the benefit of and be
binding upon the Trustee and each of the Stockholders and their respective
heirs, legal representatives, successors and assigns.
15. Construction of Agreement. The Trustee is authorized and
empowered to construe this Agreement, and his construction of the same in good
faith shall be final, conclusive and binding upon him, the Stockholders and any
other interested party.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York.
17. Notices. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) if the Trustee, to him in care of:
American Restaurant Group, Inc.
<PAGE> 7
7
450 Newport Center Drive
Newport Beach, California 92660
(b) if to a Stockholder, to him at the address set forth below his
signature to the Common Stock Subscription Agreement between such
Stockholder and the Company or at such other address as any party hereto
shall have specified by notice in writing to the other parties hereto.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Common
Stock Voting Trust and Transfer Agreement as of the date first written above.
/s/Anwar S. Soliman
--------------------------------------
Anwar S. Soliman, Trustee
STOCKHOLDERS:
/s/Anwar S. Soliman
--------------------------------------
Anwar S. Soliman
/s/Mary Ellen Bennett
--------------------------------------
Mary Ellen Bennett
/s/Ralph S. Roberts
--------------------------------------
Roberts Family Limited Partnership
By: Ralph S. Roberts
/s/William J. McCaffrey, Jr.
--------------------------------------
William J. McCaffrey, Jr.
/s/Wilfred H. Partridge
--------------------------------------
Wilfred H. Partridge
/s/Loise Partridge
--------------------------------------
Loise Partridge
/s/Meredith R. Taylor
--------------------------------------
Meredith R. Taylor
/s/Gregory A. Taylor
--------------------------------------
Gregory A. Taylor
/s/Patrick J. Kelvie
--------------------------------------
Patrick J. Kelvie
/s/Diane F. Kelvie
--------------------------------------
Diane F. Kelvie
For purposes of paragraphs 10 and 13
hereof, accepted and agreed to as of the
day and year first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/William J. McCaffrey, Jr.
--------------------------------------
Title: V.P. & Chief Financial Officer
<PAGE> 9
Schedule I
<TABLE>
<CAPTION>
Stockholders Number of Initial Shares
- ------------ ------------------------
<S> <C>
Anwar S. Soliman
Roberts Family Limited Partnership
William J. McCaffrey, Jr.
Wilfred H. Partridge
Meredith R. Taylor
Patrick J. Kelvie
</TABLE>
<PAGE> 1
EXHIBIT 9.2
SECURITYHOLDERS AGREEMENT
This Securityholders Agreement ("Agreement"), dated as of February 25,
1998, is entered into by and among American Restaurant Group, Inc., a Delaware
corporation ("Company"), American Restaurant Group Holdings, Inc., a Delaware
corporation ("Holdings"), Jefferies & Company, Inc. ("Jefferies"), TCW Shared
Opportunity Fund II, L.P. ("TCW Opp II"), TCW Leveraged Income Trust, L.P.
("TCW Lev"), Brown University ("Brown"), TCW Shared Opportunity Fund IIB, LLC
("TCW Opp IIB" and, together with TCW Opp II, TCW Lev and Brown, the "TCW
Investors"), TCW Asset Management Company ("TAMCO"), and each of the persons
identified on the signature pages hereto as "Management Stockholders"
(collectively, "Management Stockholders" and, together with Holdings,
Jefferies, TCW Investors and TAMCO, "Holders").
WHEREAS, Holdings is the owner of the number of shares of common stock of
the Company, par value $.01 per share ("Common Stock"), set forth opposite
Holdings' name on Schedule I;
WHEREAS, each Management Stockholder is the owner of the aggregate number
of shares of Common Stock set forth opposite the name of such Management
Stockholder on Schedule I;
WHEREAS, pursuant to a Purchase Agreement, dated as of February 13, 1998
(as the same exists on the date hereof without any amendment, modification or
waiver, "Purchase Agreement"), by and among Jefferies, Company and the other
ARG Entities identified on the signature pages thereto, Company has issued, and
Jefferies has purchased, among other things, 35,000 units ("Units") consisting
of $35,000,000 aggregate initial liquidation preference of Company's 12% Senior
Exchangeable Preferred Stock ("Preferred Stock") and 35,000 Warrants
("Warrants") exercisable for shares of Common Stock.
WHEREAS, Company has agreed to issue to Jefferies, as a fee in connection
with the transactions contemplated by the Offering Circular prepared by
Company, dated February 17, 1998, relating to, among other things, the offering
of the Units ("Offering Circular"), warrants exercisable for the number of
shares of Common Stock set forth opposite Jefferies' name on Schedule I
("Jefferies Warrants");
WHEREAS, Company has agreed to issue to TAMCO, as a fee in connection
with the transactions contemplated by the Offering Circular, warrants
exercisable for the number of shares of Common Stock set forth opposite TAMCO's
name on Schedule I ("TAMCO Warrants" and, together with Jefferies Warrants,
"Fee Warrants");
WHEREAS, each TCW Investor desires to purchase from Jefferies a portion of
the Units, including Warrants which are exercisable for the number of shares of
Common Stock set forth opposite such TCW Investor's name on Schedule I, and as a
<PAGE> 2
condition to such purchase each of the parties hereto has agreed to enter into
this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements, covenants and provisions contained herein, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Section 1.1. Company Representations and Warranties. Company hereby
represents and warrants to the TCW Investors and TAMCO as follows:
(a) Company is duly incorporated and validly existing under the laws
of the State of Delaware, has full right, power and authority to execute
and enter into this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of Company enforceable in accordance with its
terms.
(b) There is no provision of any existing mortgage, indenture,
contract, agreement or instrument to which Company or any of its
Subsidiaries is a party or to which Company or any of its Subsidiaries is
subject, and no statute, rule or decree of any court or government
instrumentality binding upon Company or any of its Subsidiaries, which has
been or may be contravened, breached or defaulted by Company's execution,
delivery or performance of this Agreement.
(c) There is no legal, administrative or arbitration proceeding or
investigation pending or, to the knowledge of Company, threatened against
Company or any other Person which questions the validity of this
Agreement.
(d) There is no covenant, approval or authorization of, or
designation, declaration or filing with, any Person that is required in
connection with the execution, delivery or performance by Company of this
Agreement or any action taken or to be taken by Company hereunder, except
those that have been obtained and are in full force and effect as of the
date of the execution and delivery hereof.
(e) Each of the following is in full force and effect and has not
been further amended or modified (and, with respect to the Certificate of
Incorporation and Certificate of Designation, has been duly filed with the
Secretary of State of the State of Delaware):
- 2 -
<PAGE> 3
(i) The Certificate of Incorporation, the Certificate of Designation
and Bylaws of Company (the "Charter Documents"); and
(ii) The Employment Agreements.
(f) Immediately upon issuance of the Warrants, and without any
further action on the part of any Person, (i) William J. McCaffrey, Jr.'s
resignation from the Board and all committees of the Board will be
effective in all respects; (ii) the Board will be comprised solely of
Robert Beyer, Anwar S. Soliman, Ralph S. Roberts and Jeffry Weinhuff, and
the fifth director position on the Board will be vacant; (iii) the
Compensation Committee will be comprised solely of Robert Beyer, Anwar S.
Soliman and Jeffry Weinhuff, and a fourth director position on the
Compensation Committee will be vacant and (iv) all other committees of the
Board shall be comprised of at least Robert Beyer and have at least one
vacancy.
(g) The authorized Capital Stock of Company consists solely of
1,000,000 shares of Common Stock and 160,000 shares of preferred stock, of
which only the Preferred Stock and the other shares identified on Schedule
I are outstanding. All such outstanding shares are duly authorized,
validly issued, fully paid and nonassessable. The only Convertible
Securities of Company are the Warrants and the Fee Warrants and there is
no other outstanding commitments on the part of Company to issue any
Common Stock, Convertible Securities or other Capital Stock of Company,
other than dividends paid, at the option of Company, in shares of
Preferred Stock on the Preferred Stock.
(h) Company has no Subsidiaries other than the ARG Entities
identified on the signature pages to the Purchase Agreement, each of which
is a Wholly Owned Subsidiary, and there is no commitment on the part of
any such ARG Entity to issue any of its Capital Stock to a Person other
than to Company or to a Wholly Owned Subsidiary.
(i) Each stock certificate evidencing outstanding shares of Common
Stock set forth on Schedule I will contain the legend set forth in Section
3.4.
Section 1.2. Holder Representations and Warranties. Each Holder
hereby represents and warrants, severally but not jointly, to the other Holders
as follows:
(a) If such Holder is not a natural person, such Holder is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.
- 3 -
<PAGE> 4
(b) Such Holder has full right, power and authority to execute and
enter into this Agreement, and this Agreement constitutes the legal, valid
and binding obligation of such Holder enforceable against such Holder in
accordance with its terms.
(c) There is no provision of any existing mortgage, indenture,
contract, agreement or instrument to which such Holder is a party or to
which such Holder is subject, and no statute, rule or decree of any court
or government instrumentality binding upon such Holder, which has been or
may be contravened, breached or defaulted by such Holder's execution,
delivery or performance of this Agreement.
(d) There is no legal, administrative or arbitration proceeding or
investigation pending or, to the knowledge of such Holder, threatened
against such Holder or any other Person which questions the validity of
this Agreement.
(e) There is no covenant, approval or authorization of, or
designation, declaration or filing with, any Person that is required in
connection with the execution, delivery or performance by such Holder of
this Agreement or any action taken or to be taken by such Holder
hereunder, except those that have been obtained and are in full force and
effect as of the date of the execution and delivery hereof.
(f) The total number of shares of Common Stock or Capital Stock
(other than shares of Preferred Stock) of the Company and the number of
shares of Common Stock issuable upon exercise of the Warrants, the Fee
Warrants or other Convertible Securities of Company, owned or controlled,
directly or indirectly, by such Holder is set forth on Schedule I. No
Holder has the right to purchase any shares of the Capital Stock of any
Subsidiary of the Company.
ARTICLE II
BOARD OF DIRECTORS; SIGNIFICANT BUSINESS DECISIONS
Section 2.1. Number of Directors. Each Holder agrees that, except as
otherwise specifically provided herein or in the Certificate of Designation
under which the Preferred Stock is issued, the Board of Directors of the Company
(the "Board") shall consist of five (5) directors.
Section 2.2. Identity of Directors. Each Holder agrees that the
Board shall be comprised of (x) two (2) directors nominated by the TCW Investors
("TCW Directors"), (y) two (2) directors nominated by the Management
Stockholders ("Management Directors"), and (z) one (1) director nominated by
Jefferies (the "Remaining Director"); provided that on and after the Public
Company Date, the right to nominate, replace and remove the
- 4 -
<PAGE> 5
Remaining Director shall be mutually agreed upon by the TCW Investors and the
Management Stockholders (subject to the occurrence of the New Management Date),
and Jefferies shall have no further right hereunder to designate any person to
serve as a member of the Board; provided, further, that from and after the date
upon which both Anwar S. Soliman and Ralph S. Roberts cease to be employed as
executive officers of Company (such date, the "New Management Date"), (i) the
right of the Management Stockholders hereunder to nominate, replace and remove
the Management Directors as provided in clause (y) above shall terminate and
each Holder agrees that the directors for the two Board seats formerly reserved
for the Management Directors shall be nominated, replaced and removed by the
stockholders of the Company by a vote of holders of a majority of the
outstanding shares of Common Stock or such lesser vote as is required to elect
directors at a duly called stockholders meeting (such vote, a "Stockholder
Vote") and (ii) if the Public Company Date has also occurred, the right of the
Management Stockholders hereunder to participate in the nomination, replacement
and removal of the Remaining Director as provided in the first proviso shall
terminate and each Holder agrees that the director for the one Board seat
formerly reserved for the Remaining Director shall be designated by the majority
of the members of the Board, subject to election by a Stockholder Vote. No
Holder to this Agreement shall transfer or assign, directly or indirectly, such
Holder's right to designate a director to serve on the Board of the Company or
otherwise enter into any arrangement or agreement that has the effect of
transferring or assigning such designation rights, except with respect to
transfers or assignments to a Permitted Transferee of such Holder; provided,
that such Permitted Transferee agrees to be bound by the terms of this Agreement
to the same extent as the Holder from whom the transfer was made; provided,
further, that Jefferies shall not transfer its right to designate a director
under any circumstances.
The TCW Investors hereby nominate Robert Beyer as one of the initial
TCW Directors; the other initial TCW Director shall be nominated by the TCW
Investors after the date hereof. The Management Stockholders hereby nominate
Anwar S. Soliman and Ralph S. Roberts as the initial Management Directors.
Jefferies hereby nominates Jeffry Weinhuff as the initial Remaining Director.
Should these initial directors or any other individual nominated as a director
pursuant to this Section 2.2 be unwilling or unable to serve, or otherwise cease
to serve for any reason (including by means of removal or replacement in
accordance with the following sentence), the TCW Investors (with respect to the
Board seats reserved for the TCW Directors), the Management Stockholders for so
long as they have the right hereunder to nominate the Management Directors (with
respect to the Board seats reserved for the Management Directors), Jefferies for
so long as Jefferies has the right hereunder to nominate the Remaining Director
(with respect to the Board seat reserved for the Remaining Director), the
stockholders by Stockholder Vote after the New Management Date (with respect to
the Board seats
- 5 -
<PAGE> 6
formerly reserved for the Management Directors), and a majority of the Board
after both the Public Company Date and the New Management Date (with respect to
nomination of a person to fill the Board seat formerly reserved for the
Remaining Director), as the case may be, shall be entitled at any time to
nominate or designate any replacement to fill the vacancy existing in a Board
seat for which they or it, as the case may be, have a right of nomination under
this Section 2.2; provided that the majority of the members of the Board shall
have the exclusive right hereunder, once both the Public Company Date and the
New Management Date have occurred, to nominate a person to fill any vacancy
created in the Board seat formerly reserved for the Remaining Director, subject
to election by the stockholders by Stockholder Vote. (i) If the TCW Investors
propose to remove or replace any TCW Director; or (ii) if (a) the Management
Stockholders, for so long as Management Stockholders have the right to nominate
the Management Directors, propose to remove or replace any Management Director
and (b) following the New Management Date, the stockholders of Company by
Stockholder Vote, propose to remove or replace any Management Director or any
director holding a Board seat formerly reserved for a Management Director; or
(iii) if (x) Jefferies, for so long as Jefferies has the right to nominate the
Remaining Director, proposes to remove or replace the Remaining Director and (y)
following the Public Company Date but before the New Management Date, the TCW
Investors and the Management Stockholders, acting by mutual consent, propose to
remove or replace the Remaining Director and (z) following both the Public
Company Date and the New Management Date, the stockholders by Stockholder Vote
remove the Remaining Director or the director elected to the Board Seat formerly
reserved for the Remaining Director, as applicable, then each Holder agrees,
with respect to each of clauses (i) through (iii), to take all action in its
power to cause such removal or replacement and any resulting vacancy shall be
filled in accordance with the preceding sentence and the nominating rights set
forth in the first paragraph of this Section 2.2. The Holders agree not to take
any action to remove or replace, with or without cause, any director other than
in accordance with the foregoing.
The failure to exercise any nominating rights, or other rights with
respect to directors pursuant to this Section 2.2, shall not constitute a waiver
or diminution of such rights, nor shall it prevent a Holder or group of Holders
from fully exercising such rights prospectively. Nothing in this Agreement shall
limit the rights of the holders of the Preferred Stock pursuant to Section 5 of
the Certificate of Designation to elect additional directors to serve on the
Company's Board of Directors and each Holder agrees to take all action, to the
extent that it has the power to do so, necessary to increase the size of the
Board and cause the additional directors elected by the holders of the Preferred
Stock to fill the vacancies thereby created in accordance with such holders'
rights under the Certificate of Designation.
- 6 -
<PAGE> 7
Section 2.3. Board Action. Each Holder covenants and agrees to take
all action, to the extent that it has the power to do so, so that at least three
directors must be present, in person, by telephone or by proxy, at every meeting
of the Board to constitute a quorum. Each director shall be given notice at
least ten (10) business days prior to all Board meetings unless such director
attends the meeting or waives such notice in writing. Any proposal to be acted
upon by the Board (other than a proposal with respect to or relating to any
matter referred to a committee established pursuant to Sections 2.4 and 2.5
hereof) shall require the approval of the majority of a quorum.
Section 2.4. Compensation Committee. Each Holder covenants and
agrees to take all action in its power, so that a compensation committee of the
Board ("Compensation Committee") is established and comprised of four directors,
consisting of the two TCW Directors, one Management Director and the Remaining
Director. The Compensation Committee shall determine the compensation of
management and the structuring of performance incentive plans, including without
limitation any issuances of Capital Stock or Convertible Securities by Company
to the management of Company and its Subsidiaries (other than stock owned by
Management Stockholders and listed on Schedule I) and any amendments or renewals
of the Employment Agreements.
Section 2.5. Other Committees of the Board of Directors. Each Holder
covenants and agrees that in its power, the two TCW Directors shall be entitled,
but not obligated, to serve on any committee established by the Board.
Section 2.6. Significant Business Decisions. Notwithstanding that no
vote may be required, or that a lesser percentage vote may be specified, by law,
by the Charter Documents, or otherwise, Company and each of the Holders covenant
and agree, to the extent such Holder has the power to do so, that Company shall
not take, and shall not cause or permit any Subsidiary of Company to take, any
of the following actions, in a single transaction or a series of related
transactions, without the written approval of the TCW Investors:
(a) merge or consolidate with or into any other corporation (other
than transactions solely involving the merger or consolidation of a Wholly
Owned Subsidiary of Company with or into Company or another Wholly Owned
Subsidiary of Company);
(b) purchase, lease or otherwise acquire any material amount (as
hereinafter defined) of securities or assets of any other Person;
(c) commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other federal or state bankruptcy, insolvency or
receivership or similar
- 7 -
<PAGE> 8
law; consent to the institution of or fail to contest in a timely and
appropriate manner any such proceeding or filing; apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Company or any of its Subsidiaries;
file an answer admitting the material allegations of a petition filed
against it in any such proceeding; make a general assignment for the
benefit of creditors; admit in writing its inability or fail generally to
pay its debts as they become due; or take any action for the purpose of
effecting any of the foregoing;
(d) sell, lease, exchange, transfer or otherwise dispose of any
capital stock of Subsidiaries, or a material amount of its other assets;
(e) except as otherwise contemplated herein, enter into or engage
in, or amend or modify the terms of, or terminate any transaction or
arrangement between Company or any of its Subsidiaries, on the one hand,
and any director of Company, any relative of any such director or any
Affiliate of any such director or relative (including, without limitation,
(i) any transaction or arrangement regarding employment or the appointment
or removal of any such Person as an officer or employee of Company or any
of its Subsidiaries and (ii) any transaction or arrangement regarding
employment or the appointment or removal of any of Anwar S. Soliman, Ralph
S. Roberts or Wilfred H. Partridge as an officer, employee or director of
Company or any of its Subsidiaries), on the other hand;
(f) amend, modify or repeal any provision of the Charter Documents
or any similar governing document of any Subsidiary of Company, or any
provision of this Agreement;
(g) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any equity securities, other than the Preferred
Stock, of Company;
(h) issue any equity securities of Company or of any Subsidiary of
Company (except, (i) issuances to Company or a Wholly Owned Subsidiary of
Company or (ii) Permitted Issuances; or
(i) enter into any contract, agreement, arrangement or commitment to
do or engage in any of the foregoing.
For purposes of this Section 2.6, a "material amount" means a cash amount (or
its equivalent) that equals or exceeds $15,000,000.
Section 2.7. Further Assurances. Each of the Holders covenants and
agrees, subject to compliance with applicable law, to take all action, including
voting, or taking action by consent
- 8 -
<PAGE> 9
with respect to, all shares of Common Stock owned or controlled, directly or
indirectly, at any time by such Holder, in accordance with the terms of this
Agreement, including without limitation, voting, or acting promptly by written
consent, in favor of (i) the election of the directors nominated in accordance
with Section 2.2 hereof and (ii) any amendment to the Charter Documents to cause
the parties hereto to comply with the terms of this Agreement. Except for rights
granted to a Holder pursuant to the Certificate of Designation, each Holder
hereby waives, to the fullest extent permitted by law, any rights it has under
any other agreement or arrangement that are inconsistent with the provisions of
this Agreement.
ARTICLE III
RESTRICTIONS ON TRANSFERS
Section 3.1. Restrictions on Transfers; Permitted Transferees. (a)
Company and each Holder, severally and not jointly, agrees and acknowledges that
Company or such Holder, as applicable, will not, directly or indirectly, offer,
issue, sell, assign, pledge, encumber or otherwise transfer (each, a "Transfer")
any shares of Common Stock or Convertible Securities or solicit any offers to
purchase or otherwise acquire or make a pledge of any shares of Common Stock or
Convertible Securities unless such Transfer complies with the provisions of this
Agreement; provided, however, that immediately prior to an IPO the parties
hereto agree to negotiate in good faith and without seeking any additional
compensation to establish an arrangement that both (x) permits the Holders and
the Holders' Permitted Transferees hereunder to Transfer their equity securities
of the Company without the Transfer being subject to the provisions of this
Agreement, including any Transfer restrictions (other than those restrictions
imposed by Section 3.2 and 3.3 hereof) and (y) preserves the rights of the TCW
Investors to designate and cause the TCW Directors to serve on the Board under
Article II and, to the extent practicable, to preserve such other rights as the
TCW Investors deem significant.
(b) No Holder shall Transfer any shares of Common Stock or
Convertible Securities to any Person (regardless of the manner in which such
Holder initially acquired such shares or securities) nor shall Company Transfer
any shares of Common Stock or Convertible Securities to any Person (all Persons
acquiring or receiving a Transfer of shares of Common Stock or Convertible
Securities from a Holder or from Company or from one of their respective
Permitted Transferees, regardless of the method of Transfer, shall be referred
to collectively as "Transferees" and individually as a "Transferee"), unless (i)
such shares of Common Stock or Convertible Securities bear legends as provided
in Section 3.4 hereof and (ii) such Transferee shall have executed and delivered
to Company and the TCW Investors, as a condition precedent to any Transfer of
shares of Common Stock or
- 9 -
<PAGE> 10
Convertible Securities, an instrument in form and substance satisfactory to
Company and the TCW Investors confirming that such Transferee takes such shares
or securities subject to all the terms and conditions of this Agreement, and
agrees to be bound by the terms of this Agreement to the same extent as the
Holder from whom the Transfer was made. Company shall not transfer upon its
books any shares of Common Stock or Convertible Securities to any Person except
in accordance with this Agreement and any attempted Transfer that is not in
compliance with the terms hereof shall be void. Notwithstanding the foregoing,
this Section 3.1(b) shall not apply to:
(i) Permitted Issuances by Company approved by the Board or, as
applicable, approved by the Compensation Committee;
(ii) Any Transfer by the TCW Investors, by TAMCO, by the TCW Investors'
Permitted Transferees, or by TAMCO's Permitted Transferees, in each case,
to any Transferee; or
(iii) Any Transfer by any of the Holders (other than TCW Investors, TAMCO,
TCW Investors' Permitted Transferees or TAMCO's Permitted Transferees) or
such Holder's respective Permitted Transferees; provided that immediately
after giving effect to such Transfer, all Holders and Permitted
Transferees who are then parties to this Agreement own and control
(including, without limitation, the power to vote for directors and
approve amendments to the Charter Documents) at least a majority of the
outstanding shares of Common Stock measured on both an actual and fully
diluted basis (assuming, with respect solely to the determination of
outstanding shares on a fully diluted basis, the exercise of all
Convertible Securities as of the time of determination); provided,
further, that with respect to Transfers under this clause (iii) by
Holdings and its Permitted Transferees, Holdings and its Permitted
Transferees first comply with the provisions of Sections 3.2 and 3.3
hereof.
(c) Except as specifically contemplated hereby, no Holder shall
grant any proxy or enter into or agree to be bound by any voting trust with
respect to any shares of Common Stock or Convertible Securities nor shall any
Holder enter into any stockholder agreements or arrangements of any kind with
any Person with respect to any shares of Common Stock or Convertible Securities
inconsistent with the provisions of this Agreement (whether or not such
agreements and arrangements are with other Holders or holders of shares of
Common Stock or Convertible Securities who are not parties to this Agreement),
including, but not limited to, agreements or arrangements with respect to the
acquisition, disposition or voting of shares of Common Stock, nor shall any
Holder act, for any reason, as a member of a group or in concert with any other
Persons in connection with the acquisition, disposition or voting of shares of
Common Stock or
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<PAGE> 11
Convertible Securities in any manner which is inconsistent with the provisions
of this Agreement.
(d) The provisions of Section 3.2 and 3.3 hereof shall not apply:
(i) to any Transfer (for consideration or as a gift) by any Holder to any
spouse, child, parent, sibling or grandchild of such Holder, or by any of such
relatives to such Holder or to any one or more of such relatives, or by any
Holder or any such relatives to a trust of which there are no principal
beneficiaries other than one or more of such relatives; (ii) to any Transfer to
a legal representative in the event any Holder becomes mentally incompetent;
(iii) to any Transfer by will or the laws of descent; (iv) with respect to a
Holder which is a corporation, partnership or limited liability company, to any
Transfer by such Holder to any Affiliate thereof; (v) to bona fide pledgees of
shares of Common Stock or Convertible Securities by a Holder to Company, a bank
or other financial institution in order to secure indebtedness for borrowed
money incurred by such Holder in order to finance or refinance the purchase of
shares of Common Stock or Convertible Securities or to pay taxes related to the
sale of such shares or securities by such Holder; (vi) with respect to any
Holder which is a limited partnership, to the partners, or a liquidating trust
for the benefit of the partners, of such Holder in accordance with the
provisions of the limited partnership agreement governing such Holder as then in
effect; (vii) to any Transfer to any Affiliate of the TCW Investors or TAMCO;
(viii) subject to applicable securities laws, to any Transfer by Jefferies to an
employee of Jefferies; provided that with respect to each of clauses (i) through
(viii), each Transferee, donee, distributee or pledgee (a "Permitted
Transferee") agrees to take such shares subject to and to comply with the
provisions of Section 3.1(b) hereof. For purposes hereof, the Permitted
Transferees of a Holder shall include the Permitted Transferees of such Holder's
Permitted Transferees.
Section 3.2. Right of First Offer. (a) Except for Permitted
Issuances by Company, Transfers by Holdings to Permitted Transferees of Holdings
and, following an IPO, sales to the public in either registered underwritten
offerings or pursuant to Rule 144 under the Securities Act of 1933, as amended,
any action by Company, Holdings or any Permitted Transferees of Holdings (each,
a "Seller") to issue or Transfer any shares of Common Stock or Convertible
Securities shall first be preceded by written notice (a "Seller's Notice") to
the TCW Investors stating Seller's desire to make such Transfer, the number of
shares of Common Stock or Convertible Securities proposed to be Transferred (the
"Offered Securities") and the cash price which Seller proposes to be paid for
the Offered Securities (the "First Offer Price").
(b) Upon receipt of Seller's Notice (the "First Offer"), the TCW
Investors shall have the irrevocable and exclusive option to purchase up to all
of the Offered Securities at the First Offer Price. The TCW Investors shall have
15 days
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from the date of the Seller's Notice to accept the First Offer, in whole or in
part, by delivering a written notice to Seller stating the number of Offered
Securities the TCW Investors desire to purchase.
(c) If the Seller's Notice shall be duly given, and if the TCW
Investors shall not exercise their option to purchase the Offered Securities at
the First Offer Price, then Seller shall be free (subject to Section 3.3
hereof), for a period of 60 days from the earlier of (i) the 30th day following
the date of the Seller's Notice or (ii) the date Seller shall have received
written notice from the TCW Investors stating the TCW Investors' intention not
to exercise their rights under the First Offer, to Transfer the Offered
Securities to any third party Transferee at a cash price equal to or greater
than the First Offer Price; provided that such Transfer complies with the
provisions of Section 3.1 of this Agreement.
(d) If the proposed purchase price of a Transferee for the Offered
Securities is less than the First Offer Price, Seller shall not Transfer, in
compliance with Section 3.1, any of the Offered Securities unless the Seller
shall first reoffer the Offered Securities at such lesser price to the TCW
Investors by giving written notice (the "Reoffer Notice") thereof, stating the
Seller's intention to make such Transfer at such lower price (the "Reoffer
Price"). The TCW Investors shall then have the irrevocable and exclusive option
to purchase the Offered Securities at the Reoffer Price, exercisable in the same
order of priority, proportions and manner as provided in Section 3.2(b). Any
Offered Securities not purchased by the TCW Investors may be Transferred by
Seller (subject to Section 3.3 hereof) to any third party Transferee within 60
days following the earlier of (i) the 30th day from the date of the Reoffer
Notice or (ii) the date on which Seller shall have received written notice from
the TCW Investors stating the TCW Investors' intention not to exercise the
option granted in this Section 3.2(d), at a cash price equal to or greater than
the Reoffer Price; provided that such Transfer complies with the provisions of
Section 3.1 of this Agreement.
(e) If the TCW Investors do not exercise their option to purchase
the Offered Securities at the First Offer Price or at the Reoffer Price, and
Seller shall not have Transferred the Offered Securities to any third party
Transferee approved by the Board for any reason before the expiration of the
60-day period described in Section 3.2(d) in the event of a Reoffer or, if no
Reoffer Notice is given, the 60-day period described in Section 3.2(c), then
Seller shall not give a Seller's Notice with respect to a transaction which
would require compliance with this Section 3.2 for a period of three months from
the last day of such applicable 60-day period.
(f) The closing of all purchases pursuant to the first offer rights
granted under this Section 3.2 shall take place at
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the principal offices of the Company at 10 a.m. on the later of (x) the tenth
Business Day following the delivery to Seller of all notices exercising such
first offer rights with respect to the Offered Securities to be sold by Seller
or (y) the fifth Business Day following the expiration or termination of all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, applicable to such purchases, or at such other time and/or place as
the parties to such purchases may agree. At such closing, (i) Seller shall
assign and Transfer to the TCW Investors (or any nominees thereof) good and
valid title to the shares being purchased by it, by delivery of the certificates
representing the shares of Common Stock or Convertible Securities to be sold and
Transferred, duly endorsed in blank, with the requisite stock transfer tax
stamps attached, together with such stock powers, certificates, legal opinions
and other instruments of Transfer as the TCW Investors shall reasonably request;
and (ii) the TCW Investors shall pay to Seller the purchase price for the shares
being purchased by them in cash, by delivery of a certified or bank check or by
wire transfer of immediately available funds to such account as Seller shall
direct by written notice delivered to the TCW Investors not later than two (2)
Business Days before such closing.
Section 3.3. Tag-Along Rights. In the event that (and without
limiting the obligations to comply with Sections 3.1 and 3.2 hereof) Holdings or
any of its Permitted Transferees (collectively, the "Tag Sellers") propose,
pursuant to a single transaction or series of related transactions, to Transfer
shares of Common Stock to any Person other than a Permitted Transferee of
Holdings or, following an IPO, sales to the public in either registered
underwritten offerings or pursuant to Rule 144 under the Securities Act of 1933,
as amended (a "Purchaser"), then, the Tag Sellers shall provide notice of such
proposed Transfer to the TCW Investors (a "Proposal Notice") no later than
twenty (20) days prior to the proposed closing of such Transfer, and the TCW
Investors shall have the right (a "Tag-Along Right") to require the Tag Seller
to reduce the number of shares of Common Stock to be sold by the Tag Seller, and
have Purchaser purchase from the TCW Investors, upon the same terms and
conditions applicable to the Tag Seller, that number of shares of Common Stock
derived by multiplying the total number of shares being offered to Purchaser by
the TCW Investors' fractional interest, rounded up to the nearest whole number.
For purposes of this Section, the term "fractional interest" means (a) the sum
of the total number of shares of Common Stock owned by the TCW Investors and its
Permitted Transferees (on a fully diluted basis, assuming exercise of all
Warrants and other Convertible Securities as of the time of determination),
divided by (b) the sum of (I) the aggregate number of shares of Common Stock
owned by the TCW Investors and TAMCO and their Permitted Transferees plus (II)
the aggregate number of shares of Common Stock owned by Holdings and, to the
extent shares were Transferred by Holdings to a Permitted Transferee of
Holdings, the number of shares of Common Stock
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<PAGE> 14
owned by Holding's Permitted Transferees (on a fully diluted basis, assuming
exercise of all Warrants and other Convertible Securities as of the time of
determination). The TCW Investors shall give written notice of its decision to
exercise its Tag-Along Right to the Tag Seller no later than ten (10) days after
its receipt of a Proposal Notice.
Section 3.4. Legend on Certificates. During the term of this
Agreement, Company and each Holder, to the extent that such Holder has the power
to do so, covenants and agrees that each outstanding certificate representing
shares of Common Stock or Convertible Securities that are now owned or hereafter
acquired by the Holders or otherwise subject to this Agreement shall bear a
legend reading substantially as follows:
The sale, assignment, pledge, encumbrance or other transfer of the
securities represented by this certificate is subject to the
provisions of a Securityholders Agreement, dated as of February 25,
1998, among the Company and the other parties named on the signature
pages thereto, a copy of which is on file at the principal executive
office of the Company.
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.1. Restrictions on TCW Investors. The TCW Investors shall
not transfer any of their rights under this Agreement; provided, that the TCW
Investors and Permitted Transferees of the TCW Investors may Transfer, in whole
or in part, any of their respective rights hereunder to Permitted Transferees
who comply with the provisions of Section 3.1(b) hereof.
Section 4.2. Tax Issues. If any withholding taxes imposed by
Internal Revenue Code 1441 and 1442 (or any successor provision thereof)
("Taxes") with respect to the TCW Investors' partners that are not United States
persons (collectively, the "Foreign Partners"), are required to be deducted or
withheld from any amount payable to the TCW Investors either by Company or by
any TCW Investor with respect to the TCW Investors' Foreign Partner's allocable
share of the TCW Investors' income attributable to dividends on the Preferred
Stock paid to the TCW Investors by Company, Company shall pay additional amounts
in cash (either to the appropriate taxing authority or to the TCW Investors, as
appropriate) so that the amount received and retained by the TCW Investors after
the deduction or payment of such Taxes (including Taxes on such additional
amounts) equals the amount the TCW Investors would have received and retained if
no Taxes had been deducted or been payable by the TCW Investors; provided, that
the Company shall in no event be obligated to pay additional amounts to the TCW
Investors in the aggregate in
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<PAGE> 15
excess of $125,000 each year. If Company acts as withholding agent, Company
shall pay to the appropriate taxing authority all Taxes required to be deducted
or withheld and shall, within 30 days after paying such Taxes, deliver to the
TCW Investors the original or a certified copy of the receipt for such payment.
The TCW Investors shall determine all amounts required to be paid by Company
with respect to Taxes under this Section; provided that, at the request of
Company, the TCW Investors shall provide Company with the information used in
determining such amounts; provided, further, that if Company objects to such
determination within 15 days, and such objection is accompanied by an opinion of
tax counsel in support of such objection, then Company and the TCW Investors
will negotiate in good faith to mutually resolve any disagreement over such
determination and following the failure to mutually resolve such disagreement,
either party may submit the matter to a "Big Six" accounting firm, reasonably
acceptable to both parties, which does not serve as the primary independent
accountants for either party, whose decision shall be final. The TCW Investors
and the TCW Investors' Foreign Partners shall provide Company, at Company's
request, properly completed forms, if applicable, W-8 and, if applicable, 1001
(or any successors thereto) with respect to the TCW Investors and the TCW
Investors' Foreign Partners, provided that no such additional amounts shall be
payable in respect of any dividends paid on the Preferred Stock to the extent
that Taxes would not have been imposed but for the failure of the TCW Investors
or the TCW Investors' Foreigner Partners to provide such forms. For purposes
hereof, the parties agree that dividends shall be deemed to be paid and
withholding required (x) with respect to dividends paid in stock, at such times
as dividends are paid in stock and (y) with respect to the redemption premium,
each regular dividend payment date based on the constant interest method;
provided, however, if the Company has no, or projects no, accumulated or current
earnings or profits for any taxable year, withholding shall not be required to
the extent permitted by law, and if withholding is required, the Company shall
pay such additional amounts but the TCW Investors and the TCW Investors' Foreign
Partners shall apply for any available refund of their withholding taxes and pay
it to the Company.
Section 4.3. Directors' and Officers' Indemnification, Insurance and
Expense. (a) The Company (together with its successors and assigns, the
"Indemnifying Party"), shall indemnify, defend and hold harmless each person who
is now, or becomes at any time after the date hereof, a director of Company
(each, an "Indemnified Party") against all losses, claims, damages, costs and
expenses (including reasonable attorneys' fees), liabilities, judgments and
settlement amounts that are paid or incurred in connection with any claim,
action, suit, proceeding or investigation (whether civil, criminal,
administrative or investigative and whether asserted or claimed before or after
the term of this Agreement) that is based in whole or in part on, or arises in
whole or in part out of, the fact that such Indemnified Party is or was a
director of Company
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<PAGE> 16
and relates to or arises out of any action or omission ("Indemnified
Liabilities") to the full extent a corporation is permitted under applicable law
to indemnify its directors, as the case may be. Without limiting the foregoing,
in the event that any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party, (x) the Indemnifying Party will pay
expenses in advance of the final disposition of any such claim, action, suit,
proceeding or investigation to each Indemnified Party to the full extent
permitted by applicable law; (y) the Indemnifying Party shall pay all reasonable
fees and expenses of counsel for the Indemnified Parties promptly as statements
therefor are received; and (z) the Indemnifying Party shall use all commercially
reasonable efforts to assist in the defense of any such matter. Any Indemnified
Party wishing to claim indemnification under this Section 4.3, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify the
Indemnifying Party, but the failure so to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability which it may have under
this paragraph except to the extent such failure to give notice materially and
irreparably prejudices the Indemnifying Party.
(b) Except to the extent required by law, no party hereto will take
any action so as to amend, modify or repeal the provisions for indemnification
of directors contained in the Charter Documents of Company in such a manner as
would adversely affect the rights of any Indemnified Party.
(c) From and after the date hereof, to the extent commercially
available, Company shall maintain directors' liability insurance for each
director of Company of a character usually insured by corporations engaged in
the same or similar business in the amounts customarily insured against by such
corporations; provided, that such amount shall at least be $5,000,000.
(d) To the fullest extent permitted by applicable law, Company
shall, from time to time upon request therefor, promptly reimburse each director
of Company for the reasonable out-of-pocket expenses incurred by him or her in
connection with his or her attendance at meetings of the Board and committees
thereof and any other activities undertaken by him or her in his or her capacity
as a director of Company. The foregoing shall be in addition to, and not in lieu
of, any indemnification or reimbursement obligations of Company or its
Subsidiaries under the Charter Documents (or comparable charter documents) and
this Section 4.3.
(e) The provisions this Sections are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
legal representatives, and shall be in addition to any other rights such
Indemnified Party or director may have under the Charter Documents (or
comparable charter documents) of Company and its Subsidiaries.
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<PAGE> 17
Section 4.4. Financial Statements, Certificates and Information. The
Company will deliver to the TCW Investors:
(a) as soon as practicable, but in any event not later then ninety
(90) days after the end of each fiscal year of the Company, the consolidated
balance sheet of the Company and its Subsidiaries and the consolidating balance
sheet of the Company and its Subsidiaries, each as at the end of such year, and
the related consolidated statement of income and consolidated statement of cash
flow and consolidating statement of income for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
consolidated and consolidating statements to be in reasonable detail, prepared
in accordance with generally accepted accounting principles, and certified by
the Company's independent certified public accountants;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Company, copies of the unaudited consolidated balance sheet of the Company and
its Subsidiaries and the unaudited consolidating balance sheet of the Company
and its Subsidiaries, each as at the end of such quarter, and the related
consolidated statement of income and consolidated statement of cash flow and
consolidating statement of income for such quarter and the portion of the
Company's fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of the Company
that the information contained in such financial statements fairly presents the
financial position of the Company and their Subsidiaries on the date thereof
(subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Company, the unaudited
consolidated balance sheet of the Company and its Subsidiaries and unaudited
consolidating balance sheet of the Company and their Subsidiaries, each as at
the end of such month, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of income for
such month, all in reasonable detail and each prepared in accordance with
generally accepted accounting principles, together with a certification by the
principal financial or accounting officer of the Company that the information
contained in such financial statements fairly presents the financial condition
of the Company and its Subsidiaries on the date thereof (subject to year-end
adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the Company setting forth in
reasonable detail
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<PAGE> 18
computations evidencing compliance with certain covenants made by the Company
and (if applicable) reconciliations to reflect changes in generally accepted
accounting principles to the Balance Sheet Date;
(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of the Company;
(f) on or prior to the end of each fiscal year of the Company and
their Subsidiaries and otherwise from time to time upon request of the TCW
Investors, a monthly budget for the next fiscal year of the Company and their
Subsidiaries including pro forma consolidated and consolidating (prepared by
division rather than by corporate entity) statements of income and consolidated
statement of cash flows of the Company and their Subsidiaries; and
(g) from time to time such other financial data and information
(including accountants, management letters) as the TCW Investors may reasonably
request.
(h) Company shall notify the TCW Investors forthwith in writing,
upon becoming aware of any default or event which is or would be, upon the
passing of time, a "Voting Rights Triggering Event," including any occasion upon
which the Maintenance Test Ratio exceeds the Maximum Test Ratio (as such terms
are defined in the Certificate of Designation).
Section 4.5. Additional Provisions.
(a) Notwithstanding anything herein to the contrary, the provisions
of this Agreement as they relate to securities of the Company owned or
controlled directly or indirectly at any time by Jefferies shall be limited to
the Jefferies Warrants and the Common Stock received upon exercise thereof.
(b) Following an IPO, if requested by Holdings, Company shall
cooperate in good faith with Holdings to register under the Securities Act of
1933, as amended, the shares of Common Stock held by Holdings; provided such
registration has no material adverse affect on the Company and does not
materially interfere with the rights of the Holders hereunder or materially
interfere with the rights granted under any registration rights agreement.
(c) So long as Holdings and Company are consolidated for federal
income tax purposes, Holdings shall not own any assets or conduct any operations
other than ownership of the stock of the Company and incidental activities
related thereto.
(d) Notwithstanding the fact that Company has agreed to issue to
TAMCO the TAMCO Warrants, each party to this
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<PAGE> 19
Agreement acknowledges and agrees that TAMCO, the TCW Investors and their
respective Affiliates are not acting in any agency, advisory or other fiduciary
capacity with respect to the Company or any other Holder (except as provided in
Section 4.6 hereof) in connection with the transactions contemplated by the
Offering Circular.
Section 4.6. TCW Agent and Management Agent.
Each of the TCW Investors, individually and in the capacity in which
they are acting herein, hereby appoint TAMCO as agent (together with its
successors in such capacity herein referred to as the "TCW Agent") to act for
and on behalf of the TCW Investors under and pursuant to this Agreement, until
such time as the TCW Agent and Company receives written notice from the holders
of a majority of the shares of Common Stock (measured on a fully diluted basis,
assuming the exercise of all Convertible Securities as of the time of
determination) owned by the TCW Investors, that TAMCO has been removed as the
TCW Agent and a successor has been named, in which case such successor shall act
as the TCW Agent hereunder for all purposes.
Each of the Management Stockholders, individually and in the
capacity in which they are acting herein, hereby appoint Anwar S. Soliman as
agent (together with his successors in such capacity herein referred to as the
"Management Agent") to act for and on behalf of the Management Stockholders
under and pursuant to this Agreement, until such time as Anwar S. Soliman and
Company receives written notice from the holders of a majority of the shares of
Common Stock (measured on a fully dilute basis, assuming the exercise of all
Convertible Securities as of the time of determination) owned by the Management
Stockholders, that Anwar S. Soliman has been removed as the Management Agent and
a successor has been named, in which case such successor shall act as the
Management Agent hereunder for all purposes.
The TCW Agent and the Management Agent (collectively referred to
hereinafter as the "Agents") do hereby accept such appointment and are
authorized to act on behalf of the TCW Investors and the Management
Stockholders, respectively, in (i) exercising rights and remedies with respect
to any matter under or pursuant to this Agreement, (ii) giving notices to the
parties hereto, (iii) receiving information or notices from the parties hereto,
(iv) communicating to the parties hereto determinations required or permitted to
be made under this Agreement, and (v) all other actions which the TCW Investors
or the Management Stockholders, respectively, are entitled to take hereunder.
Such appointment of TAMCO as agent for the TCW Investors and Anwar S. Soliman as
agent for the Management Stockholders shall not, however, impair or modify any
rights, obligations or duties which TAMCO or any Affiliate of TAMCO otherwise
has with respect to any of the TCW Investors, individually or as a group, or
which Anwar S. Soliman otherwise has with respect to any of the Management
Stockholders.
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<PAGE> 20
In its administration of this Agreement as an agent, the TCW Agent
and the Management Agent, respectively (i) shall have no duty or fiduciary
relationship, except as expressly set forth in this Agreement with respect
solely to the parties for whom such Agent acts, (ii) may request and rely on
written directions from the TCW Investors and the Management Stockholders,
respectively, (iii) may execute any duty under this Agreement by and through
agents or attorneys selected by it using reasonable care, (iv) shall have
liability only as to acts of gross negligence and willful misconduct, and shall
not be liable for any other party's failure to perform under this Agreement, and
(v) shall be entitled to rely upon any communication by a proper party which it
believes to be genuine.
ARTICLE V
CERTAIN DEFINITIONS
Except for capitalized terms defined elsewhere in this Agreement or
the following terms, which shall have the definitions set forth below,
capitalized terms used herein shall have the meanings set forth in the Purchase
Agreement:
"Affiliate" has the meaning given such term in Rule 12b-2 under the
Exchange Act.
"Board" has the meaning set forth in Section 1.1.
"Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in New York.
"Bylaws" means the By-laws of the Company as set forth in Exhibit
3.3 to the Company Annual Report on Form 10-K for the fiscal year ended December
30, 1996.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock of such Person; and (ii)
with respect to any other Person, any and all partnership or other equity
interests of such Person.
"Certificate of Designation" means the Certificate of Designation of
the Powers, Preferences and Relative, Participating, Optional and Other Special
Rights of the 12% Series A Senior Pay-In-Kind Exchangeable Preferred Stock and
the 12% Series B Senior Pay-In-Kind Exchangeable Preferred Stock and
Qualifications, Limitations or Restrictions Thereof, as filed with the Secretary
of State of the State of Delaware on February 24, 1998.
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<PAGE> 21
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware on February 23, 1998.
"Charter Documents" has the meaning set forth in Section 1.1 hereof.
"Common Stock" means any and all shares, interests or other
participations in, and other equivalents (however designated, whether voting or
non-voting) of Company's common stock, par value $.01 per share, whether
outstanding on the date hereof or issued after such date, and includes, without
limitation, all series and classes of such common stock.
"Compensation Committee" has the meaning set forth in Section 2.4.
"Convertible Securities" means any warrants, options or rights to
acquire shares or securities convertible into or exchangeable for shares of
Common Stock.
"Employment Agreements" means each of (i) the Amended and Restated
Employment Agreement dated as of December 14, 1992, between the Company and
Anwar S. Soliman; (ii) the Amended and Restated Employment Agreement dated as of
December 14, 1993, between the Company and Ralph S. Roberts; and (iii) the
Amended and Restated Employment Agreement dated as of December 14, 1993, between
the Company and Wilfred H. Partridge.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and in the rules and regulations of the Securities and
Exchange Commission, that are in effect on the date hereof.
"IPO" means an underwritten initial public offering of Common Stock
by Company pursuant to an effective registration statement under the Securities
Act.
"Permitted Issuances" means, (i) any issuance of shares of Common
Stock by Company pursuant to the exercise or conversion of Convertible
Securities outstanding on the date hereof, including the Warrants and the other
Convertible Securities identified on Schedule I; (ii) the sale or issuance of
shares of Common Stock or Convertible Securities pursuant to any employee
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<PAGE> 22
stock option plan, stock purchase plan, employee benefit plan, employment
contract, or any similar benefit or incentive program or agreement, where the
primary purpose of such plan, program or agreement is not to raise capital for
the Company and in case where such sale or issuance or plan is approved by the
Compensation Committee; (iii) the issuance of shares of Common Stock or
Convertible Securities pursuant to any merger transaction involving the Company
or any of its Subsidiaries as direct consideration for the acquisition by the
Company or any of its subsidiaries of assets or another business entity; (iv)
the issuance of preferred stock authorized under the Certificate of Designation;
or (v) a Registered Underwritten Public Offering, provided that immediately
after giving effect to such Registered Public Offering, Holders and Permitted
Transferees who are then parties to this Agreement own and control (including,
without limitation, the power to vote for directors and approve amendments to
the Charter Documents) at least a majority of the outstanding shares of Common
Stock measured on both an actual and fully diluted basis (assuming, with respect
solely to the determination of outstanding shares on a fully diluted basis, the
exercise of all Convertible Securities as of the time of determination).
"Permitted Transferees" has the meaning set forth in
Section 3.1(d) hereof.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union or association.
"Public Company Date" means the date that is 45 days after the date
upon which underwritten primary public offerings of Common Stock of the Company
pursuant to effective registration statements under the Securities Act have
resulted in 35% of the Company's Common Stock (measured on a fully diluted basis
after giving effect to such offering) being sold to the public and in the
Company's Common Stock being listed for trading on any of the New York Stock
Exchange, the NASDAQ National Market or the American Stock Exchange.
"Registered Underwritten Public Offering" means issuances of Common
Stock by the Company to the public in an underwritten offering registered under
the Securities Act, immediately whereafter the Common Stock is listed for
trading on any of the New York Stock Exchange, NASDAQ National Market or the
American Stock Exchange.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other
- 22 -
<PAGE> 23
Subsidiaries or by the Company and one or more other Subsidiaries.
"Transfer" has the meaning set forth in Section 3.1(a).
"Transferee" has the meaning set forth in Section 3.1(b).
"Voting Stock" means, with respect to any Person (i) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency); and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"Wholly Owned Subsidiary" means a Person all of whose capital stock
is owned by the Company or a Wholly Owned Subsidiary of the Company.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendment; Termination. This Agreement shall not be
terminated, modified or amended except as provided in the following sentence.
This Agreement (i) may be terminated by a majority of the entire Board, with the
concurrence of the TCW Investors and (ii) may be terminated, modified or amended
by approval of each of (A) the holders of a majority of the outstanding shares
of Common Stock of the Company (measured on a fully diluted basis assuming the
conversion of all Convertible Securities) owned by the TCW Investors; (B) the
holders of a majority of the outstanding shares of Common Stock of the Company
(measured on a fully diluted basis assuming the conversion of all Convertible
Securities) owned by the Management Stockholders; and (C) Holdings; provided
that Jefferies' approval shall be required with respect to modifications or
amendments to this Agreement that impose additional material obligations on
Jefferies and its Permitted Transferees.
Section 6.2. Notices. All notices to be given by any party hereunder
shall be in writing and shall be deemed to have been duly given if mailed, by
first class or registered mail, three (3) Business Days after deposit in the
United States Mail, or if telexed or telecopied, sent by telegram, or delivered
by hand or reputable overnight courier, when confirmation is received, in each
case as follows:
(i) in the case of Company, Holdings or any Management Stockholder to:
- 23 -
<PAGE> 24
c/o American Restaurant Group, Inc.
450 Newport Center Drive, 6th Floor
Newport Beach, CA 92660
Attention: Chairman
Telecopy: (714) 721-8941
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Philip T. Ruegger III, Esq.
Telecopy: (212) 455-2502
(ii) in the case of TAMCO or the TCW Investors to:
TCW Asset Management Company
11100 Santa Monica Blvd., 20th Floor
Los Angeles, CA 90025
Attention: Nicholas W. Tell
Telecopy: (310) 235-5966
with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attention: Kenneth J. Baronsky, Esq.
Telecopy: (213) 629-5063
(iii) in the case of Jefferies to:
Jefferies & Company, Inc.
11100 Santa Monica Blvd., 10th Floor
Los Angeles, CA 90025
Attention: Jerry M. Gluck
Telecopy: (310) 575-5165
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Suite 3400
Los Angeles, CA 90071
Attention: Rod A. Guerra, Jr.
Telecopy: (213) 687-5600
The parties may change their respective addresses for purposes of notice
hereunder by giving notice of such change to all other parties in the manner
provided in this Section 6.2.
Section 6.3. Binding Effect. This Agreement represents the entire
agreement among the parties hereto with respect to the subject matter hereof,
supersedes all prior
- 24 -
<PAGE> 25
negotiations, statements and agreements of the parties hereto with respect to
the subject hereof, and shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto.
Section 6.4. Counterparts. This Agreement may be executed in
counterparts and all of which are deemed to be one and the same agreement
binding upon each of the parties hereto.
Section 6.5. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
Section 6.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of law doctrine, except for matters of corporate law, which
shall be governed by and construed in accordance with the General Corporation
Law of the State of Delaware.
Section 6.7. Injunctive Relief. It is hereby agreed and acknowledged
by each of the parties hereto that it will be impossible to measure in money the
damages that would be suffered if the parties to this Agreement fail to comply
with any of the obligations imposed on them by this Agreement and that in the
event of any such failure, an aggrieved person will be irreparably damaged and
will not have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
Section 6.8. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of any provision of
this Agreement in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
Section 6.9. Recapitalization, etc. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any shares of Common Stock by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Common Stock or any other change in
the Company's capital structure, appropriate adjustments shall be made to the
provisions of this Agreement so as to fairly and equitably preserve, as far as
practicable,
- 25 -
<PAGE> 26
the original rights and obligations of the parties hereto under this Agreement.
[SIGNATURE PAGES FOLLOW]
- 26 -
<PAGE> 27
[SIGNATURE PAGE 1 OF 5 TO SECURITYHOLDERS AGREEMENT]
IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have
hereunto set their respective hands as of the day and year first above written.
"COMPANY": AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Name: William J. McCaffrey, Jr.
Its: Vice President and Chief Financial Officer
<PAGE> 28
[SIGNATURE PAGE 2 OF 5 TO SECURITYHOLDERS AGREEMENT]
"HOLDERS":
"HOLDINGS": AMERICAN RESTAURANT GROUP HOLDINGS, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Name: William J. McCaffrey, Jr.
Its: Vice President and Chief Financial Officer
<PAGE> 29
[SIGNATURE PAGE 3 OF 5 TO SECURITYHOLDERS AGREEMENT]
"HOLDERS" (continued):
"JEFFERIES": JEFFERIES & COMPANY, INC.
By: /s/ RICHARD A. GOLDENBERG
----------------------------------------------
Name: Richard A. Goldenberg
Its: Power of Attorney
<PAGE> 30
[SIGNATURE PAGE 4 OF 5 TO SECURITYHOLDERS AGREEMENT]
"HOLDERS" (continued):
"MANAGEMENT
STOCKHOLDERS": /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Anwar S. Soliman
/s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Roberts Family Limited Partnership
/s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
William J. McCaffrey, Jr.
/s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Wilfred H. Partridge
/s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Patrick J. Kelvie
/s/ WILLIAM J. McCAFFREY, JR.
----------------------------------------------
Meredith Taylor
<PAGE> 31
[SIGNATURE PAGE 5 OF 5 TO SECURITYHOLDERS AGREEMENT]
"HOLDERS" (continued):
"TAMCO": TCW ASSET MANAGEMENT COMPANY
By: /s/ MELISSA V. WELLER
--------------------------------------------
Name: Melissa V. Weller
Its: Managing Director
By: /s/ NICHOLAS W. TELL
--------------------------------------------
Name: Nicholas W. Tell
Its: Senior Vice President
"TCW INVESTORS": TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management Company
Its: Investments Manager
By: /s/ MELISSA V. WELLER
--------------------------------------------
Name: Melissa V. Weller
Its: Managing Director
By: /s/ NICHOLAS W. TELL
--------------------------------------------
Name: Nicholas W. Tell
Its: Senior Vice President
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisory (Bermuda), Ltd.
Its: General Partner
By: /s/ NICHOLAS W. TELL
--------------------------------------------
Name: Nicholas W. Tell
Its: Senior Vice President
By: /s/ MELISSA V. WELLER
--------------------------------------------
Name: Melissa V. Weller
Its: Managing Director
BROWN UNIVERSITY
By: Brown University Third Century Fund
By: /s/ MARK L. ATTANASIO
--------------------------------------------
Name: Mark L. Attanasio
Its: Investment Manager
TCW SHARED OPPORTUNITY FUND IIB, LLC
By: TCW Asset Management Company
Its: Investments Manager
By: /s/ MELISSA V. WELLER
--------------------------------------------
Name: Melissa V. Weller
Its: Managing Director
By: /s/ NICHOLAS W. TELL
--------------------------------------------
Name: Nicholas W. Tell
Its: Senior Vice President
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
Shares of Type of Convertible
"Holders" Common Stock Security
- --------- ------------ -------------------
<S> <C> <C>
"TAMCO"
TCW Asset Management TAMCO Warrants
Company 0 875
"TCW INVESTORS"
TCW Shared Opportunity Warrants
Fund II, L.P. 0 5,000
TCW Leveraged Income Warrants
Trust, L.P. 0 10,000
Warrants
Brown University 0 1,000
Shared Opportunity Fund Warrants
IIB, LLC 0 2,000
"Jefferies" Jefferies Warrants
Jefferies & Company, Inc. 0 3,500
"Holdings"
American Restaurant Group
Holdings, Inc. 93,150 0
"Management Stockholders"
Anwar S. Soliman 19,409 0
Roberts Family Limited
Partnership 9,702 0
William J. McCaffrey, Jr. 2,426 0
Wilfred H. Partridge 2,426 0
Patrick J. Kelvie 387 0
Meredith Taylor 581 0
TOTAL SHARES: 128,081 22,375
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 1997 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 29, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS ON FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-29-1997
<CASH> 5,737,000
<SECURITIES> 0
<RECEIVABLES> 7,522,000
<ALLOWANCES> 916,000
<INVENTORY> 5,893,000
<CURRENT-ASSETS> 21,378,000
<PP&E> 216,215,000
<DEPRECIATION> 123,893,000
<TOTAL-ASSETS> 152,011,000
<CURRENT-LIABILITIES> 78,530,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (111,739,000)
<TOTAL-LIABILITY-AND-EQUITY> 152,011,000
<SALES> 440,039,000
<TOTAL-REVENUES> 440,039,000
<CGS> 140,015,000
<TOTAL-COSTS> 244,234,000
<OTHER-EXPENSES> 19,627,000
<LOSS-PROVISION> 96,000
<INTEREST-EXPENSE> 23,985,000
<INCOME-PRETAX> (20,229,000)
<INCOME-TAX> 63,000
<INCOME-CONTINUING> (20,292,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,292,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
