As filed with the Securities and Exchange Commission on December 23, 2002
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
DENNY'S CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 5812 13-3487402
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code Number)
DENNY'S HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York 5812 22-3004358
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code Number)
203 East Main Street
Spartanburg, South Carolina 29319
(864) 597-8000
(Address, Including Zip Code, and Telephone Number, Including
Area Code of Registrant's Principal Executive Offices)
Rhonda J. Parish, Esq.
Executive Vice President and General Counsel
Denny's Corporation
203 East Main Street
Spartanburg, South Carolina 29319-9966
(864) 597-8000
(Address, Including Zip Code, and Telephone Number, Including Area
Codes of Agent For Service)
-
With copies to:
Gary C. Ivey, Esq.
Alston & Bird LLP
Bank Of America Plaza, Suite 4000
101 S. Tryon Street
Charlotte, North Carolina 28202
(704) 444-1000
Approximate date of commencement of proposed sale to the public: As soon as
possible after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Amount to Be Offering Price Per Aggregate Offering Registration
Title of Each Class of Securities To Be Registered Registered(1) Unit(1) Price(2) Fee(2)
12 3/4% Senior Notes due 2007 $50,000,000 100% $50,000,000 $4,600
----------- ------
===================================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) under the Securities Act of 1933, as amended, based upon
the book value (aggregate outstanding principal amount) of such securities.
(2) Calculated by multiplying the aggregate offering amount by .000092.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED DECEMBER 23, 2002
PROSPECTUS
DENNY'S CORPORATION
DENNY'S HOLDINGS, INC.
OFFER TO EXCHANGE
$50,000,000 REGISTERED
12 3/4% SENIOR NOTES DUE 2007
OF DENNY'S CORPORATION AND
DENNY'S HOLDINGS, INC.
FOR
$50,000,000 OUTSTANDING UNREGISTERED
12 3/4% SENIOR NOTES DUE 2007
OF DENNY'S CORPORATION AND
DENNY'S HOLDINGS, INC.
Denny's Corporation (formerly Advantica Restaurant Group, Inc.) is offering
to exchange up to $50,000,000 aggregate principal amount of 12 3/4% senior notes
due 2007 to be jointly issued by Denny's Corporation and Denny's Holdings, Inc.,
which we refer to as the new notes, for up to $50,000,000 aggregate principal
amount of outstanding 12 3/4% senior notes due 2007 of Denny's Holding and
Denny's Corporation, which we refer to as the old notes. The terms of the new
notes are identical in all respects to the terms of the old notes, except that
the new notes are registered under the Securities Act of 1933, as amended, and
generally are not subject to transfer restrictions or registration rights.
PLEASE CONSIDER THE FOLLOWING REGARDING THE OFFER TO EXCHANGE:
o The offer to exchange new notes for old notes will expire at 5:00
p.m., New York City time, on _________, 2003, unless we extend the
expiration date. We do not currently intend to extend the
expiration date.
o We will exchange outstanding old notes up to an aggregate principal
amount of $50,000,000 that are validly tendered and not properly
withdrawn prior to the expiration date of the exchange offer. You
should carefully review the procedures for tendering the old notes
set forth in this prospectus.
o We reserve the right to extend, delay, amend or terminate the
exchange offer.
o You may withdraw tendered outstanding old notes at any time prior
to the expiration of the exchange offer.
o We will not receive any proceeds from the exchange offer.
o The old notes are not listed, and we do not intend to list the new
notes, on any securities exchange.
-------------------------
Investing in the new notes involves risks. See "Risk Factors" beginning on
page 10 of this prospectus for a discussion of factors that you should consider
in connection with this exchange offer and an investment in the new notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is _____________, 2002.
-------------------
TABLE OF CONTENTS
Page
Important Information About This Prospectus..................................ii
Where You Can Find More Information.........................................iii
Forward-Looking Statements...................................................iv
Summary.......................................................................1
Summary Consolidated Financial Data...........................................6
Risk Factors.................................................................10
Use of Proceeds..............................................................17
The Exchange Offer...........................................................17
Description of Indebtedness..................................................24
The New Notes................................................................27
United States Federal Income Tax Consequences................................46
Legal Matters................................................................49
Experts......................................................................49
------------------------
Important Information about this Prospectus
You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. You should assume that the
information contained in this prospectus is accurate as of the date on the front
cover of this prospectus. Our business, financial condition, results of
operations and prospects may have changed since then. We are not making an offer
to sell, or soliciting an offer to buy, any of the securities offered by this
prospectus in any jurisdiction where the exchange offer is not permitted.
We are not making this exchange offer to, and we will not accept surrenders
for exchange from, holders of old notes in any jurisdiction in which this
exchange offer or the acceptance of this exchange offer would violate the
securities or other laws of that jurisdiction.
Unless the context otherwise requires, as used in this prospectus:
o the terms "Denny's," "our" and "we" refer to the combined entities of
Denny's Corporation and Denny's Holdings, Inc. and their subsidiaries;
o the term "old notes" refers to the 12 3/4% notes due 2007 that are not
registered;
o the term "new notes" refers to the 12 3/4% notes due 2007 that we have
registered under the Securities Act in connection with this exchange
offer and that we are offering in exchange for the old notes; and;
o the term "notes" refers to the old notes and the new notes,
collectively.
ii
WHERE YOU CAN FIND MORE INFORMATION
Denny's Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and accordingly files reports,
proxy statements and other information with the Securities and Exchange
Commission, or the SEC. In addition, we have filed with the SEC a registration
statement on Form S-4 under the Securities Act of 1933, as amended, with respect
to the new notes offered in this prospectus. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules that are a part of the registration statement. For further
information with respect to us and the new notes, we refer you to the
registration statement and the exhibits and schedules filed or referenced as a
part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document are not
necessarily complete. If a contract or document is an exhibit to the
registration statement, we refer you to the copy of the contract or document
that has been filed. Each statement in this prospectus relating to a contract or
document filed or referenced as an exhibit is qualified in all respects by the
exhibit. Copies of our reports, proxy statements and other information may be
inspected and copied at the public reference room maintained by the SEC at:
Room 1024
450 Fifth Street, N.W.
Washington, D.C. 20549
Information on the operation of the public reference room may be obtained
by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
reports, proxy statements and other information regarding Denny's. The address
of the SEC website is http://www.sec.gov. This information is also available on
our website, the address of which is http://www.dennys.com. Information
contained at our website is not, and should not be deemed to be, a part of this
prospectus.
The SEC allows us to incorporate by reference information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
information superseded by information contained directly in, or incorporated by
reference in, this prospectus. This prospectus incorporates by reference the
documents set forth below that we previously filed with the SEC and that contain
important information about us:
o Annual Report on Form 10-K for the fiscal year ended December 26, 2001;
o Quarterly Report on Form 10-Q for the fiscal quarter ended March 27,
2002;
o Quarterly Report on Form 10-Q for the fiscal quarter ended June 26,
2002;
o Quarterly Report on Form 10-Q for the fiscal quarter ended September
25, 2002; and
o Current Reports on Form 8-K dated July 10, 2002, August 12, 2002,
November 18, 2002 and December 16, 2002.
Included with this prospectus are copies of our Annual Report on Form 10-K
for the fiscal year ended December 26, 2001 and our Quarterly Report on Form
10-Q for the fiscal quarter ended September 25, 2002.
In addition, we will provide, without charge, to each person to whom this
prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents (other than exhibits to documents that are not
specifically incorporated by reference to the documents). Please direct such
requests to 203 East Main Street, Spartanburg, South Carolina 29319-9966, (864)
597-8000, Attention: Corporate Secretary.
If you would like to request documents, please do so by __________, 2003,
in order to receive them before the scheduled expiration of the exchange offer
on __________, 2003.
iii
FORWARD-LOOKING STATEMENTS
This prospectus contains numerous forward-looking statements about our
financial condition, results of operations, cash flows, financing plans,
business strategies, operating efficiencies, capital and other expenditures,
competitive positions, growth opportunities, plans and objectives of management,
markets for our stock and debt securities and other matters which reflect
management's best judgment based on factors currently known. These
forward-looking statements involve risks and uncertainties. The words
"estimate," "project," "intend," "expect," "believe," "forecast" or similar
expressions, or the negative of these terms or expressions, are intended to
identify these forward-looking statements, but some of these statements use
other phrasing. In addition, any statement in this prospectus that is not a
historical fact is a "forward-looking statement." Except as required by law, we
expressly disclaim any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events. Actual
results could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors including, among others:
o competitive pressures from within the restaurant industry;
o the level of success of our operating initiatives and advertising and
promotional efforts, including the initiatives and efforts
specifically mentioned in this prospectus;
o adverse publicity;
o changes in business strategy or development plans;
o terms and availability of capital;
o regional weather conditions;
o overall changes in the general economy, particularly at the retail
level; and
o other factors included in the sections containing the forward-looking
statements, including the section entitled "Risk Factors" in this
prospectus.
iv
SUMMARY
This summary highlights material information from the prospectus. It may
not contain all of the information that is important to you. For a more complete
understanding of our company, the exchange offer and the terms of the new notes,
you should read this entire prospectus and the other documents to which it
refers you.
The Issuers
Denny's Corporation is the parent company and owner of 100% of Denny's
Holdings, Inc., a holding company that in turn owns 100% of Denny's, Inc., the
operator of almost 1,700 company-owned and franchised restaurants. Prior to
their divestiture in July, 2002, Denny's Corporation also owned and operated the
Coco's and Carrows restaurant chains through our subsidiary FRD Acquisition Co.,
or FRD.
Our principal executive offices are located at 203 East Main Street,
Spartanburg, South Carolina 29319-9966. Our telephone number is (864) 597-8000.
Description of Business
Denny's is the nation's largest family dining restaurant chain in terms of
market share, number of units and U.S. system-wide sales. At September 25, 2002,
Denny's restaurants operated in 49 states, the District of Columbia, two U.S.
territories and four foreign countries, with concentrations in California (24%
of total restaurants), Florida (11%) and Texas (9%). Of the 1,686 Denny's
restaurants operating at September 25, 2002, 1,109 (66%) were franchised or
licensed units. Our restaurants generally are open 24 hours a day, 7 days a
week. We offer traditional family fare (including breakfast items, hamburgers,
sandwiches, steaks and chicken), and provide both counter and table service.
Our sales are evenly distributed across each of the typical mealtimes; however,
breakfast items account for the majority of our sales. Denny's restaurants are
designed to provide a "dining value" with moderately priced food, friendly and
efficient service and a pleasant atmosphere. We believe that Denny's benefits
from its generally strong market position and consumer recognition.
Risk Factors
For a discussion of the risks facing our business and the factors that
you should consider in connection with the exchange offer and an investment in
the new notes, see "Risk Factors" beginning on page 10 of this prospectus.
1
The Exchange Offer
Offerors.......................................Denny's Corporation and Denny's
Holdings, Inc.
Exchange Offer
Size...........................................Subject to the terms and
conditions set forth in this
prospectus, Denny's Corporation
and Denny's Holdings, Inc. are
offering to exchange up
to $50.0 million aggregate
principal amount of registered 12
3/4% senior notes due 2007 of
Denny's Corporation and Denny's
Holdings, which we refer to as
the new notes, for up to $50.0
million aggregate principal
amount of unregistered 12 3/4%
senior notes due 2007 of Denny's
Corporation and Denny's Holdings,
which we refer to as the old
notes.
General........................................We are offering to exchange old
notes for a like principal amount
of new notes. Old notes may be
tendered, and new notes will be
issued, only in integral
multiples of $1,000 principal
amount. Currently, $50.0 million
in principal amount of old
notes is outstanding. See "The
Exchange Offer - Terms Of The
Exchange Offer."
This exchange offer is intended
to satisfy our obligations under
the note exchange and
registration rights agreements
that we entered into when we
issued the old notes. See "The
Exchange Offer - Background and
Purpose of the Exchange Offer."
The terms of the new notes are
identical in all respects to the
terms of the old notes, except
that the new notes are registered
under the Securities Act and
generally are not subject to
transfer restrictions or
registration rights.
Expiration Date;
Extensions; Termination;
Amendments.....................................This exchange offer expires at
5:00 p.m., New York City time,
on _________, 2003, unless the
exchange offer is extended. We
do not currently intend to
extend the expiration date.
Denny's reserves the right to
extend, delay, amend or terminate
the exchange offer. See "The
Exchange Offer - Expiration Date;
Extensions; Termination;
Amendments."
Conditions of the Exchange
Offer..........................................This exchange is subject to
customary conditions, which we
may assert or waive. For more
information about these
conditions, see "The Exchange
Offer - Conditions of the
Exchange Offer."
Resale of New Notes............................We believe that you can resell
and transfer your new notes
without registering them under
the Securities Act and
delivering a prospectus if:
o you are acquiring the new
notes in the ordinary
course of your business for
investment purposes;
o you are not engaged in, do
not intend to engage in and
have no arrangement or
understanding with anyone to
participate in a
distribution of the new
notes (within the meaning of
the Securities Act);
o you are not a broker-dealer
who purchased the old notes
directly from us for resale
pursuant to Rule 144A or any
other available exemption
under the Securities Act;
and
2
o you are not an affiliate of
Denny's within the meaning
of Rule 405 under the
Securities Act.
Our belief is based on
interpretations expressed in some
of the SEC's no-action letters to
other issuers in similar exchange
offers. However, we cannot
guarantee that the SEC would make
a similar decision about this
exchange offer. If our belief is
wrong, or if you cannot
truthfully make the necessary
representations, and you transfer
any new note received in this
exchange offer without meeting
the registration and prospectus
delivery requirements of the
Securities Act or without an
exemption from these
requirements, then you could
incur liability under the
Securities Act. We are not
indemnifying you for any
liability that you may incur
under the Securities Act.
Consequences of Failure to
Exchange Your Old
Notes..........................................Old notes that are not tendered
in the exchange offer or that
are not accepted for exchange
will continue to bear legends
restricting their transfer. You
will not be able to offer or
sell the old notes unless:
o....each offer or sale is made
pursuant to an exemption
from the requirements of
the Securities Act; or
o....the old notes are
registered under the
Securities Act.
After the exchange offer is
closed, we will no longer have
an obligation to register the
old notes. See "The Exchange
Offer - Consequences of Failure
to Exchange Old Notes."
Procedures for Tendering
Old Notes......................................If you wish to tender your old
notes for exchange, you must:
o....complete and sign the
accompanying letter of
transmittal;
o indicate the amount of old
notes, if less than all, to
which your election to
tender for new notes
applies;
o have the signature
guaranteed if required by
the letter of transmittal;
and
o mail or deliver the
certificates for the old
notes, together with a
properly completed and duly
executed letter of
transmittal (or a facsimile
thereof), with any required
signature guarantees and any
other required documents, to
the exchange agent at its
address shown on the back
cover page of this
prospectus on or prior to
the expiration date.
For more detailed information,
see "The Exchange Offer -
Procedures for Tendering."
Guaranteed Delivery
Procedures.....................................If you wish to tender your old
notes but are not able to deliver
the required documents prior to
the expiration date for the
exchange offer, you may tender
your old notes according to the
guaranteed delivery procedures
set forth in "The Exchange Offer
- Guaranteed Delivery."
Withdrawal Rights..............................You may withdraw tenders of old
notes at any time on or prior
to the expiration date. Any old
notes not accepted for exchange
will be returned to the
tendering holder without cost
promptly after the termination or
expiration
3
of the exchange offer.
For more information on
withdrawing tenders of old
notes, see "The Exchange Offer -
Withdrawal of Tenders."
Acceptance of Tenders;
Delivery of New Notes..........................Subject to the satisfaction or
waiver of all conditions of the
exchange offer, Denny's will
accept for exchange all old
notes that have been validly
tendered in the exchange offer
and not properly withdrawn on or
prior to the expiration date. We
will issue and deliver the new
notes in exchange for the
applicable old notes accepted
pursuant to the exchange offer
promptly following the
expiration date. See "The
Exchange Offer - Acceptance of
Tenders; Compliance with
Conditions of the Exchange Offer;
Delivery of New Notes."
U.S. Federal Income Tax
Considerations.................................The exchange of old notes for
new notes in this exchange offer
should not be a taxable event
for U.S. federal income tax
purposes. See "United States
Federal Income Tax
Considerations."
Exchange Agent................................ U.S. Bank National
Association is acting as the
exchange agent in the exchange
offer. The address and phone
numbers of the exchange agent are
set forth on the outside back
cover of this prospectus.
The New Notes
Issuers........................................Denny's Corporation and Denny's
Holdings, Inc.
Notes Offered..................................Up to $50.0 million aggregate
principal amount of 123/4%
senior notes due 2007.
Interest Payment Dates.........................Interest on the new notes will
be payable semi-annually in
arrears on each March 31 and
September 30, commencing
March 31, 2003.
Maturity Date..................................September 30, 2007.
Optional Redemption............................Except as provided below, the
new notes may not be redeemed
prior to September 30, 2004. On
and after September 30, 2004,
the new notes will be redeemable,
in whole or in part, at 106.3750%
of their principal amount, at
decreasing amounts thereafter to
and including September 30, 2006,
and thereafter at 100% of their
principal amount, together in
each case with accrued and unpaid
interest. Notwithstanding the
foregoing, from the closing date
until September 30, 2004, the
issuers may redeem up to 35% of
the aggregate principal amount of
new notes, at a redemption price
of 112.75%, plus accrued and
unpaid interest to the redemption
date, from the net proceeds of
any public offering for cash of
certain equity securities of
Denny's Corporation, Denny's
Holdings or any of their
subsidiaries.
Ranking........................................The new notes will be senior
obligations of the issuers and
will rank equal in right of
payment with all other senior
indebtedness of the issuers. The
new notes will be senior to
all existing and future
subordinated indebtedness of the
issuers. However, the new notes
will be effectively
subordinated to the issuers'
secured indebtedness to the
extent of the assets securing
that indebtedness and
structurally subordinated to the
indebtedness and other
obligations of the
issuers' subsidiaries, including
Denny's, Inc. As of September
25, 2002, we had total
indebtedness of approximately
$606.1 million. Of that amount,
$81.2 million, plus trade
payables, would be
4
structurally senior to the new
notes. See "Capitalization" for
more information.
Covenants......................................The indenture governing the new
notes contains covenants that,
among other things, will limit
our ability to incur additional
indebtedness, pay dividends or
make other distributions, make
loans and investments, enter
into asset sales and use those
proceeds, create liens, enter
into transactions with
affiliates, merge, consolidate
or transfer all or substantially
all of our assets or make
investments in unrestricted
subsidiaries. For additional
information, see "The New Notes -
Certain Covenants."
Change of Control..............................If we experience a change of
control, we must offer to
purchase the new notes at a
purchase price equal to 101% of
the principal amount, plus
accrued and unpaid interest. We
might not be able to pay you the
required price for the new notes
you present to us at the time of
a change of control because our
revolving credit facility or
other indebtedness may prohibit
payment or we might not have
enough funds at the time. See
"The New Notes - Change Of
Control."
Previously Registered 12 3/4% Notes
due 2007 Outstanding.......................... The new notes will be issued
pursuant to an indenture under
which we already have issued and
outstanding, in addition to
the old notes that are the
subject of this exchange offer,
an aggregate of $70.4 million of
123/4% senior notes due 2007
that have been registered under
the Securities Act. The new
notes will have the same terms
and conditions as these
previously registered
outstanding 123/4% senior notes
due 2007.
Trustee........................................U.S. Bank National Association
will serve as trustee under the
indenture governing the new
notes.
5
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated balance sheet data as of December 31, 1997, December 30, 1998
and December 29, 1999 and the related statements of consolidated operations and
consolidated cash flow data for the fiscal year ended December 31, 1997, the one
week period ended January 7, 1998, and the fifty-one week period ended December
30, 1998 are derived from our audited consolidated financial statements that are
not included in this prospectus. The consolidated balance sheet data as of
December 27, 2000 and December 26, 2001 and the statements of consolidated
operations and consolidated cash flow data for the fiscal years ended December
29, 1999, December 27, 2000 and December 26, 2001 are derived from our audited
consolidated financial statements that are incorporated by reference into this
prospectus. The consolidated balance sheet data as of September 26, 2001 and
September 25, 2002 and the statements of consolidated operations and
consolidated cash flow data for the three quarters ended September 26, 2001 and
September 25, 2002 are derived from our unaudited consolidated financial
statements that are incorporated by reference into this prospectus. In the
opinion of management, our unaudited interim consolidated financial statements
include all adjustments necessary for a fair presentation of our consolidated
results of operations, cash flows and financial condition for these interim
periods. Excluding impairment and restructuring charges and exit costs, all of
such adjustments are of a normal and recurring nature. The unaudited interim
consolidated results of operations are not necessarily indicative of the
consolidated results of operations for any other interim period or for any
fiscal year as a whole. You should read the selected consolidated financial data
and other information in conjunction with our consolidated financial statements
and the notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference into this
prospectus.
Predecessor Company Successor Company(a)
----------------------- -------------------------------------------------------
Fiscal Year One Week Fifty-One Fiscal Year Ended
Ended Ended Weeks Ended -----------------------------------------
December 31, January 7, December 30, December 29, December 27, December 26,
1997(b) 1998 1998 1999 2000 2001
------------ ---------- ------------ ------------ ------------ ------------
(In millions, except ratios
and per share amounts)
Income Statement Data:
Operating revenue $ 1,193.3 $ 23.2 $ 1,156.0 $ 1,200.2 $ 1,155.2 $ 1,039.7
Operating income (loss)(c) 78.2 8.7 (51.2) (195.9) (0.3) (19.7)
(Loss) income from
continuing operations(d) (83.2) 602.9(e) (126.0) (275.8) (82.5) (88.5)
Basic (loss) per share
from continuing
operations
applicable to common
shareholders (2.29) 14.21 (3.15) (6.89) (2.06) (2.21)
Diluted (loss) income per
share from continuing
operations applicable to
common shareholders (2.29) 10.93 (3.15) (6.89) (2.06) (2.21)
Cash dividends per common
per share(f) -- -- -- -- -- --
Ration of earnings to
fixed charges(g) -- 268.5x -- -- -- --
Deficiency in the
coverage of
fixed charges by earnings
before fixed charges(g) 82.0 -- 129.1 275.0 80.7 94.8
Balance Sheet Data (at end
of period):
Current assets(h) $ 129.6 $ 291.1 $ 379.5 $ 56.4 $ 40.1
Working capital
(deficit)(h)(i) (230.2) (81.2) (197.0) (170.6) (147.5)
Net property and equipment 625.8 630.3 510.9 425.3 362.4
Total assets 1,407.4 1,930.7 1,236.3 745.3 607.3
Long-term debt, excluding
current portion 594.2(j) 1,141.2 615.4 593.7 645.1
Other Data:
EBITDA as defined(k) $ 136.4 $ 9.7 $ 140.0 $ 160.4 $ 172.3 $ 135.1
Net cash flows provided by
(used in) operating 37.0 7.7 (10.7) (31.1) (8.4) 8.2
activities
Net cash flows (used in)
provided by investing
activities(l) (41.6) 7.9 180.3 86.7 204.8 (75.1)
Net cash flows (used in)
provided by financing
activities(m) (28.4) (5.3) (66.6) (47.9) (335.0) 46.3
Successor Company(a)
---------------------------
Three Quarters Ended
----------------------------
September 26, September 25,
2001 2002
------------- -------------
(In millions, except ratios
and per share amounts)
Income Statement Data:
Operating revenue $ 792.8 $ 721.7
Operating income (loss)(c) (0.8) 47.2
(Loss) income from
continuing operations(d) (49.0) 11.1
Basic (loss) income per
share from continuing
operations
applicable to common
shareholders (1.22) (1.68)
Diluted (loss) income per
share from continuing
operations applicable to
common shareholders (1.22) (1.67)
Cash dividends per common
share(f) -- --
Ration of earnings to
fixed charges(g) -- 1.1x
Deficiency in the
coverage of
fixed charges by earnings
before fixed charges(g) 47.7 --
Balance Sheet Data (at end
of period):
Current assets(h) $ 41.4 $ 28.5
Working capital
(deficit)(h)(i) (113.9) (146.2)
Net property and equipment 369.7 328.0
Total assets 630.1 549.8
Long-term debt, excluding
current portion 661.5 561.7
Other Data:
EBITDA as defined(k) $ 108.1 $ 113.5
Net cash flows provided by
(used in) operating (14.4) 2.7
activities
Net cash flows (used in)
provided by investing
activities(l) (63.6) 30.7
Net cash flows (used in)
provided by financing
activities(m) 54.4 (36.1)
Certain amounts in all periods presented have been reclassified to conform to
the 2002 presentation.
6
(a) Denny's Corporation's predecessor, Flagstar Companies, Inc, or
FCI, and its wholly owned subsidiary Flagstar Corporation, or
Flagstar, emerged from bankruptcy on January 7, 1998. The change
in ownership of Denny's Corporation effected by the financial
restructuring resulting from the bankruptcy required the
application of fresh start reporting effective January 7, 1998 in
accordance with the American Institute of Certified Public
Accountants' Statement of Position 90-7, or SOP 90-7, "Financial
Reporting By Entities in Reorganization Under the Bankruptcy Code."
All financial statements subsequent to January 7, 1998 are
referred to as "Successor Company" statements, as they reflect
periods subsequent to the implementation of fresh start reporting
and are not comparable to the financial statements for periods
prior to January 7, 1998.
(b) Effective January 1, 1997, we changed our fiscal year end from
December 31 to the last Wednesday of the calendar year. Concurrent
with this change, we changed to a four-four-five week quarterly
closing calendar. This reporting schedule generally results in four
13-week quarters during the fiscal year, for a total of 52 weeks. Due
to the timing of this change, the fiscal year ended December 31, 1997
included five additional days of Denny's operations.
(c) Operating income (loss) reflects impairment and restructuring charges
and exit costs of $136.5 million, $19.0 million and $30.5 million for
1999, 2000 and 2001, respectively, and $16.8 million and $4.1 million
for the three quarters ended September 26, 2001 and September 25,
2002, respectively.
(d) We have classified as discontinued operations restaurant
subsidiaries Flagstar Enterprises, Inc., or FEI, (which
operated our Hardee's restaurants under licenses from Hardee's Food
Systems), Quincy's Restaurants, Inc., or Quincy's, El Pollo Loco,
Inc., or EPL, and FRD. FEI and Quincy's were sold in 1998, and
EPL was sold in 1999. We completed the divestiture of FRD on
July 10, 2002.
(e) The income from continuing operations for the one week ended January
7, 1998 includes reorganization items of $582.0 million resulting
from the application of fresh start reporting in accordance with SOP
90-7.
(f) Our bank facilities have prohibited, and our public debt indentures
have significantly limited, distributions and dividends on our (and
our predecessors') common equity securities.
(g) For purposes of computing the ratio of earnings to fixed charges or
deficiency in the coverage of fixed charges by earnings before fixed
charges, fixed charges consist of interest expense including
capitalized interest, amortization of debt expenses and the interest
element in rental payments under operating leases (estimated to be
one third of the total rental payments). Earnings consist of income
from continuing operations before income taxes and fixed charges
excluding capitalized interest.
(h) The current assets and working capital deficit amounts presented
exclude assets held for sale of $347.0 million as of December 31,
1997, $87.7 million as of December 30, 1998, and net liabilities of
discontinued operations of $54.0 million as of December 29, 1999,
$69.4 million as of December 27, 2000, $15.1 million as of December
26, 2001 and $13.5 million as of September 26, 2001. Assets held for
sale for 1997 relate to FEI and Quincy's. For 1998, net assets held
for sale relate to EPL. For 1999, 2000 and 2001, net liabilities of
discontinued operations relate to FRD. We completed the divestiture
of FRD on July 10, 2002.
(i) A negative working capital position is not unusual for a
restaurant operating company. The decrease in the working
capital deficit from December 31, 1997 to December 30, 1998 is
attributable primarily to an increase in cash and cash
equivalents from the sales of FEI and Quincy's. The increase in
the working capital deficit from December 30, 1998 to December 29,
1999 is attributable primarily to the reclassification of certain
mortgage notes to current liabilities and a reduction in cash and
cash equivalents related to acquisitions of restaurants, the
retirement of a portion of senior notes and expenditures related to
Denny's reimaging program. The decrease in working capital deficit
from December 29, 1999 to December 27, 2000 is attributable
primarily to the increase in Denny's refranchising activity in
2000. The decrease in the working capital from December 27, 2002
to December 26, 2001 is primarily related to the use of cash on
hand and borrowings under the revolving credit facility to satisfy
current liabilities, the reduction of capital lease
obligations and the reduction of company owned units from
refranchising activity and store closures.
7
(j) Reflects the reclassification of $1,496.7 million of long-term debt
to liabilities subject to compromise in accordance with SOP 90-7 as a
result of the Chapter 11 filing.
(k) We define "EBITDA" as operating income (loss) before depreciation,
amortization and charges for impairment and restructuring and exit
costs as follows:
Predecessor Company Successor Company(a)
------------------------ ---------------------------------------------------------
Fiscal Year One Week Fifty-One Fiscal Year Ended
Ended Ended Weeks Ended -----------------------------------------
December 31, January 7, December 30, December 29, December 27, December 26,
1997 1998 1998 1999 2000 2001
------------ ---------- ------------ ------------ ------------- ------------
(In millions)
Operating income
(loss) $ 78.2 $ 8.7 $ (51.2) $ (195.9) $ (0.3) $ (19.7)
Total amortization
and depreciation 58.2 1.0 191.2 219.8 153.6 124.3
Total impairment
and restructuring charges
and exit costs - - - 136.5 19.0 30.5
------------ ---------- ------------ ------------ ------------- ------------
EBITDA as defined $ 136.4 $ 9.7 $ 140.0 $ 160.4 $ 172.3 $135.1
=========== ========== ============ ============= ============= ============
Successor Company(a)
-----------------------------
Three Quarters Ended
-----------------------------
September 26, September 25,
2001 2002
------------- -------------
(In millions)
Operating income
(loss) $ (0.8) $ 47.2
Total amortization
and depreciation 92.0 62.3
Total impairment
and restructuring charges
and exit costs 16.9 4.0
------------- -------------
EBITDA as defined $ 108.1 $ 113.5
============= =============
We believe that EBITDA as defined is a key internal measure used to
evaluate the amount of cash flow available for debt repayment and
funding of additional investments. EBITDA as defined is not a measure
defined by accounting principles generally accepted in the United
States of America and should not be considered as an alternative to
net income or cash flow data prepared in accordance with accounting
principles generally accepted in the United States of America. Our
measure of EBITDA as defined may not be comparable to similarly
titled measures reported by other companies, and although the
definition of EBITDA in our revolving credit facility differs
somewhat from the definition of "EBITDA as defined," the amount of
our EBITDA as defined has been the same as that calculated under the
revolving credit facility since our emergence from bankruptcy in
January 1998.
(l) Net cash flows (used in) provided by investing activities include net
proceeds of $460.4 million from the disposition of FEI and Quincy's
in the fifty-one weeks ended December 31, 1998 and net proceeds of
$109.4 million from the sale of EPL in 1999. For 2000, net cash flows
from investing activities include $158.7 million of proceeds from the
maturity of investments securing our in-substance defeased debt (see
(m) below). For fiscal year 2001, net cash flows used in investing
activities include $53.3 million of advances to discontinued
operations. For the three quarters ended September 25, 2002, net cash
flows from investing activities include $39.4 million of receipts
from discontinued operations resulting primarily from the divestiture
of FRD on July 10, 2002.
(m) Net cash flows (used in) provided by financing activities for 2000
include the repayment of the $160.0 million principal amount of our
mortgage notes and the repayment of the $153.3 million principal
amount of our in-substance defeased debt through the use of the
proceeds described in (l) above. For fiscal year 2001, net cash flows
provided by financing activities includes borrowings of $58.7 million
under our revolving credit facility.
8
(n) We adopted Statement of Financial Accounting Standard No. 142, or
SFAS 142, "Goodwill and Other Intangible Assets," at the beginning
of fiscal year 2002, and as a result we are no longer amortizing
reorganization value, goodwill and trade names. During the first
quarter of 2002, we completed our testing of intangible assets
with definite lives and our assessment of impairment of goodwill
and other intangible assets with indefinite lives. We performed an
impairment test and determined that none of the recorded goodwill
or other intangible assets with indefinite lives was impaired.
In accordance with SFAS 142, goodwill and other intangible assets
with indefinite lives will be tested for impairment at least
annually, and more frequently if circumstances indicate that they
may be impaired. We anticipate performing our annual impairment
test during the fourth quarter of each fiscal year. The following
table reflects consolidatednoperating results as though we adopted
SFAS 142 as the beginning of fiscal year 1997:
Predecessor Company Successor Company(a)
------------------------- ----------------------------------------------------------
Fiscal Year One Week Fifty-One Fiscal Year Ended
Ended Ended Weeks Ended ------------------------------------------
December 31, January 7, December 30, December 29, December 27, December 26,
1997 1998 1998 1999 2000 2001
------------ ---------- ------------ ------------ ------------ ------------
(In millions)
Reported net
income (loss) $ (148.6) $ 1,394.6 $ (181.4) $ (381.9) $ (98.0) $ (88.5)
Add back amortization
of reorganization
value -- -- 89.2 88.9 42.1 28.7
Add back goodwill
amortization -- -- 0.2 1.0 1.4 1.6
Add back trade
name amortization -- -- 1.1 1.2 1.2 1.2
------------ ---------- ------------ ------------ ------------ ------------
Adjusted net
income (loss) $ (148.6) $ 1,394.6 $ (90.9) $ (290.8) $ (53.3) $ (57.0)
============ ========== ============ =========== ============ ============
Reported basic
income (loss) per
share $ (3.50) $ 32.87 $ (4.53) $ (9.54) $ (2.45) $ (2.21)
Add back amortization
of reorganization
value -- -- 2.23 2.22 1.05 0.71
Add back goodwill
amortization -- -- 0.01 0.02 0.04 0.04
Add back trade name
amortization -- -- 0.03 0.03 0.03 0.03
------------ ---------- ------------ ------------ ----------- ------------
Adjusted basic
income (loss) per
share $ (3.50) $ 32.87 $ (2.26) $ (7.27) $ (1.33) $ (1.43)
============ ========== ============ ============ =========== ============
Reported diluted
income (loss) per
share $ (3.50) $ 25.30 $ (4.53) $ (9.54) $ (2.45) $ (2.21)
Add back amortization
of reorganization
value -- -- 2.23 2.22 1.05 0.71
Add back goodwill
amortization -- -- 0.01 0.02 0.04 0.04
Add back trade name
amortization -- -- 0.03 0.03 0.03 0.03
------------ ---------- ------------ ------------ ----------- ------------
Adjusted diluted
income (loss) per
share $ (3.50) $ 25.30 $ (2.26) $ (7.27) $ (1.33) $ (1.43)
============ ========== ============ ============ =========== ============
Successor Company(a)
----------------------------
Three Quarters Ended
----------------------------
September 26, September 27,
2001 2002
------------- -------------
(in millions)
Reported net
income (loss) $ (49.0) $ 67.7
Add back amortization
of reorganization
value 21.8 --
Add back goodwill
amortization 1.2 --
Add back trade
name amortization 0.9 --
------------- -------------
Adjusted net
income (loss) $ (25.1) $ 67.7
============= =============
Reported basic
income (loss) per
share $ (1.22) $ 1.68
Add back amortization
of reorganization
value 0.54 --
Add back goodwill
amortization 0.03 --
Add back trade name
amortization 0.02 --
------------- -------------
Adjusted basic
income (loss) per
share $ (0.63) $ 1.68
============= =============
Reported diluted
income (loss) per
share $ (1.22) $ 1.67
Add back amortization
of reorganization
value 0.54 --
Add back goodwill
amortization 0.03 --
Add back trade name
amortization 0.02 --
------------- -------------
Adjusted diluted
income (loss) per
share $ (0.63) $ 1.67
============= =============
9
RISK FACTORS
You should read and carefully consider the risks described in this
section, as well as the other information contained in this prospectus, before
making a decision to tender your old notes in exchange for new notes in the
exchange offer.
Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our operations, including
our ability to perform our obligations under the old notes and the new notes.
We have now and will continue to have a significant amount of
indebtedness. As of September 25, 2002, we had total indebtedness of
approximately $606.1 million, and a shareholders' deficit of $271.8 million.
Our substantial indebtedness could have important consequences to you.
For example, it could:
o make it more difficult for us to satisfy our obligations with
respect to the old notes and the new notes;
o require us to continue to dedicate a substantial portion of our
cash flow from operations to payments on our indebtedness, which
would reduce the availability of our cash flow to fund future
working capital, capital expenditures, acquisitions and other
general corporate purposes;
o increase our vulnerability to general adverse economic and
industry conditions;
o limit our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate;
o restrict us from making strategic acquisitions or pursuing
business opportunities;
o place us at a competitive disadvantage compared to our
competitors that have relatively less indebtedness; and
o limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds. Failing to comply with those covenants could
result in an event of default which, if not cured or waived, could
have a material adverse effect on our business, financial
condition and results of operations.
Despite current indebtedness levels, we may still incur substantially more
indebtedness, including secured indebtedness. Incurring more indebtedness could
intensify the risks described above.
Subject to the restrictions in our revolving credit facility, the
indenture governing the notes and the indenture governing Denny's Corporation's
11 1/4% senior notes due 2008, or the 11 1/4% notes, we may incur significant
additional indebtedness. Although the terms of the revolving credit facility,
the indenture governing the notes and the indenture governing the 11 1/4% notes
contain restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of qualifications and exceptions, and
additional indebtedness incurred in compliance with these restrictions could be
substantial. If new debt is added to our current debt levels, the related risks
that we now face could intensify. As of September 25, 2002, we had $40.0 million
of advances and $52.1 million of letters of credit outstanding under our prior
revolving credit facility, leaving $63.2 million of additional permitted
borrowings available under that facility. As of December 16, 2002, we refinanced
our prior credit facility and entered into a new $125 million credit facility
that expires December 20, 2004. As of December 16, 2002, we had $43.9 million of
advances and $48.8 million of letters of credit outstanding under our revolving
credit facility, leaving $32.3 million of additional permitted borrowings
thereunder.
Your right to receive payment on the notes will be effectively subordinate to
our obligations under the revolving credit facility and structurally subordinate
to the debt of our subsidiaries.
Our revolving credit facility is secured by a first priority security
interest on the majority of our assets, including the capital stock of our
subsidiaries. Any borrowings under our revolving credit facility or other
secured indebtedness would be
10
effectively senior to the notes to the extent of the security. In the event of
our liquidation or insolvency, or if any of our secured indebtedness is
accelerated, the secured assets will be first applied to repay our obligations
under our secured indebtedness in full and then to repay our obligations under
our unsecured indebtedness, including under the notes. Accordingly, there may
not be sufficient assets remaining to pay amounts due on any or all of the
notes then outstanding. In addition, borrowings of our subsidiaries, including
Denny's, Inc., whether secured or not and including capital lease obligations
and trade payables, will be structurally senior to the notes.
As holding companies, Denny's Corporation and Denny's Holdings depend on
upstream payments from their operating subsidiaries.
Denny's Corporation is a holding company that currently conducts its
operations through consolidated subsidiaries, including Denny's Holdings.
Accordingly, Denny's Corporation is dependent upon dividends, loans and other
intercompany transfers from its subsidiaries to meet its debt service and other
obligations. These transfers are subject to contractual restrictions and are
contingent upon the earnings of its subsidiaries. Similarly, Denny's Holdings is
itself a holding company, which conducts its operations through consolidated
subsidiaries. Dividends, loans and other intercompany transfers from
subsidiaries to Denny's Holdings are also subject to contractual restrictions
and are contingent upon the earnings of its subsidiaries. We cannot assure you
that the operating results of our subsidiaries will be sufficient to enable us
to make payments on the notes.
Our ability to generate cash depends on many factors beyond our control, and we
may not be able to generate the cash required to service or repay our
indebtedness.
Our ability to pay or refinance our indebtedness, including the notes,
will depend upon our future operating performance, which will be affected by
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control. Our historical financial results have been,
and our future financial results are expected to be, subject to substantial
fluctuations. We cannot assure you that our business will generate sufficient
cash flow from operations, that currently anticipated revenue growth and
operating improvements will be realized or that future borrowings will be
available to us under our revolving credit facility or any refinancing thereof
in amounts sufficient to enable us to service or reduce our indebtedness,
including the notes, or to fund our other liquidity needs. Our ability to
maintain or increase operating cash flow will depend upon:
o consumer tastes;
o the success of our marketing initiatives and other efforts by us
to increase customer traffic in our restaurants; and
o prevailing economic conditions and other matters, many of which
are beyond our control.
If we are unable to meet our debt service obligations or fund other
liquidity needs, we may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity or seek additional equity capital. We
cannot assure you that we will be able to pay or refinance our indebtedness or
obtain additional equity capital on commercially reasonable terms, if at all.
Restrictive covenants in our debt instruments restrict or prohibit our ability
to engage in or enter into a variety of transactions, which could adversely
affect us.
The indenture governing the notes contains various covenants that
limit, among other things, our ability to:
o incur additional indebtedness;
o pay dividends or make distributions or certain other restricted
payments;
o make certain investments;
o create dividend or other payment restrictions affecting
restricted subsidiaries;
11
o issue or sell capital stock of restricted subsidiaries;
o guarantee indebtedness;
o enter into transactions with stockholders or affiliates;
o create liens;
o sell assets and use the proceeds thereof;
o engage in sale-leaseback transactions; and
o enter into certain mergers and consolidations.
Our revolving credit facility and the indenture governing our 11 1/4%
notes each contain similar and additional restrictive covenants, including
financial maintenance requirements. These covenants could have an adverse effect
on our business by limiting our ability to take advantage of financing, merger
and acquisition or other corporate opportunities and to fund our operations.
A breach of a covenant in our debt instruments could cause acceleration of a
significant portion of our outstanding indebtedness.
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a default under
that instrument and, due to cross-default and cross-acceleration provisions,
could result in a default under our other debt instruments. In addition, our
revolving credit facility requires us to maintain certain financial ratios. Our
ability to comply with these covenants may be affected by events beyond our
control, and we cannot assure you that we will be able to comply with these
covenants. Upon the occurrence of an event of default under the revolving credit
facility or any other debt instrument, the lenders could elect to declare all
amounts outstanding to be immediately due and payable and terminate all
commitments to extend further credit. If we were unable to repay those amounts,
the lenders could proceed against the collateral granted to them, if any, to
secure the indebtedness. If the lenders under our current or future indebtedness
accelerate the payment of the indebtedness, we cannot assure you that our assets
would be sufficient to repay in full our outstanding indebtedness, including the
notes.
We may be unable to repurchase the notes and/or 11 1/4% notes upon a change of
control.
In the event of a "change of control" (as defined in the indenture for
the notes), we must offer to purchase the notes at a purchase price equal to
101% of the principal amount, plus accrued and unpaid interest to the date of
repurchase. See "The New Notes - Change of Control." Denny's Corporation has a
similar obligation under the indenture governing the 11 1/4% notes. In the event
that we are required to make such an offer, there can be no assurance that we
would have sufficient funds available to purchase any notes or 11 1/4% notes,
and we may be required to refinance the notes and/or the 11 1/4% notes. There
can be no assurance that we would be able to accomplish a refinancing or, if a
refinancing were to occur, that it would be accomplished on commercially
reasonable terms.
Our revolving credit facility prohibits us from repurchasing any notes
or 11 1/4% notes, except under limited circumstances. Our revolving credit
facility also provides that certain change of control events would constitute a
default. In the event a change of control occurs at a time when we are
prohibited from purchasing the notes and/or the 11 1/4% notes, we could seek the
consent of the lenders under the revolving credit facility to purchase the notes
and/or the 11 1/4% notes or we could attempt to refinance the revolving credit
facility. If we did not obtain such a consent or were unable to refinance the
revolving credit facility, we would remain prohibited from purchasing the notes
and/or the 11 1/4% notes. In this case, our failure to purchase would constitute
an event of default under the indentures. The provisions relating to a change of
control included in the indentures may also increase the difficulty of a
potential acquirer from obtaining control of us.
12
Insolvency proceedings involving Denny's Corporation or Denny's Holdings may
hinder the receipt of payment on the notes.
An investment in the notes involves insolvency and bankruptcy
considerations that investors should carefully consider. If Denny's Corporation
or Denny's Holdings becomes a debtor subject to insolvency proceedings under the
United States Bankruptcy Code, such circumstances are likely to result in delays
in the payment of the notes and may result in our inability to make payment of
all or a portion of the amounts due under the notes. Provisions of the United
States Bankruptcy Code or general principles of equity that could result in the
impairment of your rights include the automatic stay, avoidance of transfers by
a trustee or debtor-in-possession, substantive consolidation, limitations on the
collectibility of unmatured interest or attorneys' fees, and forced
restructuring of the notes.
If Denny's Corporation or Denny's Holdings becomes a debtor in a case
under the United States Bankruptcy Code, claims could be made by creditors that
the assets and liabilities of any one of those entities should be substantively
consolidated with those of any other of those entities. If such claims are
successful, the effect could impair the ability of Denny's Corporation and
Denny's Holdings to repay the notes.
Substantive consolidation is an exception rather than the rule,
especially if one of the companies involved is not in bankruptcy. If Denny's
Corporation or Denny's Holdings becomes a debtor in a case under the United
States Bankruptcy Code, the equitable doctrine of substantive consolidation
could permit a bankruptcy court to disregard the corporate separateness of those
entities and to consolidate and pool their respective assets and liabilities as
though they were held and incurred by one entity. If a court were to order the
substantive consolidation of the assets and liabilities of Denny's Corporation
and Denny's Holdings, the notes would lose their structural seniority over the
11 1/4% notes issued by Denny's Corporation, of which $379.0 million in
aggregate principle amount is currently outstanding. In such event, the holders
of the notes would have the same priority as the holders of the 11 1/4% notes
with respect to the assets of the consolidated entities. The assets of the
substantively consolidated entities may not be sufficient to pay amounts then
due on the notes.
Risks Related to the Exchange Offer
If you fail to properly exchange your old notes for new notes, you will continue
to hold old notes subject to transfer restrictions, and the liquidity of the
trading market for any untendered old notes may be substantially limited.
We will only issue new notes in exchange for old notes that you timely
and properly tender. You should allow sufficient time to ensure timely delivery
of the old notes, and you should carefully follow the instructions on how to
tender your old notes set forth under "The Exchange Offer -- Procedures for
Tendering" and in the letter of transmittal that accompanies this prospectus.
Neither we nor the exchange agent are required to notify you of any defects or
irregularities relating to your tender of old notes.
If you do not exchange your old notes for new notes in this exchange
offer, the old notes you hold will continue to be subject to the existing
transfer restrictions. In general, you may not offer or sell the old notes
except under an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. If you continue to hold any
old notes after this exchange offer is completed, you will not have any further
registration rights and you may have trouble selling them because of these
restrictions on transfer. We expect that the liquidity of the market for the old
notes after completion of this exchange offer will be substantially limited.
We expect that there will be only a limited trading market for the new notes, if
any, and you may be unable to sell the new notes or to sell them at a price you
deem sufficient.
Although the new notes will be registered, we do not intend to list the
new notes on any exchange, and we expect that there will be only a limited
trading market for the new notes, if any. We cannot give you any assurance as
to:
o the liquidity of any trading market that currently exists or that
may develop;
o the ability of holders to sell their new notes; or
o the price at which holders would be able to sell their new notes.
13
Even if a more active trading market develops, the new notes may trade
at higher or lower prices than their principal amount, depending on many
factors, including:
o prevailing interest rates;
o the number of holders of the new notes;
o the interest of securities dealers in making a market for the new
notes;
o the market for similar notes; and
o our financial performance.
Risks Related to Our Business
The restaurant business is highly competitive.
The restaurant business is highly competitive and the competition is
expected to increase. If we are unable to compete effectively, our business will
be adversely affected. The following are important aspects of competition:
o price;
o restaurant location;
o food quality;
o quality and speed of service;
o attractiveness and repair and maintenance of facilities; and
o the effectiveness of marketing and advertising programs.
Our restaurants compete with a wide variety of restaurants ranging from
national and regional restaurant chains to locally owned restaurants. Some of
these competitors have substantially greater financial resources than we do.
There is also active competition for advantageous commercial real estate sites
suitable for restaurants.
Food service businesses may be adversely affected by changes in consumer tastes,
economic conditions and demographic trends.
Food service businesses are often adversely affected by changes in:
o consumer tastes;
o national, regional and local economic conditions; and
o demographic trends.
The performance of individual restaurants may be adversely affected by
factors such as:
o traffic patterns;
o demographic considerations; and
o the type, number and location of competing restaurants.
14
Multi-unit food service chains such as ours can also be materially and
adversely affected by publicity resulting from:
o poor food quality;
o illness;
o injury; and
o other health concerns or operating issues.
Dependence on frequent deliveries of fresh produce and groceries
subjects food service businesses to the risk that shortages or interruptions in
supply caused by adverse weather or other conditions could adversely affect the
availability, quality and cost of ingredients. In addition, the food service
industry in general and our results of operations and financial condition in
particular also may be adversely affected by unfavorable trends or developments
such as:
o inflation;
o increased food costs;
o labor and employee benefits costs (including increases in hourly
wage and minimum unemployment tax rates);
o regional weather conditions; and
o the availability of experienced management and hourly employees.
The locations where we have restaurants may cease to be attractive as
demographic patterns change.
The success of our owned and franchised restaurants is significantly
influenced by location. Current locations may not continue to be attractive as
demographic patterns change. It is possible that the neighborhood or economic
conditions where our restaurants are located could decline in the future,
potentially resulting in reduced sales in those locations.
Franchising problems could adversely affect our royalty income.
We have refranchised, and may continue to refranchise, a significant
portion of our company-owned restaurants. This franchising initiative may
ultimately not be successful due to a lack of franchisee interest or changing
economic conditions. In addition, even if our franchising initiative is
successful, there can be no assurance that this decision will prove advantageous
to us from an operational standpoint. The interests of franchisees might
sometimes conflict with our interests. For example, whereas franchisees are
concerned with their individual business strategies and objectives, we are
responsible for ensuring the success of the entire Denny's chain.
Franchising also presents certain financial risks for us. The family
dining industry is intensely competitive, and some of our franchisees are and
will be highly leveraged. Some of our current franchisees have recently
experienced financial difficulties. Financial problems of our franchisees
adversely affect our royalty income and the value of the Denny's brand.
Numerous government regulations impact our business.
We and our franchisees are subject to federal, state and local laws and
regulations governing, among other things:
o health;
o sanitation;
o environmental matters;
15
o safety;
o the sale of alcoholic beverages; and
o hiring and employment practices, including minimum wage laws.
Restaurant operations also are subject to federal and state laws that
prohibit discrimination and laws regulating the design and operation of
facilities, such as the American With Disabilities Act of 1990. The operation of
our franchisee system also is subject to regulations enacted by a number of
states and rules promulgated by the Federal Trade Commission. If we or our
franchisees fail to comply with these laws and regulations, we could be
subjected to closure, fines, penalties, and litigation, which may be costly. We
cannot predict the effect on our operations, particularly on our relationship
with franchisees, caused by the future enactment of additional legislation
regulating the franchise relationship.
Negative publicity generated by incidents at a few restaurants can adversely
affect the operating results of our entire chain and the Denny's brand.
Food safety concerns, criminal activity, alleged discrimination or
other operating issues stemming from one restaurant or a limited number of
restaurants do not just impact that particular restaurant or a limited number of
restaurants. Rather, our entire chain of restaurants is at risk from negative
publicity generated by an incident at a single restaurant. This negative
publicity can adversely affect the operating results of our entire chain and the
Denny's brand.
16
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
note exchange and registration rights agreements that we entered into when we
issued the old notes. We will not receive any cash proceeds from this exchange
offer. In exchange for old notes tendered pursuant to this exchange offer, you
will receive new notes in like principal amount. The old notes that are
surrendered in exchange for the new notes will be retired and cancelled by us
upon receipt and cannot be reissued. Accordingly, the issuance of the new notes
under this exchange offer will not result in any change in our outstanding debt.
THE EXCHANGE OFFER
Background And Purpose Of The Exchange Offer
Up to $50 million in aggregate principal amount of new notes will be
exchanged in this exchange offer for up to $50.0 million in aggregate principal
amount of old notes. We issued the old notes without compliance with the
registration requirements of the Securities Act in reliance upon an exemption
from those registration requirements. In connection with the issuance of the old
notes, we entered into note exchange and registration rights agreements with the
holders of the old notes pursuant to which we agreed to file with the SEC, a
registration statement under the Securities Act with respect to the issuance of
new registered notes in an exchange offer. We have filed the form of the note
exchange and registration rights agreement as an exhibit to the registration
statement of which this prospectus is a part.
Based on interpretations by the staff of the SEC, as set forth in
no-action letters issued to third parties, we believe that the new notes issued
pursuant to this exchange offer may be offered for resale, resold or otherwise
transferred by a holder under U.S. federal securities laws without compliance
with the registration and prospectus deliver requirements of the Securities Act,
provided that:
o the holder is acquiring the new notes in the ordinary course of
business for investment purposes;
o the holder is not engaged in, does not intend to engage in and
has no arrangement or understanding with any person to
participate in a distribution of the new notes (within the
meaning of the Securities Act);
o the holder is not a broker-dealer who purchased the old notes
directly from us for resale pursuant to Rule 144A or any other
available exemption under the Securities Act; and
o the holder is not an affiliate of ours within the meaning of Rule
405 under the Securities Act.
If you wish to participate in this exchange offer, you must represent
to us in the letter of transmittal that the conditions above have been met.
However, we do not intend to request the SEC to consider, and the SEC has not
considered, this exchange offer in the context of a no-action letter, and we
cannot assure you that the staff of the SEC would make a similar determination
with respect to this exchange offer. Therefore, if you transfer any new note
delivered to you in the exchange offer without delivering a prospectus meeting
the requirements of the Securities Act or without an exemption from registration
of your new notes from such requirements, you may incur liability under the
Securities Act. We do not assume this liability or indemnify you against this
liability, but we do not believe this liability would exist if the above
conditions are met.
If any holder is an affiliate of ours, or is engaged in or intends to
engage in or has any arrangement or understanding with respect to the
distribution of the new notes, that holder may not participate in this exchange
offer. In addition, this exchange offer is not being made to, nor will we accept
tenders for exchange from, holders of old notes in any jurisdiction in which the
exchange offer or the acceptance of it would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Terms Of The Exchange Offer
Upon the terms and subject to the conditions of this exchange offer, we
will accept any and all old notes validly tendered prior to 5:00 p.m., New York
time, on the expiration date. We will issue, promptly following acceptance of
validly tendered old notes, up to $50 million in aggregate principal amount of
new notes for a like principal amount of old notes
17
tendered and accepted in this exchange offer. Holders may tender some or all of
their old notes in connection with this exchange offer, but only in $1,000
increments of principal amount.
The terms of the new notes are identical in all material respects to
the terms of the old notes, except that the new notes have been registered under
the Securities Act and will be issued free from any transfer restrictions or any
covenant regarding registration. The new notes will evidence the same debt as
the old notes and will be issued under the same indenture and be entitled to the
same benefits under that indenture as the old notes being exchanged. As of the
date of this prospectus, $50.0 million in aggregate principal amount of
unregistered old notes is outstanding.
The new notes initially will be issued, upon consummation of the
exchange offer, in the form of physical, certificated securities. Immediately
thereafter, at the election of a holder and by notice to U.S. Bank National
Association, as transfer agent, and The Depository Trust Company, or DTC, the
new notes may be re-issued as part of the already outstanding global note issued
under the indenture for the already outstanding $70.4 million of 12 3/4% senior
notes due 2007, which global note is registered in the name of DTC or its
nominee. Thereafter, each beneficial owner's interest in the global note will be
transferable in book-entry form through DTC.
Holders of old notes do not have any appraisal or dissenters' rights in
connection with this exchange offer. Old notes that are tendered but not
accepted in connection with this exchange offer will remain outstanding and be
entitled to the benefits of the indenture under which they were issued. However,
the registration rights under the note exchange and registration rights
agreement will terminate upon completion of this exchange offer, and holders of
the old notes will not be entitled to any further registration rights under the
note exchange and registration rights agreement.
We will have accepted validly tendered old notes if and when we have
given oral or written notice to the exchange agent. The exchange agent will act
as agent for the tendering holders for the purpose of receiving the new notes
from us. If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, we will return the old notes, without expense, to the
tendering holder as promptly as possible after the expiration date.
Holders who tender old notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes on the exchange of old notes in connection with this
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with this exchange offer. See
"--Fees and Expenses."
Interest on the New Notes
Interest on the new notes will accrue at a rate of 12 3/4% per annum from
the most recent date on which interest on the old notes has been paid, or if no
interest has been paid, from the date provided in the indenture governing the
notes.
Expiration Date; Extensions; Termination; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on
_______, 2003, subject to extension by us by notice to the exchange agent as
provided in this prospectus. We reserve the right to extend the exchange offer
in our reasonable discretion, in which event the expiration date will be the
latest time and date to which the exchange offer is extended. In order to extend
the expiration date, we will notify the exchange agent of any extension by oral
or written notice and make a public announcement by making a timely release
through an appropriate news agency.
In addition, we reserve the right, in our discretion:
o to delay acceptance of any old notes tendered or to terminate the
exchange offer and not accept for exchange any old notes by giving oral
or written notice of such extension or termination to the exchange
agent; and
o to amend the terms of the exchange offer in any manner.
Any such delay, termination or amendment will be followed as promptly as
practicable by a public announcement. If the exchange offer is amended in a
manner determined by us to constitute a material change, we will promptly
disclose
18
the amendment in a manner reasonably calculated to inform the holders of old
notes of the amendment and will extend the exchange offer for the minimum
period of time required by applicable law (which in certain instances could be
five or ten business days from the date of such amendment, if the exchange offer
would otherwise expire during this five or ten business day period). The rights
reserved by us in this paragraph are in addition to our rights set forth below
under the caption "-- Conditions of the Exchange Offer."
Conditions of the Exchange Offer
Notwithstanding any other provision of the exchange offer, we will not be
required to accept for exchange any old notes or issue any new notes and may
terminate the exchange offer if, at any time prior to the expiration of the
exchange offer, we determine, in our reasonable judgment, that any of the
following conditions has not been satisfied prior to or concurrently with the
expiration of the exchange offer:
o no action or proceeding has been instituted or threatened or is
pending in any court or by or before any governmental agency or
instrumentality, and there has been proposed, adopted or enacted,
no law, statute, rule or regulation with respect to the exchange
offer or us that, in our reasonable judgment, has or may have a
material adverse effect on our business, financial condition,
operations or prospects or that, in our reasonable judgment,
impairs the benefits of the exchange offer to us or our ability
to proceed with the exchange offer;
o there shall not have occurred or be likely to occur any event
that, in our reasonable judgment, has or may have a material
adverse effect on our business, financial condition,
operations or profits or impair the benefits of the exchange
offer to us or our ability to proceed with the exchange offer;
and
o there shall not have occurred:
(1) any general suspension of or general limitation on
prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market;
(2) any limitation by a governmental agency or authority
that may adversely affect our ability to complete the
transactions contemplated by the exchange offer;
(3) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by any governmental agency or authority that
adversely affects the extension of credit; or
(4) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing
existing at the time of the commencement of the exchange offer,
a material acceleration or worsening thereof.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to such conditions. These conditions
may be waived or amended by us in whole or in part at any time and from time to
time prior to expiration of the exchange offer in our reasonable discretion. If
we waive or amend the foregoing conditions, we will, if required by applicable
law, extend the exchange offer for the minimum period of time required by
applicable law (which in certain instances could be five or ten business days)
commencing on the date that we first give notice, by public announcement or
otherwise, of such waiver or amendment, if the exchange offer would otherwise
expire within this time period. Any determination by us concerning the events
described will be final and binding upon all parties.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for any such old notes, if at such time any
stop order shall be threatened or in effect with respect to the registration
statement of which this prospectus forms a part.
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Consequences of Failure to Exchange Old Notes
In the event the exchange offer is completed, we will not be required, and
do not intend, to register the remaining old notes for resale under the
Securities Act or otherwise provide registration rights to the holders thereof.
Remaining old notes will continue to be subject to the following restrictions on
transfer:
o the remaining old notes may be resold only if registered
pursuant to the Securities Act, if any exemption from
registration is available, or if neither registration nor an
exemption is required by law; and
o the remaining old notes will bear a legend restricting transfer
in the absence of registration or an exemption.
Procedures for Tendering
The tender of old notes by a holder pursuant to the procedures set forth
below, upon our acceptance of such tender, will constitute an agreement between
such holder on the one hand and us on the other in accordance with the terms and
subject to the conditions set forth in this prospectus and in the associated
letter of transmittal.
A holder who wishes to tender old notes for exchange pursuant to the
exchange offer must, on or prior to the expiration date, deliver the
certificates for such old notes in proper form for transfer.
The registered holder must also deliver a properly completed letter of
transmittal (or a facsimile thereof), duly executed by the registered holder
with any required signature guarantee(s) and any other documents required
thereby, prior to the expiration date of the exchange offer in order for the
tender of old notes to be valid and complete.
YOU SHOULD SEND LETTERS OF TRANSMITTAL AND OLD NOTES TO THE EXCHANGE AGENT
AND NOT TO DENNY'S CORPORATION, DENNY'S HOLDINGS OR THE TRUSTEE UNDER THE
INDENTURE.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes tendered pursuant thereto
are tendered either: o by a registered holder of old notes who has not completed
the boxes entitled "Special Issuance
Instructions" and "Special Delivery Instructions" on the letter of
transmittal; or o for the account of an eligible guarantor institution.
In the event that signatures on a letter of transmittal are required to be
guaranteed, such guarantee must be by a firm that is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
in the United States, or an eligible guarantor institution within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended.
Holders of old notes whose certificates for such old notes are not
immediately available or who cannot deliver all required documents to the
exchange agent on or prior to the expiration date may tender their old notes
according to the guaranteed delivery procedures set forth below under "-
Guaranteed Delivery."
The method of delivery of the letter of transmittal, old notes and all
other required documents is at the election and risk of the tendering holders,
and the delivery will be deemed made only when actually received or confirmed by
the exchange agent. If the letter of transmittal, old notes or other required
documents are sent by mail, it is suggested that the mailing be by registered
mail, properly insured, with return receipt requested and made sufficiently in
advance of the expiration date to permit delivery to the exchange agent on or
prior to the expiration date.
Generally, only a registered holder of old notes may tender old notes in
the exchange offer. If the letter of transmittal is signed by a person other
than the registered holder of the old notes, such old notes must be endorsed or
accompanied by
20
appropriate bond powers, signed exactly as the name or names of the registered
holder (or registered holders) appear on the old notes. If the letter of
transmittal or any old notes or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing and, unless waived by us, provide evidence satisfactory
to us of their authority to so act.
Any beneficial owner whose old notes are registered in the name of its
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender old notes in the exchange offer should contact such registered holder
promptly and instruct such registered holder to tender on its behalf by
completing the form of instructions (including the section regarding eligibility
to participate in the exchange offer) provided by its broker, bank or other
nominee. If a beneficial owner wishes to tend on its own behalf, the beneficial
owner must, prior to completing and executing the letter of transmittal and
delivering its old notes, either make appropriate arrangements to register
ownership of the old notes in such holder's name or obtain a properly completed
bond power from the registered holder. Beneficial owners should be aware that
the transfer of record ownership may take considerable time.
Guaranteed Delivery
If a holder desires to tender old notes pursuant to the exchange offer and
the certificates for such old notes are not immediately available or time will
not permit all required documents to reach the exchange agent on or prior to the
expiration date, such old notes may nevertheless be tendered, provided that all
of the following guaranteed delivery procedures are complied with:
(1) such tenders are made by or through an eligible guarantor institution;
(2) prior to the expiration date, the exchange agent receives from an
eligible guarantor institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form accompanying
the letter of transmittal, setting forth the name and address of the
holder of the old notes and the amount of old notes tendered, stating
that the tender is being made thereby and guaranteeing that, within
three trading days of the New York Stock Exchange after the date of
execution of the Notice of Guaranteed Delivery, a properly completed
and duly executed letter of transmittal and the certificates for all
physically tendered old notes, in proper form for transfer, and any
other documents required by the letter of transmittal will be deposited
by the eligible guarantor institution with the exchange agent. The
Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the exchange agent and must include a guarantee
by an eligible guarantor institution in the form set forth in the
Notice of Guaranteed Delivery; and
(3) the certificates representing all tendered old notes, in proper form
for transfer, together with a properly completed and duly executed
letter of transmittal, with any required signature guarantees and any
other documents required by the letter of transmittal, are received by
the exchange agent within three trading days of the New York Stock
Exchange after the date of execution of the Notice of Guaranteed
Delivery.
Withdrawal of Tenders
Tenders of old notes pursuant to the exchange offer may be properly
withdrawn at any time on or prior to the expiration date. Thereafter, such
tenders may be withdrawn only if the exchange offer is terminated without any
old notes being accepted for exchange.
If you have tendered old notes, you may withdraw such old notes prior to
the expiration date by delivering a written notice of withdrawal and revocation,
subject to the limitations described in this prospectus. To be effective, a
written notice of withdrawal and revocation must be delivered by hand, overnight
courier, mail or telegraphic or facsimile transmission and must:
o be timely received by the exchange agent at its addresses set
forth on the back cover hereof on or prior to the expiration
date;
o specify the name of the person having tendered the old notes to
be withdrawn and the principal amount of such old notes to be
withdrawn;
21
o identify the old notes to be withdrawn (including the principal
amount of such old notes); and
o be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such old notes
were tendered (including any required signature guarantees).
If certificates representing old notes to be withdrawn have been delivered
or otherwise identified to the exchange agent, then the name of the registered
holder and the serial numbers of the particular certificate evidencing the old
notes to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution (except in the case of old notes tendered
by an eligible institution for which no signature guarantee will be required)
must also be so furnished to the exchange agent as aforesaid prior to the
physical release of the certificates for the withdrawn old notes. We reserve the
right to contest the validity of any withdrawal or revocation. A purported
withdrawal and revocation which is not received by the exchange agent in a
timely fashion will not be effective.
Any old notes properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the exchange offer and the holder will not
receive any consideration in the exchange offer. Withdrawn old notes may be
re-tendered by again following the appropriate procedures described in this
prospectus at any time on or prior to the expiration date.
Acceptance of Tenders; Compliance with Conditions of the Exchange Offer;
Delivery of New Notes
Upon the terms and subject to the conditions of the exchange offer, we will
accept for exchange all old notes validly tendered and not properly withdrawn on
or prior to the expiration date. The acceptance for exchange of old notes
validly tendered and not properly withdrawn and the delivery of new notes will
be made as promptly as practicable after the expiration date upon consummation
of the exchange offer. We expressly reserve the right to delay acceptance of any
of the old notes or to terminate the exchange offer and not accept for exchange
and payment any old notes not theretofore accepted if any of the conditions set
forth under the heading "- Conditions of the Exchange Offer" have not been
satisfied or waived. In all cases, the issuance of new notes in exchange for old
notes accepted for exchange pursuant to the exchange offer will be made only
after timely receipt by the exchange agent of old notes, together with a
properly completed and validly executed letter of transmittal (or a facsimile
thereof) with any required signature guarantees and any other documents required
thereby.
For purposes of the exchange offer, we shall be deemed to have accepted
validly tendered old notes when, as and if we give oral or written notice
thereof to the exchange agent. The exchange agent will act as agent for the
tendering holders of old notes for the purpose of receiving the new notes.
All questions as to the form of all documents and the validity, eligibility
(including the time of receipt and eligibility under applicable state securities
laws), acceptance and withdrawal of tendered old notes will be determined by us,
in our discretion, which determination shall be final and binding. We expressly
reserve the right to reject any and all tenders not in proper form and to
determine whether the acceptance of or exchange for such tenders would be
unlawful. We also reserve the right, subject to applicable laws, to waive or
amend any of the conditions to the exchange offer or to waive any defect or
irregularity in the tender of any of the old notes. None of Denny's Corporation,
Denny's Holdings, the exchange agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification. No tender of old notes
will be deemed to have been validly made until all defects and irregularities
with respect to such old notes have been cured or waived. Any old notes received
by the exchange agent that are not properly tendered and as to which
irregularities have not been cured or waived will be returned by the exchange
agent to the appropriate tendering holder as soon as practicable. Our
interpretation of the terms and conditions of the exchange offer (including the
letter of transmittal and the instructions thereto) will be final and binding on
all parties.
Lost or Missing Certificates
If you desire to tender old notes pursuant to the exchange offer, but your
old note has been mutilated, lost, stolen or destroyed, you should write to or
telephone the exchange agent at the telephone number or address listed on the
back cover page of this prospectus, concerning the procedures for obtaining
replacement certificates for such old notes, arranging for indemnification or
any other matter with regard to the tender.
22
Exchange Agent
U.S. Bank National Association has been appointed as exchange agent for the
exchange offer. Letters of transmittal, notices of guaranteed delivery and all
correspondence in connection with the exchange offer should be sent or delivered
by each holder of old notes or a beneficial owner's broker, dealer, commercial
bank, trust company or other nominee to the exchange agent at the address set
forth on the back cover page of prospectus and associated letter of transmittal.
We will pay the exchange agent reasonable and customary fees for its services
and will reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
Fees and Expenses
Except as described above, we will not make any payments to brokers,
dealers, or other persons soliciting acceptances of the exchange offer. We will,
however, pay the reasonable and customary fees and out-of-pocket expenses of the
exchange agent, the trustee and legal, accounting and other related fees and
expenses associated with the exchange offer. We will also pay the reasonable
expenses of holders in delivering their old notes to the exchange agent. We will
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of the
prospectus and related documents to the beneficial owners of the old notes and
in handling or forwarding tenders for exchange.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, new notes and/or substitute
old notes for principal amounts not exchanged are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the old notes, or if tendered old notes are registered in the name of
any person other than the person signing the letter of transmittal, or if a
transfer tax is imposed for any reason other than the exchange of old notes
pursuant to the exchange offer, the amount of any those transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted, the amount of such transfer taxes will be billed
directly to the tendering holder.
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DESCRIPTION OF INDEBTEDNESS
The following summary of the principal terms of our indebtedness does not
purport to be complete and is qualified in its entirety by reference to the
documents governing our indebtedness, including the definitions of certain terms
therein, copies of which are exhibits to the registration statement filed with
the SEC that contains this prospectus or the other documents incorporated by
reference into this prospectus. Whenever particular provisions of these
documents are referred to in this prospectus, such provisions are incorporated
by reference, and the statements are qualified in their entirety by such
reference.
The Revolving Credit Facility
As of December 16, 2002, our principal operating subsidiary, Denny's, Inc.
and its subsidiary Denny's Realty, Inc. entered into a revolving credit
facility, as borrowers, with JPMorgan Chase Bank and other lenders named
therein, which established a $125.0 million senior secured revolving credit
facility.
This facility is available for our working capital advances, letters of
credit (up to a $60.0 million sublimit) and general corporate purposes. The
revolving credit facility is guaranteed by Denny's Corporation and Denny's
Holdings and, subject to certain exceptions, by our subsidiaries that are not
borrowers under the revolving credit facility. The credit facility generally is
secured by liens on the stock of our direct and indirect subsidiaries, accounts
receivable, intellectual property and cash and cash accounts (along with
additional liens on our corporate headquarters in Spartanburg, South Carolina).
It is also secured by first-priority mortgages on 246 owned restaurant
properties. The revolving credit facility matures on December 20, 2004.
The revolving credit facility contains covenants customarily found in
credit agreements for leveraged financings that, among other things, place
limitations on:
o dividends on capital stock;
o redemptions and repurchases of capital stock;
o prepayments, redemptions and repurchases of debt (other than
loans under the credit agreement);
o liens and sale-leaseback transactions;
o loans and investments;
o incurrence of debt;
o capital expenditures;
o operating leases;
o mergers and acquisitions;
o asset sales;
o transactions with affiliates;
o changes in the business conducted by us and our subsidiaries;
and
o amendment of debt and other material agreements.
The revolving credit facility also contains covenants that require us, on a
consolidated basis, to meet certain financial ratios and tests described below:
24
Consolidated Total Debt Ratio. We are required not to permit the ratio of
(a) total debt outstanding on the last day of any fiscal quarter to (b) EBITDA
(as defined) of the borrowers and the guarantors on a consolidated basis for the
period of four consecutive fiscal quarters then ended, to be more than 6.25:1.00
at March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003;
5.90:1.00 at March 31, 2004 and June 30, 2004; and 5.75:1.00 at September 30,
2004. These ratios will be adjusted to reflect the reduction in Consolidated
Total Debt (net of expenses and taxes) resulting from our closing of certain
senior note exchanges permitted by the revolving credit facility.
Consolidated Senior Secured Debt Ratio. We are required not to permit the
ratio of (a) senior secured debt outstanding on the last day of any fiscal
quarter to (b) EBITDA of the borrowers and the guarantors on a consolidated
basis for the period of four consecutive fiscal quarters then ended, to be more
than 1.50:1.00 from March 31, 2003 and thereafter.
Consolidated Fixed Charge Coverage Ratio. We are required not to permit the
ratio, determined on the last day of each fiscal quarter for the period of four
consecutive fiscal quarters then ended, of (a) the sum of (1) EBITDA of the
borrowers and the guarantors on a consolidated basis and (2) Consolidated Lease
Expense to (b) the sum of (1) Consolidated Cash Interest Expense (as defined)
and (2) Consolidated Lease Expense (as defined), to be less than 1.25:1.00 on
March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003;
1.30:1.00 on March 31, 2004 and June 30, 2004; and 1.35:1.00 on September 30,
2004.
Consolidated Capital Expenditures; Acquisitions. We are required not to
permit the borrowers and the guarantors on a consolidated basis to incur
Consolidated Capital Expenditures (as defined) or make acquisition of properties
or related assets in excess of $45 million in the aggregate for each of our 2002
and 2003 fiscal years or in excess of $60 million in the aggregate for our 2004
fiscal year, subject in each case to a limited carryover provision providing for
our ability to carryover a portion of any unused amounts from the immediately
preceding fiscal year. Notwithstanding the above, however, not more than $45
million (plus any permitted carryover amount from our 2003 fiscal year) of
Consolidated Capital Expenditures and acquisitions of properties and related
assets during our 2004 fiscal year may be funded from sources other than
permitted indebtedness under the revolving credit facility.
Minimum Consolidated EBITDA. We are required not to permit the EBITDA of
the borrowers and the guarantors on a consolidated basis for the period of four
consecutive fiscal quarters then ended, to be less than $105 million on March
31, 2003, June 30, 2003 and September 30, 2003; $110 million on December 31,
2003, March 31, 2004 and June 30, 2004; and $115 million on September 30, 2004.
Events of default under the revolving credit facility include (1) a default
in the payment of principal amounts due thereunder, (2) a default in the payment
of interest and the continuance thereof for three business days, (3) a default
in the observance or performance of financial and other covenants, including,
but not limited, to those described or referred to above (and, in the case of
certain non-financial covenants, the continuance thereof for 10 days), (4) our
failure to pay, when due or payable, principal or interest on our other
indebtedness having a principal amount in excess of $10.0 million or our failure
to observe other terms, covenants, conditions or agreements under such
indebtedness if the effect of such failure is to permit the acceleration of such
indebtedness, (5) certain events of bankruptcy or other similar proceedings, (6)
a money judgment against us in an amount in excess of $5.0 million remaining
undischarged for 30 days or other non-monetary judgment against us reasonably
likely to have a material adverse effect, (7) the lenders' loss of security
interests securing our indebtedness under the revolving credit facility, and (8)
a Change of Control (as defined).
Upon the occurrence and during the continuance of an event of default, the
lenders may terminate their commitments under the revolving credit facility and
declare amounts outstanding thereunder immediately due and payable, except that
in the case of an event of default referred to in clause (5) above, such
remedies shall become automatically effective.
Public Debt
On April 15, 2002, we exchanged $88.1 million aggregate principal amount of
Denny's Corporation's 11 1/4% senior notes due 2008, or 11 1/4% Notes, for
approximately $70.4 million aggregate principal amount of 12 3/4% senior notes
due 2007, or 12 3/4% Notes. These 12 3/4% Notes were issued under the same
indenture that governs the old notes and the new notes that are the subject of
the exchange offer. Pursuant to a tack-on provision in that indenture, in a
subsequent series of privately negotiated transactions, we exchanged an
additional $62.5 million of 11 1/4% Notes for the $50.0 million of old notes
that we are offering to exchange pursuant to this prospectus. We now have $379.0
million aggregate principal amount of 11 1/4% Notes outstanding and $120.4
million aggregate principal amount of 12 3/4% Notes.
25
Denny's Corporation and Denny's Holdings, Inc. are jointly obligated with
respect to the 12 3/4% Notes. Because only Denny's Corporation is obligated with
respect to the 11 1/4% Notes, the 12 3/4% Notes are structurally senior to the
11 1/4% Notes. The 11 1/4% Notes pay interest on January 15 and July 15 of each
year and will expire on January 7, 2008. The 12 3/4% Notes pay interest on March
31 and September 30 of each year and will expire on September 30, 2007.
26
THE NEW NOTES
The new notes will be issued under the indenture, dated April 15, 2002,
among Denny's Corporation and Denny's Holdings, as issuers, and U.S. Bank
National Association, as trustee. In this section of the prospectus, the term
"issuers" refers to Denny's Corporation and Denny's Holdings, Inc.; the term
"Denny's Corporation" refers only to Denny's Corporation (formerly Advantica
Restaurant Group, Inc.); and the term "Denny's Holdings" refers only to Denny's
Holdings, Inc. The terms of the new notes will include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939 as in effect on the date of the indenture. The new notes
will be subject to all of these terms, and holders of the new notes are referred
to the indenture and the Trust Indenture Act for a statement thereof. The
following is a summary of the material provisions of the indenture. It does not
restate the indenture in its entirety. We urge you to read the indenture because
it, and not this description, defines your rights as a holder of the new notes.
Copies of the indenture and the form of the new notes will be filed as exhibits
to our registration statement filed with the SEC that contains this prospectus.
General
The new notes will be issued only in registered form without coupons in
denominations of $1,000 or multiples thereof. New notes, in an aggregate
principal amount not to exceed $50 million, the amount permitted to be issued
under the indenture pursuant to this exchange offer, may be executed by the
issuers and delivered to the trustee for authentication, and the trustee will
then authenticate and deliver the new notes to or upon the written order of the
issuers, as provided in the indenture. Principal of, premium, if any, and
interest on the new notes will be payable, and the new notes will be
transferable and exchangeable, at the corporate trust office or agency of the
trustee in The Borough of Manhattan, The City of New York, maintained for such
purposes. In addition, interest may be paid, at the option of the issuers, by
wire transfer or check mailed to the person entitled thereto as shown on the
register for the new notes.
An aggregate of up to $50.0 million principal amount of new notes is being
offered in the exchange offer. There are currently issued and outstanding under
the indenture $120.4 million in aggregate principal amount of 12 3/4% senior
notes due 2007, which are subject to the same terms and conditions as the new
notes and which consist of (i) the $50 million in aggregate principal amount of
unregistered notes for which the registered new notes are offered in exchange
pursuant to this prospectus and (ii) $70.4 million in aggregate principal amount
of 12 3/4% senior notes due 2007 originally issued under the indenture as of
April 15, 2002, referred to in this section as the "original notes". The
original notes, which will remain outstanding following the completion of this
exchange offer, and the new notes will constitute part of the same series of
securities and will vote together as a series on all matters. Except where the
context otherwise requires, all references to the new notes in this section
includes the original notes.
The new notes will be senior unsecured obligations of the issuers and will
be equal in right of payment to all Senior Indebtedness of the issuers. Interest
on the new notes will accrue at a rate equal to 12 3/4% per annum, payable in
arrears on each March 31 and September 30, commencing March 31, 2003, until
maturity, to holders of record of new notes at the close of business on each
March 15 and September 15 next preceding the interest payment date. Interest on
the new notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of the indenture. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The new
notes will mature September 30, 2007.
Optional Redemption
Except as provided below, the new notes may not be redeemed at the option
of the issuers prior to September 30, 2004. On and after September 30, 2004, the
new notes will be redeemable, in whole or in part, at the option of the issuers,
at the redemption prices (expressed as percentages of the principal amount) set
forth below, plus accrued and unpaid interest, if any, to the redemption date,
if redeemed during the 12-month period beginning on September 30 of the years
indicated below:
27
Year Percentage
---- ----------
2004...................................................... 106.3750%
2005...................................................... 103.1875%
2006 and thereafter....................................... 100.0000%
provided that, if the date fixed for redemption is on an interest payment date,
then the interest payable on such date shall be paid to the holder of record on
the March 15 or September 15 next preceding such interest payment date.
Notwithstanding the foregoing, prior to September 30, 2004, the issuers may
redeem up to 35% of the aggregate principal amount of new notes outstanding on
the date of the indenture at a redemption price (expressed as a percentage of
the principal amount) of 112.75%, plus accrued and unpaid interest, if any, to
the redemption date, from the net proceeds of any Public Offering.
Selection And Notice
Notice of redemption shall be mailed at least 30 and not more than 60 days
prior to the redemption date to each holder of new notes to be redeemed. In the
event of a redemption of less than all of the new notes, the trustee shall
select, in such manner as it shall deem appropriate and fair, but generally pro
rata or by lot, which new notes shall be redeemed in whole or in part, and shall
promptly notify the issuers in writing of the new notes selected for redemption.
On and after the redemption date, interest ceases to accrue on the new notes or
portions thereof called for redemption and all rights of the holder with respect
to such redeemed new notes, except the right to payment of amounts payable on
such redemption, shall cease.
Certain Definitions
Set forth below (notwithstanding any other usage of terms in other sections
of this prospectus) is a summary of certain of the defined terms used in the
indenture (except only that we have modified the defined terms and references in
this section to refer to Denny's Corporation by its current name rather than its
former name, Advantica Restaurant Group, Inc.). Reference is made to the
indenture for the full definitions of all terms set forth below and used in such
indenture as well as for any other capitalized terms used in this section for
which no definition is provided.
"Acquisition Indebtedness" means Indebtedness of any person existing at the
time such person becomes a Subsidiary of an issuer (or at the time such person
is merged with or into a Subsidiary of an issuer), excluding Indebtedness of any
Subsidiary of an issuer incurred in connection with, or in contemplation of,
such person becoming a Subsidiary of such issuer.
"Adjusted Consolidated Net Worth" means, with respect to any person as of
any date, the Consolidated Net Worth of such person plus (1) the respective
amounts reported on such person's most recent consolidated balance sheet with
respect to any Preferred Stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
person upon issuance of such Preferred Stock or of securities converted into
such Preferred Stock, excluding (2) any amount reflecting any equity adjustment
resulting from a foreign currency translation on a consolidated balance sheet of
such person, but only to the extent not excluded in calculating Consolidated Net
Worth of such person, plus (3) any gain realized upon the sale or other
disposition of any Business Segment to the extent such gains do not exceed the
sum of the aggregate amount of any losses included (on a net after tax basis) in
the computation of Consolidated Net Worth.
"Affiliate" means, with respect to any person, any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purposes of this definition, beneficial
ownership of 10% or more of the voting common equity of a person shall be deemed
to be control unless ownership of a lesser amount may be deemed to be control
under the Trust Indenture Act.
"Asset Segment" means (1) Denny's Holdings, or (2) any Subsidiary, group of
Subsidiaries or group of assets (other than inventory held for sale in the
ordinary course of business) of an issuer or its Subsidiaries which (A) accounts
for at least 20 percent of the total assets of such issuer and its Subsidiaries
on a consolidated basis as of the end of the last fiscal quarter immediately
preceding the date for which such determination is being made or (B) accounts
for at least 20 percent of the income from continuing operations before income
taxes, extraordinary items and cumulative effects of changes in accounting
28
principles of such issuer and its Subsidiaries on a consolidated basis for the
four full fiscal quarters immediately preceding the date for which such
calculation is being made.
"Business Segment" means (1) each Significant Subsidiary of an issuer, (2)
the Equity Interests of any of an issuer's Subsidiaries or (3) any group of
assets of an issuer or any of its Subsidiaries, whether now owned or hereafter
acquired; provided, in each case, that the sale (other than the sale of
inventory in the ordinary course of business), lease, conveyance or other
disposition of such Significant Subsidiary, Equity Interests or group of assets,
as the case may be, either in a single transaction or group of related
transactions that are part of a common plan, results in Net Proceeds to such
issuer or any of its Subsidiaries of $50 million or more.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Cash Equivalents" means (1) 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), (2) time deposits and
certificates of deposit with a maturity date not more than one year from the
date of acquisition issued by any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million or a commercial
bank organized under the laws of any other country that is a member of the
Office for Economic Cooperation and Development and having total assets in
excess of $500 million, (3) repurchase obligations with a term of not more than
7 days for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause (2)
above, (4) commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (5) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (1) through (4) above.
"Code" means the Internal Revenue Code of 1986, as it may be amended from
time to time.
"Consolidated Fixed Charges" means, with respect to any person for a given
period, (1) consolidated interest expense of such person and its consolidated
Subsidiaries to the extent deducted in computing Consolidated Net Income of such
person (including, without limitation, amortization of original issue discount
and non-cash interest payments, all net payments and receipts in respect of
Interest Rate Agreements and the interest component of capital leases, but
excluding deferred financing costs existing immediately after the date of the
indenture and the amortization thereof), plus (2) the amount of all cash
dividend payments on any series of Preferred Stock of such person; provided that
if, during such period, (1) such person or any of its Subsidiaries shall have
made any asset sales (other than, in the case of an issuer and its Subsidiaries,
sales of the Capital Stock of, or any assets of, Unrestricted Subsidiaries),
Consolidated Fixed Charges of such person and its Subsidiaries for such period
shall be reduced by an amount equal to the Consolidated Fixed Charges directly
attributable to the assets that are the subject of such asset sales for such
period and (2) such person or any of its Subsidiaries has made any acquisition
of assets or Capital Stock (occurring by merger or otherwise), including,
without limitation, any acquisition of assets or Capital Stock occurring in
connection with the transaction causing a calculation to be made under the
indenture, Consolidated Fixed Charges of such person and its Subsidiaries shall
be calculated on a pro forma basis as if such acquisition of assets or Capital
Stock (including the incurrence of any Indebtedness in connection with any such
acquisition and the application of the proceeds thereof) took place on the first
day of such period.
"Consolidated Net Income" means, with respect to any person for a given
period, the aggregate of the Net Income of that person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with generally
accepted accounting principles; provided that (1) the Net Income of any person
that is not a Subsidiary of that person or is accounted for by the equity method
of accounting shall be included only to the extent of the amount of dividends or
distributions paid to that person and its Subsidiaries, (2) the Net Income of
any person that is a Subsidiary (other than a Subsidiary of which at least 80%
of the Capital Stock having ordinary voting power for the election of directors
or other governing body of such Subsidiary is owned by that person directly or
indirectly through one or more Subsidiaries) shall be included
29
only to the extent of the lesser of (a) the amount of dividends or
distributions paid to that person and its Subsidiaries and (b) the Net Income
of such person, (3) the Net Income of any person acquired by that person and
its Subsidiaries in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (4) with respect to an
issuer, the Net Income (if positive) of any person that becomes a Subsidiary of
such issuer after the date of the indenture shall be included only to the
extent that the declaration or payment of dividends on Capital Stock or any
similar distributions, by that Subsidiary to such issuer or to any other
consolidated Subsidiary of such issuer, of such Net Income is at the time
permitted under the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
binding upon or applicable to that Subsidiary, provided that, if the exclusion
from an otherwise positive Net Income of certain amounts pursuant to this
clause (4) would cause such Net Income to be negative, then such Net Income
shall be deemed to be zero.
"Consolidated Net Worth" means, with respect to any person at any date of
determination, the sum of the Capital Stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of such person and its
Subsidiaries on a consolidated basis, each item to be determined in conformity
with generally accepted accounting principles (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52), except that all effects of
the application of Accounting Principles Board Opinions Nos. 16 and 17 and
related interpretations shall be disregarded.
"Credit Agent" means any person acting as managing agent (or in a similar
capacity) under the Credit Agreement, or any successor thereto; provided that
"Credit Agent" shall also mean any person acting as managing agent (or in a
similar capacity) under any agreement pursuant to which the Credit Agreement is
refunded or refinanced if such person is designated as such by each person that
is at the time of such designation a Credit Agent; and provided further that if
at any time there shall be more than one Credit Agent, then "Credit Agent" shall
mean each such Credit Agent, and any notice, consent or waiver to be given by,
action to be taken by, or notice to be given to, the Credit Agent shall be given
or taken by, or given to, each such Credit Agent.
"Credit Agreement" means the Credit Agreement, dated as of January 7, 1998,
among Denny's, Inc., El Pollo Loco, Inc., Flagstar Enterprises, Inc., Flagstar
Systems, Inc. and Quincy's Restaurants, Inc., as borrowers, Denny's Corporation
as a guarantor, the lenders named therein, and The Chase Manhattan Bank, as
administrative agent, as amended through and including the date of the
indenture, including any and all related notes, collateral and security
documents, instruments and agreements executed in connection therewith
(including, without limitation, all Loan Documents (as defined in such Credit
Agreement)) and all obligations of Denny's Corporation and its Subsidiaries
incurred thereunder or in respect thereof, and in each case as amended,
supplemented, restructured or otherwise modified, extended or renewed and each
other agreement pursuant to which any or all of the foregoing may be refunded
or refinanced, from time to time.
"Default" means any event that is, or after notice or passage of time
would be, an Event of Default.
"Denny's Corporation Group" means Denny's Corporation (formerly Advantica
Restaurant Group, Inc.) and any Subsidiary of Denny's Corporation, other than
Denny's Holdings or any Subsidiary of Denny's Holdings.
"Denny's Holdings Group" means Denny's Holdings and any Subsidiary of
Denny's Holdings.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorly
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the new notes.
"EBITDA" means, with respect to any person and its consolidated
Subsidiaries for a given period, the Consolidated Net Income of such person for
such period plus, with respect to an issuer and its consolidated Subsidiaries,
(1) an amount equal to any net loss realized upon the sale or other disposition
of any Business Segment (to the extent such loss was deducted in computing
Consolidated Net Income), (2) any provision for taxes based on income or profits
deducted in computing Consolidated Net Income and any provision for taxes
utilized in computing net loss under clause (1) hereof, (3) consolidated
interest expense (including amortization of original issue discount and non-cash
interest payments, all net payments and receipts in respect of Interest Rate
Agreements and the interest component of capital leases) and (4) depreciation
and amortization (including amortization of goodwill and deferred financing
costs existing immediately after the date of the indenture and other
intangibles) to the extent required under generally accepted accounting
principles, all on a consolidated basis; provided that if, during such period,
(x) such person or any of its Subsidiaries shall have made any asset sales
(other than, in the case of an issuer and its Subsidiaries, sales of the Capital
Stock of, or any assets of, Unrestricted Subsidiaries), EBITDA of such person
and its Subsidiaries for such period shall be reduced by an amount equal to the
EBITDA directly attributable to the assets that are the subject of such asset
sales for such period, and (y) such person or any of its Subsidiaries
30
has made any acquisition of assets or Capital Stock (occurring by merger or
otherwise), including, without limitation, any acquisition of assets or Capital
Stock occurring in connection with the transaction causing a calculation to be
made under the indenture, EBITDA of such person and its Subsidiaries shall be
calculated, excluding any expenses which in the good faith estimate of
management of such person will be eliminated as a result of such acquisition, on
a pro forma basis as if such acquisition of assets or Capital Stock (including
the incurrence of any Indebtedness in connection with any such acquisition and
the application of the proceeds thereof) took place on the first day of such
period.
"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).
"Excluded Property" means Denny's Corporation's corporate headquarters
property located in Spartanburg, South Carolina.
"Existing Indebtedness" means Indebtedness of an issuer or any of its
Subsidiaries existing on the date of the indenture (other than Indebtedness
under the Old Notes and the Credit Agreement).
"Fixed Charge Coverage Ratio" means, with respect to any person for a given
period, the ratio of the EBITDA of such person for such period to the
Consolidated Fixed Charges of such person for such period.
"FRD" means FRD Acquisition Co., a Delaware corporation, a wholly owned
subsidiary of Denny's Corporation, and an Unrestricted Subsidiary under the
indenture.
"FRD Chapter 11Case" means the voluntary petition under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware,
Case No. 01 0436 PJW, filed by FRD on February 14, 2002.
"FRD Investment" means any Investment in FRD by either issuer or any of its
Subsidiaries existing on the date of the indenture.
"Indebtedness" means, with respect to any person at any date, without
duplication, (1) all obligations of such person for borrowed money, (2) all
obligations of such person evidenced by bonds, debentures, notes or other
similar instruments other than Interest Rate Agreements, (3) all reimbursement
obligations and other liabilities of such person with respect to letters of
credit issued for such person's account, (4) all obligations of such person to
pay the deferred purchase price of property or services, except accounts payable
arising in the ordinary course of business, (5) all obligations of such person
as lessee in respect of capital lease obligations under capital leases and (6)
all obligations of others of a nature described in any of clauses (1) Through
(5) above guaranteed by such person; provided that, in the case of clauses (1)
through (5) above, Indebtedness shall include only obligations reported as
liabilities in the financial statements of such person in accordance with
generally accepted accounting principles.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement to or under which an issuer or any
of its subsidiaries is or becomes a party or a beneficiary.
"Investment" means any direct or indirect advance (other than advances to
customers in the ordinary course of business that are recorded as accounts
receivable on the balance sheet of any person or its subsidiaries), loan or
other extension of credit or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Equity
Interests, bonds, notes, debentures or other securities issued by, any other
person.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any capital
lease, any option or other agreement to sell and any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
31
"Mortgage Financing" means the incurrence by an issuer or any of its
Subsidiaries of any Indebtedness secured by a mortgage or other Lien on real
property acquired or improved by such issuer or any such Subsidiary after the
date of the indenture.
"Mortgage Financing Proceeds" means, with respect to any Mortgage
Financing, the aggregate amount of cash proceeds received or receivable by an
issuer or any of its Subsidiaries in connection with such financing after
deducting therefrom brokerage commissions, legal fees, finder's fees, closing
costs and other expenses incidental to such Mortgage Financing and the amount of
taxes payable in connection with or as a result of such transaction, to the
extent, but only to the extent, that the amounts so deducted are, at the time of
receipt of such cash, actually paid to a person that is not an Affiliate of such
issuer or its Subsidiaries and are properly attributable to such transaction or
to the asset that is the subject thereof.
"Mortgage Refinancing" means the incurrence by an issuer or any of its
Subsidiaries of any Indebtedness secured by a mortgage or other Lien on real
property subject to a mortgage or other Lien existing on the date of the
indenture or created or incurred subsequent to the date hereof as permitted
hereby and owned by such issuer or any such Subsidiary.
"Mortgage Refinancing Proceeds" means, with respect to any Mortgage
Refinancing, the aggregate amount of cash proceeds received or receivable by an
issuer or any of its Subsidiaries in connection with such refinancing after
deducting therefrom the original mortgage amount of the underlying indebtedness
refinanced therewith and brokerage commissions, legal fees, finder's fees,
closing costs and other expenses incidental to such Mortgage Refinancing and the
amount of taxes payable in connection with or as a result of such transaction,
to the extent, but only to the extent, that the amounts so deducted are, at the
time of receipt of such cash, actually paid to a person that is not an Affiliate
of such issuer or its Subsidiaries and are properly attributable to such
transaction or to the asset that is the subject thereof.
"Net Income" of any person shall mean the net income (loss) of such person,
determined in accordance with generally accepted accounting principles,
excluding, however, (1) with respect to an issuer and its Subsidiaries, any gain
or loss, together with any related provision for taxes on such gain or loss,
realized upon the sale or other disposition (including, without limitation,
dispositions pursuant to sale and leaseback transactions) of a Business Segment,
and (2) any gain or loss realized upon the sale or other disposition by such
person of any capital stock or marketable securities.
"Net Proceeds" with respect to any Asset Sale, sale and leaseback
transaction or sale or other disposition of a Business Segment, means (1) cash
(freely convertible into U.S. dollars) received by an issuer or any of its
Subsidiaries from such transaction, after (a) provision for all income or other
taxes measured by or resulting from such transaction, (b) payment of all
brokerage commissions and other expenses (including, without limitation, the
payment of principal, premium (if any) and interest on Indebtedness required
(other than pursuant to the provisions described in the first paragraph under
"Certain Covenants- Limitation on Sale of Assets") to be paid as a result of
such transaction) in connection with such transaction and (c) deduction of
appropriate amounts to be provided by an issuer as a reserve, in accordance with
generally accepted accounting principles, against any liabilities associated
with the asset disposed of in such transaction and retained by such issuer or
its Subsidiaries after such sale or other disposition thereof, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction and (2) promissory notes received
by an issuer or any of its Subsidiaries in connection with such transaction upon
the liquidation or conversion of such notes into cash.
"Obligations" means, with respect to any Indebtedness or any Interest Rate
Agreement, any principal, premium, interest (including, without limitation,
interest, whether or not allowed, after the filing of a petition initiating
certain bankruptcy proceedings), penalties, commissions, charges, expenses,
fees, indemnifications, reimbursements and other liabilities or amounts payable
under or in respect of the documentation governing such Indebtedness or such
Interest Rate Agreement.
"Old Notes" means any outstanding 11 1/4% senior notes due 2008 of Denny's
Corporation issued pursuant to that certain indenture, dated as of January 7,
1998, by and between Denny's Corporation and U.S. Bank National Association
(formerly, First Trust National Association), as Trustee..
"Permitted Investments" means (1) Investments in cash (including major
foreign currency or currency of a country in which an issuer or any of its
Subsidiaries has operations) or Cash Equivalents, (2) with respect to each
issuer and its Subsidiaries, Investments that are in persons at least a majority
of whose revenues are derived from food service operations, ancillary operations
or related activities and that have the purpose of furthering the food service
operations of such issuer or any of its Subsidiaries (other than any Investment
by any of the Denny's Holdings Group in any of the Denny's Corporation Group),
(3) advances to employees of Denny's Corporation
32
or its Subsidiaries not in excess of $5 million in the aggregate at any one
time outstanding, (4) accounts receivable created or acquired in the ordinary
course of business, (5) obligations or shares of stock received in connection
with any good faith settlement or bankruptcy proceeding involving a claim
relating to a Permitted Investment, (6) evidences of Indebtedness, obligations
or other Investments not exceeding $5 million in the aggregate held at any one
time by Denny's Corporation or any of its Subsidiaries and (7) currency swap
agreements and other similar agreements designed to hedge against fluctuations
in foreign exchange rates entered into in the ordinary course of business in
connection with the operation of the business.
"Permitted Payments to Denny's Corporation" means, without duplication,
payments by any Subsidiary of Denny's Corporation to Denny's Corporation in an
amount sufficient to enable Denny's Corporation to (a) pay reasonable and
necessary operating expenses and other general corporate expenses of Denny's
Corporation and its subsidiaries, (b) pay foreign, federal, state and local tax
liabilities of Denny's Corporation and its current and former subsidiaries to
the extent that Denny's Corporation has an obligation to pay such tax
liabilities, the determination of which shall take into account any operating
losses, net operating loss carryovers, and other tax attributes available to
Denny's Corporation and its subsidiaries, (c) pay, as and when the same becomes
due and payable, interest on the Old Notes, (d) pay, as and when the same
becomes due and payable, (i) interest and (ii) principal at maturity (or as
otherwise required pursuant to contractually scheduled principal payments,
which, in the case of Existing Indebtedness are existing on the date of the
indenture, and, in the case of Indebtedness incurred after the date of the
indenture are existing on the date such Indebtedness is incurred), in each case
on the Credit Agreement, any Existing Indebtedness and on any other Indebtedness
incurred after the date of the indenture that was permitted to be incurred in
accordance with the covenant "Limitation on Additional Indebtedness and Issuance
of Disqualified Capital Stock" and (e) repurchase, redeem or otherwise acquire
or retire for value, Equity Interests in Denny's Corporation in accordance with
clause (3) of, and the Old Notes in accordance with clause (8) of, the covenant
"Limitation on Restricted Payments." Notwithstanding anything herein to the
contrary, any such payments made to Denny's Corporation pursuant hereto shall
either be used by Denny's Corporation for the purpose such payment was made to
Denny's Corporation within 90 days of Denny's Corporation's receipt of such
payment or refunded to the party from whom Denny's Corporation received such
payment; provided, however, that to the extent that any such payments have not
been paid within such 90 day period, Denny's Corporation shall be entitled to
retain an amount that shall not at any time exceed an aggregate of $250,000 for
the purpose of making the payments described herein.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
persons' stock which is preferred or has a preference with respect to the
payment of dividends, or as to distributions upon any dissolution or liquidation
over Equity Interests of any other class of such person whether now outstanding
or issued after the date of the indenture.
"Public Offering" means any underwritten public offering for cash pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act of Capital Stock other than Disqualified Stock of Denny's
Corporation or any of its Subsidiaries.
"Restricted Investments" means (a) any Investment by any of the (i) Denny's
Corporation Group in any person that is not a wholly owned Subsidiary of Denny's
Corporation and (ii) Denny's Holdings Group in any person that is not a wholly
owned Subsidiary of Denny's Holdings, or (b) other transfers of assets by any of
the (i) Denny's Corporation Group to any Subsidiary or Affiliate of Denny's
Corporation that is not a wholly owned Subsidiary of Denny's Corporation or (ii)
Denny's Holdings Group to any Subsidiary or Affiliate of Denny's Holdings that
is not a wholly owned Subsidiary of Denny's Holdings (other than any such other
transfers of assets described in clause (b) above in transactions the terms of
which are fair and reasonable to the transferor and are at least as favorable as
the terms that could be obtained by the transferor in a comparable transaction
made on an arms' length basis between unaffiliated parties, as conclusively
determined, for any such transfer involving aggregate consideration in excess of
$5 million, by a majority of the directors of Denny's Corporation or Denny's
Holdings, as applicable, that are unaffiliated with the transferee or, if there
are no such directors, by a majority of the directors of Denny's Corporation or
Denny's Holdings, as applicable), except in each case for Permitted Investments
and any such Investments existing on the date of the indenture.
"Senior Indebtedness" means (1) all obligations of an issuer and its
Subsidiaries now or hereafter existing under or in respect of the Credit
Agreement, the Old Notes, and the new notes, whether for principal, interest
(including, without limitation, interest accruing after the filing of a petition
initiating any bankruptcy, insolvency or similar proceeding, whether or not such
interest is an allowable claim under such proceeding), penalties, commissions,
charges, indemnifications, liabilities, reimbursement obligations in respect of
letters of credit, fees, expenses or other amounts payable under or in
33
respect of the Credit Agreement, the Old Notes and the new notes and all
obligations and claims related thereto, (2) all Obligations of an issuer in
respect of Interest Rate Agreements and (3) additional Indebtedness permitted
by the covenant "Limitation on Additional Indebtedness and Issuance of
Disqualified Stock" (other than pursuant to clause (3) of the third paragraph
thereof) which is not expressly by its terms subordinated to the new notes and
all Obligations and claims related thereto; provided, that Senior Indebtedness
shall not include (x) any Indebtedness of an issuer to any of its Subsidiaries
or (y) Indebtedness incurred for the purchase of goods or services (other than
services provided by the Credit Agent in connection with the Credit Agreement
or any other party to an agreement evidencing Senior Indebtedness in connection
with such agreement) obtained in the ordinary course of business. "Senior
Indebtedness" under or in respect of the Credit Agreement, the Old Notes and
the new notes shall continue to constitute Senior Indebtedness for all purposes
of the indenture notwithstanding that such Senior Indebtedness or any
obligations or claims in respect thereof may be disallowed, avoided or
subordinated pursuant to any Bankruptcy Law or other applicable insolvency law
or equitable principles.
"Significant Subsidiary" means any Subsidiary of an issuer that would be a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
of the in denture) (excluding, except for the purposes of determining an Event
of Default, subparagraph (c) of Rule 1-02 of Regulation S-X).
"Subsidiary" of any person means any entity of which shares of the Capital
Stock or other Equity Interests (including partnership interests) entitled to
cast at least a majority of the votes that may be cast by all shares or Equity
Interests having ordinary voting power for the election of directors or other
governing body of such entity are owned by such person directly and/or through
one or more Subsidiaries of such person; provided that each Unrestricted
Subsidiary shall be excluded from the definition of "Subsidiary."
"Unrestricted Subsidiary" means (1) FRD, (2) any subsidiary of an issuer
that at the time of determination is an Unrestricted Subsidiary (as designated
by such issuer's board of directors, as provided below) and (3) any subsidiary
of an Unrestricted Subsidiary. The board of directors of such issuer may
designate any subsidiary of an issuer (including any Subsidiary and any newly
acquired or newly formed subsidiary) to be an Unrestricted Subsidiary unless
such subsidiary owns any Capital Stock of, or owns, or holds any lien on, any
property of, any Subsidiary of such issuer (other than any subsidiary of the
subsidiary to be so designated); provided that (a) any Unrestricted Subsidiary
must be an entity of which shares of the Capital Stock or other Equity Interests
(including partnership interests) entitled to cast at least a majority of the
votes that may be cast by all shares or Equity Interests having ordinary voting
power for the election of directors or other governing body are owned, directly
or indirectly, by such issuer (b) such issuer certifies that such designation
complies with the covenants described under "Certain Covenants- Limitation on
Restricted Payments" and "Investments in Unrestricted Subsidiaries" and (c) each
of (1) the subsidiary to be so designated and (2) its subsidiaries have not at
the time of designation, and do not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
such issuer or any of its Subsidiaries. The board of directors of such issuer
may designate any Unrestricted Subsidiary to be a Subsidiary; provided that,
immediately after giving effect to such designation, Denny's Corporation could
incur at least $1 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test described under "Certain Covenants - Limitation on
Additional Indebtedness and Issuance of Disqualified Stock" on a pro forma basis
taking into account such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (1) the then outstanding
aggregate principal amount of such Indebtedness into (2) the total of the
product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
Certain Covenants
Limitation on Restricted Payments. The indenture provides that each issuer
will not, and will not permit any of its Subsidiaries to, directly or
indirectly:
(1) declare or pay any dividend or make any distribution on account of
the Capital Stock or other Equity Interests of such issuer or any
Subsidiary of Denny's Corporation or Denny's Holdings ((A) other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of such issuer or such Subsidiary and (B) other than
dividends or distributions payable by a Subsidiary (other than dividends or
distributions payable by any of the Denny's Holdings
34
Group to any of the Denny's Corporation Group) so long as, in the case of
any dividend of distribution payable on any class or series of securities
issued by a Subsidiary other than a wholly owned Subsidiary, such issuer
or a Subsidiary of such issuer receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interest in such
class or series of securities);
(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of such issuer or any Subsidiary of Denny's Corporation or
Denny's Holdings (other than any such Equity Interests (i) owned by Denny's
Corporation or any of its Subsidiaries so purchased, redeemed or otherwise
acquired or retired for value by any of the Denny's Corporation Group and
(ii) owned by any of the Denny's Holdings Group so purchased, redeemed or
otherwise acquired or retired for value by any of the Denny's Holdings
Group);
(3) voluntarily prepay any Old Notes or any Indebtedness that is
subordinated to the new notes other than in connection with any (a)
refinancing of such Indebtedness specifically permitted by the terms of the
indenture, (b) Indebtedness between (i) Denny's Corporation and any of its
Subsidiaries in the Denny's Corporation Group or between Subsidiaries in
the Denny's Corporation Group, (ii) Denny's Holdings and any of its
Subsidiaries in the Denny's Holdings Group or between Subsidiaries in the
Denny's Holdings Group or (c) Indebtedness of any of the Denny's
Corporation Group to any of the Denny's Holdings Group; or
(4) make any Restricted Investments (other than an Investment in any
Unrestricted Subsidiary)
(all such dividends, distributions, purchases, redemptions or other
acquisitions, retirements, prepayments or Restricted Investments being
collectively referred to as "Restricted Payments"), if, at the time of such
Restricted Payment:
(a) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(b) immediately after such Restricted Payment and after giving
effect thereto on a pro forma basis, Denny's Corporation would not be
able to incur $1 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test described under "Limitation on Additional
Indebtedness and Issuance of Disqualified Stock" below; or
(c) such Restricted Payment, without duplication, together with
(A) the aggregate of all other Restricted Payments (in each case
valued, where other than cash, at their fair market value as of the
date such Restricted Payment is made) made after the date of the
indenture and (B) the amount by which the aggregate of all then
outstanding Investments in Unrestricted Subsidiaries (other than the
FRD Investment), calculated without giving effect to amounts included
pursuant to clause (z)(2) below, exceeds $25 million, is greater than
the sum of, without duplication: (v) 50% of the aggregate Consolidated
Net Income of Denny's Holdings for the period (taken as one accounting
period) from the beginning of the first quarter immediately after the
date of the indenture to the end of its most recently ended fiscal
quarter at the time of such Restricted Payment; provided that if such
Consolidated Net Income for such period is less than zero, then minus
100% of the amount of such loss, plus (w) 100% of the aggregate
amortization of goodwill and of excess reorganization value for the
period specified in clause (v) above, plus (x) 100% of the aggregate
net cash proceeds and the fair market value of marketable securities
received by Denny's Holdings from the issue or sale, after the date of
the indenture, of Capital Stock of Denny's Holdings (other than Capital
Stock issued and sold to a Subsidiary of Denny's Holdings and other
than Disqualified Stock), or any Indebtedness or other security
convertible into any such Capital Stock that has been so converted plus
(y) 100% of the aggregate amounts contributed to the capital of Denny's
Holdings after the date of the indenture plus (z) 100% of the aggregate
amounts received in cash and the fair market value of marketable
securities (other than Restricted Investments) received from (1) the
sale or other disposition of Restricted Investments made after the date
of the indenture by Denny's Holdings and its Subsidiaries or (2) the
sale of the stock of an Unrestricted Subsidiary or the sale of all or
substantially all of the assets of an Unrestricted Subsidiary to the
extent that a liquidating dividend is paid to Denny's Holdings or any
Subsidiary of Denny's Holdings from the proceeds of such sale (in each
case, other than to the extent of the FRD Investment and only to the
extent that such amounts were not applied to reduce the aggregate
amount of all outstanding Investments in Unrestricted Subsidiaries for
purposes of calculating the aggregate amount of all such Investments in
(B) above); provided, that no such amounts shall be included pursuant
to clause (x) or (y) above to the extent that the proceeds (including
by exchange) from any such issuance, sale or contribution were used as
provided in clause (2), (4) or (5) in the next succeeding paragraph.
For purposes of this
35
clause (c), the fair market value of property other than cash shall be
conclusively determined in good faith by the board of directors of
Denny's Holdings.
Notwithstanding the foregoing, the indenture permits:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture;
(2) the retirement of any shares of Capital Stock of an issuer in
exchange for, or out of the net proceeds of the substantially concurrent
sale (other than to a Subsidiary of such issuer) of, other shares of such
issuer's Capital Stock, other than any Disqualified Stock;
(3) payments for the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests in Denny's Corporation issued
to members of management of Denny's Corporation and its Subsidiaries
pursuant to subscription and option agreements in effect on the date of the
indenture and Equity Interests in Denny's Corporation issued to future
members of management pursuant to subscription agreements executed
subsequent to the date of the indenture, containing provisions for the
repurchase of such Equity Interests upon death, disability or termination
of employment of such persons which are substantially identical to those
contained in the subscription agreements in effect on the date of the
indenture; provided that the amount of such dividends or distributions,
after the date of the indenture, in the aggregate will not exceed the sum
of (A) $5 million plus (B) the cash proceeds from any reissuance of such
Equity Interests by Denny's Corporation to members of management of Denny's
Corporation and its Subsidiaries;
(4) the repurchase, redemption or other acquisition or retirement for
value of any Indebtedness of an issuer that is subordinated in right of
payment to the new notes in exchange for or with the proceeds of the
issuance of shares of such issuer's Equity Interests (other than
Disqualified Stock);
(5) the redemption, repurchase or retirement for value of any
Indebtedness of an issuer that is subordinated to the new notes (A) with
the proceeds of, or in exchange for, Indebtedness incurred pursuant to
clause (2) of the third paragraph under "Limitation on Additional
Indebtedness and Issuance of Disqualified Stock" below or (B) if, after
giving effect to such redemption, repurchase or retirement, Denny's
Corporation could incur at least $1 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test described under "Limitation on
Additional Indebtedness and Issuance of Disqualified Stock" below;
(6) the purchase, redemption or other acquisition or retirement for
value of Equity Interests of any Subsidiary of Denny's Corporation (other
than any such Equity Interests (i) owned by Denny's Corporation or any of
its Subsidiaries so purchased, redeemed or otherwise acquired or retired
for value by any of the Denny's Corporation Group and (ii) owned by any of
the Denny's Holdings Group so purchased, redeemed or otherwise acquired or
retired for value by any of the Denny's Holdings Group) in an aggregate
cumulative amount not to exceed $5 million annually;
(7) so long as no Default or Event of Default shall have occurred
and be continuing, Permitted Payments to Denny's Corporation; and
(8) after the date on which a bankruptcy court enters an order closing
the FRD Chapter 11 Case, the repurchase, redemption or other acquisition or
retirement for value of Old Notes by Denny's Corporation for consideration
in an aggregate amount not to exceed an amount, not less than $50 million,
equal to the sum of $50 million plus 50% of the difference between $160
million and the amount of Old Notes tendered and accepted in exchange for
the original notes on April 15, 2002; provided, however, that no Default or
Event of Default shall have occurred and be continuing at the time of any
such repurchase, redemption or other acquisition or retirement;
provided, that in determining the aggregate amount expended for Restricted
Payments in accordance with clause (c) of the first paragraph of this covenant,
(x) no amounts expended under clauses (2), (4), or (5) of this paragraph shall
be included, (y) 100% of the amounts expended under clauses (3), (6), (7) and
(8) of this paragraph shall be included, and (z) 100% of the amounts expended
under clause (1), to the extent not included under subclauses (x) or (y) of this
proviso, shall be included.
36
Limitation on Additional Indebtedness and Issuance of Disqualified Stock.
The indenture provides that (1) each issuer will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume or
guarantee any Indebtedness (other than (A) Indebtedness (a) owing from any of
the Denny's Holdings Group payable to any of the Denny's Corporation Group; (b)
between Denny's Holdings and a Subsidiary of Denny's Holdings; (c) between
Subsidiaries of Denny's Holdings; (d) between Denny's Corporation and a
Subsidiary of Denny's Corporation in the Denny's Corporation Group; or (e)
between Subsidiaries of the Denny's Corporation Group; and (B) guarantees by
Denny's Corporation or any Subsidiary of Denny's Corporation of Indebtedness of
any of the Denny's Holdings Group or guarantees by any Subsidiary in the Denny's
Corporation Group of Indebtedness of any of the Denny's Corporation Group) and
(2) neither issuer will issue any Disqualified Stock, unless (a) such
Indebtedness or Disqualified Stock is either Acquisition Indebtedness or is
created, incurred, issued, assumed or guaranteed by such issuer and not a
Subsidiary of such issuer and (b) Denny's Corporation's Fixed Charge Coverage
Ratio for the four full fiscal quarters last preceding the date such additional
Indebtedness is created, incurred, assumed or guaranteed, or such additional
stock is issued, would have been at least 2.25:1, determined on a pro forma
basis (including a pro forma application of the net proceeds of such
Indebtedness or such issuance of stock) as if the additional Indebtedness had
been created, incurred, assumed or guaranteed, or such additional stock had been
issued, at the beginning of such four-quarter period.
The foregoing limitations will not apply to the incurrence by an issuer or
any of its Subsidiaries of any Indebtedness pursuant to the Credit Agreement;
provided, however, that the principal amount of such Indebtedness incurred and
outstanding at any time pursuant to the Credit Agreement (including any
Indebtedness incurred to refund or refinance such Indebtedness) for this purpose
will not exceed the greater of $250 million and the aggregate amount of the
commitments under the Credit Agreement on the date of the indenture.
In addition, the foregoing limitations notwithstanding,
(1) Denny's Corporation or any of its Subsidiaries may create, incur,
issue, assume or guarantee Indebtedness pursuant to the Credit Agreement or
otherwise, (a) in connection with or arising out of Mortgage Financings,
Mortgage Refinancings and sale and lease-back transactions; provided that
the Mortgage Financing Proceeds, Mortgage Refinancing Proceeds (excluding
any Mortgage Refinancing Proceeds received in connection with any
refinancing of any Indebtedness secured by a mortgage or Lien on the
Excluded Property) or Net Proceeds, as the case may be, incurred, assumed
or created in connection therewith are used to pay any outstanding Senior
Indebtedness, and provided further that any amounts used to repay
Indebtedness outstanding under the Old Notes shall be applied only as and
when permitted under the covenant "Limitation on Restricted Payments", (b)
constituting purchase money obligations for property acquired in the
ordinary course of business or other similar financing transactions
(including, without limitation, in connection with Mortgage Financings and
Mortgage Refinancings as and to the extent permitted in clause (a) above);
provided that, in the case of Indebtedness exceeding $2 million for any
such obligation or transaction, such Indebtedness exists at the date of the
purchase or transaction or is created within 180 days thereafter, (c)
constituting capital lease obligations, (d) constituting reimbursement
obligations with respect to letters of credit, including, without
limitation, letters of credit in respect of workers' compensation claims
issued for the account of an issuer or a Subsidiary of an issuer in the
ordinary course of its business, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims, (e)
constituting additional Indebtedness in an aggregate principal amount
(including any Indebtedness incurred to refund or refinance such
Indebtedness) at any one time outstanding of up to $179,611,000 (which is
equal to the difference between $250 million and the aggregate principal
amount of original notes issued on April 15, 2002), whether incurred under
the Credit Agreement or otherwise, provided, however that no more than $50
million of such additional Indebtedness incurred pursuant to this subclause
(e) shall be secured by a consensual Lien or be secured by Denny's
Corporation or any Subsidiary of Denny's Corporation other than Denny's
Holdings, (f) constituting Indebtedness secured by the Excluded Property,
and (g) constituting Existing Indebtedness and permitted refinancings
thereof in accordance with clause (2) of this paragraph;
(2) an issuer or any Subsidiary of an issuer may create, incur, issue,
assume or guarantee any Indebtedness that serves to refund, refinance or
restructure the new notes, Existing Indebtedness or any other Indebtedness
incurred as permitted under the indenture, or any Indebtedness issued to so
refund, refinance or restructure such Indebtedness, in an amount equal to
or less than the Indebtedness being so refunded, refinanced or
restructured, including additional Indebtedness incurred to pay premiums
and fees in connection therewith ("Refinancing Indebtedness"), prior to its
respective maturity; provided, however, that such Refinancing Indebtedness
is incurred by the obligor on the Indebtedness being refinanced and (a)
bears an interest rate per annum that is equal to or less than the interest
rate per annum then payable under such Indebtedness being refunded or
refinanced (calculated in accordance with any formula
37
set forth in the documents evidencing any such Indebtedness) unless such
Refinancing Indebtedness is incurred, created or assumed within twelve
months of the scheduled maturity of the Indebtedness being refinanced,
(b) has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred which is not less than the remaining Weighted
Average Life to Maturity of such Indebtedness being refunded or
refinanced, and (c) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinated to the new notes, such refinancing indebtedness
is subordinated to the new notes at least to the same extent as the
Indebtedness being refinanced or refunded, and provided further that
subclauses (a), (b) and (c) of this clause (2) will not apply to any
refunding or refinancing of any Senior Indebtedness; and
(3) any nonconsolidated subsidiary of an issuer created after the date
of the indenture may create, incur, issue, assume, guarantee or otherwise
become liable with respect to any additional Indebtedness; provided that
such Indebtedness is nonrecourse to any issuer and its consolidated
subsidiaries, and the issuers and their consolidated Subsidiaries have no
liability with respect to such additional Indebtedness.
Limitation on Liens. The indenture provides that, subject to certain
exceptions, each issuer shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
upon any asset now owned or hereafter acquired, except with respect to (a) Liens
securing or arising under or in connection with any Indebtedness of an issuer
not expressly by its terms subordinate or junior in right of payment to any
other Indebtedness of such issuer; (b) Liens existing on the date of the
indenture; (c) Liens permitted by or required pursuant to the Credit Agreement;
(d) Liens relating to judgments to the extent such judgments do not give rise to
specified Events of Default; (e) Liens arising under or in connection with the
satisfaction and discharge of the indenture; (f) Liens incurred in the ordinary
course of business so long as the Indebtedness secured by such Lien does not
exceed $5 million at any one time outstanding; (g) Liens for taxes or
assessments and similar charges either (x) not delinquent or (y) contested in
good faith by appropriate proceedings and as to which either issuer or a
Subsidiary of either issuer shall have set aside on its books such reserves as
may be required pursuant to generally accepted accounting principles; (h) Liens
incurred or pledges and deposits in connection with workers' compensation,
unemployment insurance and other social security benefits, or securing
performance bids, tenders, leases, contracts (other than for the repayment of
borrowed money), statutory obligations, progress payments, surety and appeal
bonds and other obligations of like nature, incurred in the ordinary course of
business; (i) Liens imposed by law, such as mechanics', carriers',
warehousemen's, materialmen's and vendors' Liens, incurred in good faith in the
ordinary course of business; (j) zoning restrictions, easements of licenses,
covenants, reservations, restrictions on the use of real property or minor
irregularities of title incident thereto of any of the Denny's Holdings Group
which do not in the aggregate materially detract from the value of the property
or assets of the Denny's Holdings Group, taken as a whole, or of any of the
Denny's Corporation Group which do not in the aggregate materially detract from
the value of the property or assets the Denny's Corporation Group, taken as a
whole, or materially impair the operation of the business of, as applicable,
either the Denny's Holdings Group, taken as a whole, or the Denny's Corporation
Group, taken as a whole; (k) Liens created by Subsidiaries in the Denny's
Holdings Group to secure Indebtedness of such Subsidiaries to any of Denny's
Holdings Group or Liens created by Subsidiaries in the Denny's Corporation Group
to secure Indebtedness of such Subsidiaries to any of the Denny's Corporation
Group or the Denny's Holdings Group; (l) pledges of or Liens on raw materials or
on manufactured products as security for any drafts or bills of exchange in
connection with the importation of such raw materials or manufactured products
in the ordinary course of business; (m) a Lien on any assets (x) securing
Indebtedness incurred or assumed pursuant to clause (b) or (c) or paragraph (1)
of the covenant "Limitation on Additional Indebtedness and Issuance of
Disqualified Stock" for the purpose of financing all or any part of the cost of
acquiring such asset or construction thereof or thereon or (y) existing on
assets or businesses at the time of the acquisition thereof; (n) the Lien
granted to the Trustee pursuant to the indenture and any substantially
equivalent Lien granted to the respective trustees under the indentures for
other debt securities of either issuer; (o) Liens arising in connection with any
Mortgage Financing or Mortgage Refinancing by either issuer or any of its
Subsidiaries; (p) Liens securing reimbursement obligations with respect to
letters of credit issued for the account of either issuer or any of its
Subsidiaries in the ordinary course of business; (q) any Lien on the Excluded
Property; (r) Liens securing an interest of a landlord in real property leases;
and (s) Liens created in connection with the refinancing of any Indebtedness
secured by Liens permitted to be incurred or to exist pursuant to the foregoing
clauses; provided, however, that no additional assets are encumbered by such
Liens in connection with such refinancing, unless permitted by clause (c) above
or the immediately succeeding sentence. The indenture provides that,
notwithstanding the foregoing, an issuer may create or assume any Lien upon its
properties or assets if such issuer shall cause the new notes to be equally and
ratably secured with all other Indebtedness secured by such Lien as long as such
other Indebtedness shall be so secured. Notwithstanding anything in the
indenture to the contrary, in no event shall any Lien be incurred (i) securing
Indebtedness outstanding pursuant to the Old Notes or (ii) on any assets of the
Denny's Holdings Group securing Indebtedness of any of
38
the Denny's Corporation Group (other than such Indebtedness of any of the
Denny's Corporation Group which is also Indebtedness of any of the Denny's
Holdings Group).
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The indenture provides that each issuer will not, and will not
permit any of its Subsidiaries (other than nonconsolidated subsidiaries) to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any such
Subsidiary to (1) pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured by, its profits,
owned by an issuer or any of its Subsidiaries or pay any Indebtedness owed to an
issuer or any of its Subsidiaries, (2) make loans or advances to an issuer or
any of its Subsidiaries or (3) transfer any of its properties or assets to an
issuer or any of its Subsidiaries, except in each case for such encumbrances or
restrictions existing under or by reason of (a) applicable law, (b) the
indenture, (c) the Credit Agreement or any other agreement entered into in
connection therewith or as contemplated thereby, (d) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of an issuer or any of its Subsidiaries, (e) any instrument governing
Indebtedness of a person acquired by an issuer or any of its Subsidiaries at the
time of such acquisition; provided that such Indebtedness is not incurred in
connection with or in contemplation of such acquisition, (f) the Old Notes,
Existing Indebtedness or other contractual obligation of an issuer or any of its
Subsidiaries existing on the date of the indenture, (g) additional Indebtedness
in an aggregate principal amount at any one time outstanding of up to
$179,611,000 (which is equal to the difference between $250 million and the
amount of original notes issued on April 15, 2002), (h) any amendment,
modification, renewal, extension, replacement, refinancing or refunding of
encumbrances or restrictions imposed pursuant to clauses (b), (c), (f) or (g)
above; provided that the restrictions contained in any such amendment,
modification, renewal, extension, replacement, refinancing or refunding are no
less favorable in all material respects to the holders of the new notes, (i) any
Mortgage Financing or Mortgage Refinancing, (j) any Permitted Investment or (k)
contracts for the sale of assets so long as such encumbrances or restrictions
apply only to the assets to be sold pursuant thereto.
Limitation on Sale of Assets. The indenture provides that neither issuer
nor any of their respective Subsidiaries (other than nonconsolidated
subsidiaries) will (A) (x) sell, lease, convey or otherwise dispose of, in any
transaction or group of transactions that are a part of a common plan, all or
substantially all of the assets or Capital Stock of any Asset Segment (provided
that the sale, lease, conveyance or other disposition of all or substantially
all of an issuer's assets will not be governed by this provision but rather by
the provisions described under "--Merger, Consolidation or Sale of All or
Substantially All Assets") or (y) issue or sell Equity Interests of any Asset
Segment (each of the foregoing, an "Asset Sale") or (B) sell, lease, convey or
otherwise dispose of any Business Segment, unless in each case, such issuer
shall apply the Net Proceeds from such Asset Sale or such sale, lease,
conveyance or other disposition of a Business Segment to one or more of the
following in such combination as such issuer may choose: (1) an Investment in
another asset or business in the same line of business as, or a line of business
similar to that of, the line of business of Denny's Corporation and its
Subsidiaries (other than in the case of any Asset Sale of an Asset Segment in
any of the Denny's Holdings Group or any sale, lease, conveyance or other
disposition of any Business Segment in any of the Denny's Holdings Group, any
Investment by any of the Denny's Holdings Group in any of the Denny's
Corporation Group) and such Investment occurs within 366 days of such Asset Sale
or such sale, lease, conveyance or other disposition of a Business Segment, (2)
a Net Proceeds Offer (defined below) expiring within 366 days of such Asset Sale
or such sale, lease, conveyance or other disposition of a Business Segment or
(3) the purchase, redemption or other prepayment or repayment of outstanding
Senior Indebtedness within 366 days of such Asset Sale or such sale, lease,
conveyance or other disposition of a Business Segment, provided that any amounts
used to repay Indebtedness outstanding under the Old Notes shall be applied only
as and when permitted under the covenant "Limitation on Restricted Payments";
provided, however, that if the net amount not invested pursuant to clause (1)
above or applied pursuant to clause (3) above is less than $15 million, such
issuer shall not be further obligated to offer to repurchase new notes pursuant
to clause (2) above. Notwithstanding the foregoing, the receipt of all proceeds
of insurance paid on account of the loss of or damage to any Business Segment
and awards of compensation for any such Business Segment taken by condemnation
or eminent domain which result in net proceeds to such issuer of $50 million or
more (excluding proceeds to be used for replacement of such Business Segment,
provided that the trustee has received notice from such issuer within 90 days of
such receipt of its intention to use such proceeds for such purpose) will be
deemed an "Asset Sale." Notwithstanding anything herein to the contrary, the
following will not be deemed an "Asset Sale" or a sale or other disposition of a
Business Segment: (a) Permitted Investments, (b) sales, leases, conveyances or
other dispositions of assets by (i) any of the Denny's Corporation Group to
Denny's Corporation or any of its wholly owned Subsidiaries or (ii) any of the
Denny's Holdings Group to Denny's Holdings, or (c) a Public Offering of any
Subsidiary of Denny's Corporation, but only to the extent that the proceeds of
which are used to redeem up to 35% of the aggregate principal amount of new
notes as provided above under "Optional Redemption."
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For purposes of clause (2) of the preceding paragraph, the issuers shall
apply the Net Proceeds of the Asset Sale or the sale, lease, conveyance or other
disposition of a Business Segment to make a tender offer in accordance with
applicable law (a "Net Proceeds Offer") to repurchase new notes at a price not
less than 100% of the principal amount thereof, plus accrued and unpaid
interest. Any Net Proceeds Offer shall be made by the issuers only if and to the
extent permitted under, and subject to prior compliance with, the terms of any
agreement governing Senior Indebtedness. If on the date any Net Proceeds Offer
is commenced, securities of an issuer ranking pari passu in right of payment
with the new notes are at the time outstanding, and the terms of such securities
provide that a similar offer is to be made with respect thereto, then the Net
Proceeds Offer for the new notes shall be made concurrently with such other
offer, and securities of each issue shall be accepted pro rata in proportion to
the aggregate principal amount of securities of each issue which the holders of
securities of such issue elect to have repurchased. After the last date on which
holders of the new notes are permitted to tender their new notes in a Net
Proceeds Offer, the issuer that originally received the Net Proceeds shall not
be restricted under this "Restrictions on Sale of Assets" covenant as to its use
of any Net Proceeds available to make such Net Proceeds Offer (up to the amount
of Net Proceeds that would have been used to repurchase new notes assuming 100%
acceptance of the Net Proceeds Offer) but not used to repurchase new notes
pursuant thereto.
Notwithstanding any provision of the indenture to the contrary, for a
period of 120 days after the last date on which holders of the new notes are
permitted to tender their new notes in the Net Proceeds Offer, the issuer that
originally received the Net Proceeds may use any Net Proceeds available to make
such Net Proceeds Offer but not used to repurchase new notes pursuant thereto to
purchase, redeem or otherwise acquire or retire for value any securities of such
issuer ranking junior in right of payment to the new notes at a price, stated as
a percentage of the principal or face amount of such junior securities, not
greater than the price, stated as a percentage of the principal amount of the
new notes, offered in the Net Proceeds Offer; provided that, if the Net Proceeds
Offer is for a principal amount (the "Net Proceeds Offer Amount") of the new
notes less than the aggregate principal amount of the new notes then
outstanding, then the Net Proceeds available for use by such issuer for such a
purchase, redemption or other acquisition or retirement for value of junior
securities shall not exceed the Net Proceeds Offer Amount.
Limitation on Transactions with Affiliates. The indenture provides that
each issuer will not, and will not permit any of its Subsidiaries to, directly
or indirectly, enter into any transaction with any Affiliate (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) involving aggregate consideration in excess of
$5,000,000 for any one transaction, except for (1) transactions (including any
investments, loans or advances by or to any Affiliate) in good faith the terms
of which are fair and reasonable to such issuer or Subsidiary, as the case may
be, and are at least as favorable as the terms that could be obtained by such
issuer or Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis between unaffiliated parties (in each case as conclusively
determined by a majority of the board of directors of Denny's Corporation or
Denny's Holdings, as applicable, unaffiliated with such Affiliate or, if there
are no such directors, as conclusively determined by a majority of the board of
directors of Denny's Corporation or Denny's Holdings, as applicable), (2)
transactions in which such issuer or any of its Subsidiaries, as the case may
be, delivers to the holders of the new notes a written opinion of a nationally
recognized investment banking firm stating that such transaction is fair to such
issuer or Subsidiary, as the case may be, from a financial point of view, (3)
transactions between such issuer and its Subsidiaries or between Subsidiaries of
such issuer that are not otherwise prohibited by the covenant described under
"Limitation on Restricted Payments," and (4) payments or loans to employees or
consultants pursuant to employment or consultancy contracts which are approved
by the board of directors of Denny's Corporation or Denny's Holdings, as
applicable, in good faith.
Investments in Unrestricted Subsidiaries. The indenture provides that each
issuer will not, and will not permit any of its Subsidiaries to, directly or
indirectly, make any Investment in any Unrestricted Subsidiary unless (1) the
amount of such Investment does not exceed the amount then permitted to be used
to make a Restricted Payment pursuant to clause (c) of the first paragraph under
"Limitation on Restricted Payments" above and (2) immediately after such
Investment, and after giving effect thereto on a pro forma basis deducting from
Net Income the amount of any Investment the issuers and Subsidiaries of the
issuers have made in Unrestricted Subsidiaries during the four full fiscal
quarters last preceding the date of such Investment, Denny's Corporation would
be able to incur $1 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test described under "Limitation on Additional Indebtedness and
Issuance of Disqualified Stock" above.
Notwithstanding clauses (1) and (2) of the immediately preceding paragraph
or any provision contained in the indenture to the contrary, the issuers and
their Subsidiaries shall be permitted to make investments in Unrestricted
Subsidiaries in an aggregate amount not to exceed $25 million (without regard to
the FRD Investment) at any one time outstanding. The amount by which the
aggregate of all Investments in Unrestricted Subsidiaries exceeds $25 million
(without regard to the FRD
40
Investment) shall be counted in determining the aggregate permissible amount of
Restricted Payments pursuant to clause (c) of the first paragraph under
"Limitation on Restricted Payments" above. Neither issuer will permit any
Unrestricted Subsidiary to become a Subsidiary, except pursuant to the last
sentence of the definition of "Unrestricted Subsidiary."
Merger, Consolidation or Sale of All or Substantially All Assets. The
indenture provides that neither issuer will consolidate or merge with or into,
or sell, transfer, lease or convey all or substantially all of its assets to,
any person unless:
(1) the person formed by or surviving any such consolidation or merger
(if other than such issuer), or to which such sale, transfer, lease or
conveyance shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia;
(2) the corporation formed by or surviving any such consolidation or
merger (if other than such issuer), or to which such sale, transfer, lease
or conveyance shall have been made, assumes all the obligations of such
issuer pursuant to a supplemental indenture in a form reasonably
satisfactory to the trustee under the new notes and the indenture;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) such issuer or any corporation formed by or surviving any such
consolidation or merger, or to which such sale, transfer, lease or
conveyance shall have been made, shall have an Adjusted Consolidated Net
Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater
than the Adjusted Consolidated Net Worth of such issuer immediately
preceding the transaction; provided, however, that clause (4) will not
apply to any transaction where the consideration consists solely of common
stock or other Equity Interests of such issuer or any surviving corporation
and any liabilities of such person are not assumed by and are specifically
non-recourse to such issuer or such surviving corporation; and
(5) after giving effect to such transaction and immediately thereafter,
such issuer or any corporation formed by or surviving any such
consolidation or merger, or to which such sale, transfer, lease or
conveyance shall have been made, shall be permitted to incur at least $1 of
additional indebtedness as provided under clause (b) of the first paragraph
under "Limitation on Additional Indebtedness and Issuance of Disqualified
Stock" above if such provision were applicable to such entity.
Future Subsidiary Guarantors. The indenture provides that each issuer will
not permit any of its Subsidiaries to guarantee the payment of any Indebtedness
of an issuer that is expressly by its terms subordinate or junior in right of
payment to any other Indebtedness of such issuer (a "Subordinated Indebtedness
Guarantee"), unless (i) such Subsidiary executes and delivers a supplemental
indenture evidencing its guarantee of such issuer's Obligations under the
indenture and under the new notes on a substantially similar basis (the
"Securities Guarantee") and (ii) the Securities Guarantee is senior in right of
payment to such Subordinated Indebtedness Guarantee to the same extent as the
new notes are senior in right of payment to such junior Indebtedness of such
issuer; provided that if such Subordinated Indebtedness Guarantee ceases to
exist for any reason, the Securities Guarantee shall thereupon automatically
cease to exist. Notwithstanding anything herein to the contrary, in no event
shall any Subsidiary of Denny's Corporation guarantee Indebtedness outstanding
pursuant to the Old Notes.
Change Of Control
The indenture provides that, if at any time
(1) all or substantially all of an issuer's assets are sold as an e
ntirety to any person or related group of persons,
(2) an issuer is merged with or into another corporation or another
corporation is merged with or into an issuer with the effect that
immediately after such transaction the stockholders of such issuer
immediately prior to such transaction hold less than a majority in interest
of the total voting power entitled to vote in the election of directors,
managers or trustees of the person surviving such transaction,
(3) any person or related group of persons acquires a majority in
interest of the total voting power or voting stock of an issuer,
41
(4) the persons constituting the board of directors of Denny's
Corporation on the date of the indenture or persons nominated or elected to
the board of directors of Denny's Corporation by a majority vote of such
directors (the "Continuing Directors") or by a majority vote of the
Continuing Directors do not constitute a majority of the members of the
board of directors of Denny's Corporation, or
(5) Denny's Corporation shall cease to own, directly or indirectly,
100% of the Equity Interests of Denny's Holdings having ordinary voting
power for the election of directors or other governing body,
then, in any such case, the issuers will notify the holders of the new notes in
writing of such occurrence and will make an offer to purchase in accordance with
the terms of the indenture (the "Change of Control Offer") all new notes then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the repurchase date; provided,
however, that such repurchase will only occur if there has been no acceleration
which has not been withdrawn or paid pursuant to the Credit Agreement prior to
the time of notice of a Change of Control Offer.
Prior to the mailing of the notice to holders provided for above, the
issuers will (x) to the extent then repayable or prepayable, repay in full all
Indebtedness under the Credit Agreement and, to the extent not then repayable or
prepayable, offer to repay in full all such Indebtedness and to repay the
Indebtedness of each lender under the Credit Agreement who has accepted such
offer or (y) obtain the requisite consent under the Credit Agreement to permit
the repurchase of the new notes. The issuers shall first comply with the proviso
in the preceding sentence before they shall be required to repurchase the new
notes pursuant to this covenant. The issuers will comply with all applicable
tender offer rules (including without limitation Rule 14e-1 under the Exchange
Act, if applicable) in the event that the repurchase option is triggered under
the circumstances described herein. Not less than 30 or more than 60 days
following any change of control, the issuers will mail a notice to each holder
of any new notes stating, among other things, (a) that a change of control has
occurred and that a change of control offer is being made as described in this
provision, (b) the purchase price and the change of control payment date and (c)
the instructions determined by the issuers, consistent with this provision, that
a holder of the new notes must follow in order to have such holder's new notes
repurchased.
Events Of Default And Remedies
"Events of Default" under the indenture include:
(1) default for 30 days in payment of interest on any of the new notes;
(2) default in payment when due of principal, whether at maturity,
upon redemption or otherwise;
(3) failure by the issuers for 30 days after notice to comply with any
other agreements or covenants in the indenture or the new notes;
(4) default under any instrument governing any Indebtedness of an
issuer or its Subsidiaries (other than (A) Indebtedness of any of the
Denny's Corporation Group to any of the Denny's Corporation Group or
Indebtedness of any of the Denny's Holdings Group to any of the Denny's
Holdings Group or (B) Indebtedness of a nonconsolidated subsidiary of an
issuer that is nonrecourse to such issuer or its consolidated
Subsidiaries), if (a) either (x) such default results from the failure to
pay principal upon the final maturity of such Indebtedness (after the
expiration of any applicable grace period) or (y) as a result of such
default the maturity of such Indebtedness has been accelerated prior to its
final maturity, (b) the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness with respect to
which the principal amount remains unpaid upon its final maturity (after
the expiration of any applicable grace period), or the maturity of which
has been so accelerated, aggregates $30 million or more and (c) such
default does not result from compliance with any applicable law or any
court order or governmental decree to which such issuer or any of its
Subsidiaries is subject;
(5) failure by an issuer or any of its Subsidiaries to pay certain
final judgments aggregating in excess of $10 million (net of amounts
covered by insurance, treating any deductibles, self-insurance or retention
as not so covered) which judgments remain undischarged for a period of 60
days after their entry by a competent tribunal; and
(6) certain events of bankruptcy or insolvency.
42
An Event of Default shall not be deemed to have occurred under clause (4)
or (5) until the issuers shall have received written notice thereof from the
trustee or the holders of at least 30% in principal amount of the new notes then
outstanding.
If an Event of Default, other than in respect of any events of bankruptcy
or insolvency, occurs and is continuing with respect to the new notes, the
trustee or the holders of at least 30% (or 25% in the case of an Event of
Default with respect to payment of principal of or interest on the new notes) in
principal amount of the new notes then outstanding may declare in writing 100%
of the principal amount of, and any accrued and unpaid interest on, the new
notes to be due and payable immediately; provided, however, that if any Senior
Indebtedness is outstanding pursuant to the Credit Agreement, then all the new
notes shall be due and payable upon the earlier of (x) the day that is five
business days after the provision to the issuers and the Credit Agent of such
written notice of acceleration unless such Event of Default is cured or waived
prior to such date and (y) the date of acceleration of any Senior Indebtedness
under the Credit Agreement. In the event of a declaration of acceleration
because an event of default described in clause (4) of the immediately preceding
paragraph has occurred and is continuing, such declaration of acceleration shall
be automatically annulled if such payment default is cured or waived or the
holders of the Indebtedness which is the subject of such Event of Default have
rescinded their declaration of acceleration in respect of such Indebtedness
within 60 days thereof and the trustee has received written notice of such cure,
waiver or rescission and no other Event of Default described in clause (4) of
the preceding paragraph has occurred and is continuing with respect to which 60
days have elapsed since the declaration of acceleration of the Indebtedness
which is the subject thereof (without rescission of the declaration of
acceleration of such indebtedness). Upon an Event of Default arising from
certain events of bankruptcy or insolvency, the unpaid principal of and any
accrued and unpaid interest on all the new notes will immediately become due and
payable without further action or notice.
Holders of the new notes may not enforce the indenture or the new notes
except as provided in the indenture. Subject to certain limitations, holders of
a majority in principal amount of the new notes then outstanding may direct the
trustee in its exercise of any trust or power.
The trustee may withhold from holders of the new notes notice of any
continuing Default or Event of Default (except a default or event of default in
payment of principal or interest) if it determines in good faith that
withholding notice is in the interests of such holders.
The holders of a majority in aggregate principal amount of the new notes
then outstanding may on behalf of the holders of all of the new notes waive any
past Default or Event of Default under the indenture and its consequences,
except a continuing Default or Event of Default in the payment of the principal
of or interest on the new notes.
The issuers are required to deliver to the trustee annually a statement
regarding compliance with the indenture, and, upon an officer of an issuer
becoming aware of any event of default or of certain defaults, a statement
specifying such event of default or default and what action the issuers are
taking or propose to take with respect thereto.
Recourse Against Incorporators, Officers, Directors And Stockholders
No recourse shall be had against any incorporator, officer, director or
stockholder, as such, of Denny's Corporation or Denny's Holdings for any
obligation under the new notes or the indenture, and each holder of the new
notes by accepting a new note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the new notes. Nothing
in this provision limits the liability, if any, of any such incorporator,
officer, director or stockholder, as such, under the federal securities laws.
Transfer And Exchange
The issuers may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange or
registration of transfer of new notes. No service charge will be made for any
registration of transfer or exchange of the new notes.
The trustee is not required to transfer or exchange any new notes selected
for redemption except, in the case of any new note where public notice has been
given that such new note is to be redeemed in part, the portion thereof not so
to be redeemed. Also, the trustee is not required to transfer or exchange any
new note for a period of 15 days before the mailing of a notice of redemption of
new notes to be redeemed.
43
The registered holder of a new note will be treated as its owner for all
purposes.
Satisfaction And Discharge
The indenture and the new notes provide that the indenture shall cease to
be of further effect (except for specified rights of registration of transfer
and exchange; the issuers' right of optional redemption; substitution of
mutilated, defaced, destroyed, lost or stolen new notes; rights of holders to
receive payments of principal and interest on the new notes; the rights,
obligations and immunities of the trustee under the indenture; rights of note
holders as beneficiaries of the indenture with respect to the property so
deposited with the trustee payable to all or any of them; and the obligation of
the issuers to maintain an office or agency for payment of the new notes), if at
any time:
(a) the issuers shall have paid or caused to be paid the principal
of and interest on all of the new notes outstanding, as and when the same
shall have become due and payable, or
(b) the issuers shall have delivered to the trustee for cancellation
all new notes previously authenticated (subject to specified exceptions),
or
(c) all new notes not previously cancelled or delivered to the trustee
for cancellation shall have become due and payable, or are by their terms
to become due and payable within one year, or are to be called for
redemption within one year under arrangements satisfactory to the trustee
for the giving of notice of redemption, and the issuers shall deposit with
the trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the new notes (other than any that have been
destroyed, lost or stolen and have been replaced or paid as provided in the
indenture) not previously cancelled or delivered to the trustee for
cancellation, including principal and interest due or to become due to such
date of maturity or redemption date, as the case be, (but excluding,
however, the amount of any moneys for the payment of principal of or
interest on the new notes previously repaid to the issuers pursuant to
specified provisions of the indenture or unclaimed property or similar
laws), or
(d) the issuers shall also pay or cause to be paid all other sums
payable under the indenture by the issuers.
In addition, the issuers must deliver an Officers' Certificate and an
Opinion of Counsel to the trustee indicating that they have complied with all
conditions precedent to obtaining satisfaction and discharge under this
provision.
Defeasance
The indenture and the new notes provide that the issuers will be deemed to
be discharged from any and all obligations in respect of the new notes (except
for certain obligations to register the transfer, substitution or exchange of
new notes to replace stolen, lost or mutilated new notes and to maintain paying
agencies, and except for the right of the holders of the new notes to receive
payments of principal, premium, if any, and interest on the new notes from the
defeasance trust, and the rights, obligations and immunities of the trustee)
within 91 days after applicable conditions have been satisfied, or that the
issuers may terminate their obligations under certain covenants in the indenture
upon the satisfaction of applicable conditions, including, in either case, upon
the deposit with the trustee, in trust, of money and/or U.S. Government
obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and each installment of
interest on the new notes on the stated maturity of such payments or on a
selected date of redemption in accordance with the terms of the indenture and
the new notes. Such a trust may only be established if, among other things, the
issuers have delivered to the trustee either (1) an opinion of counsel to the
effect that holders of the new notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such deposit, discharge or
covenant defeasance and will be subject to U.S. federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit, discharge or covenant defeasance had not occurred or (2) a
private letter ruling to such effect directed to the trustee received from the
Internal Revenue Service.
Modification of Indenture
With the consent of the holders of not less than a majority in aggregate
principal amount of the new notes at the time outstanding, the issuers, when
authorized by a resolution of their respective boards of directors, and the
trustee may, from
44
time to time and at any time, enter into an indenture or indentures
supplemental to the indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the indenture or
of any supplemental indenture or of modifying in any manner the rights of the
holders of the new notes; provided that no such supplemental indenture shall
(a) extend the final maturity of any new notes, reduce the principal amount
thereof, reduce the rate or extend the time of payment of interest thereon, or
reduce the premium, if any, payable thereon, or reduce any amount payable on
redemption thereof, or impair or affect the right of any holder to institute
suit for the payment thereof, or waive a default in the payment of principal
of, premium, if any, or interest on any new notes, change the currency of
payment of principal of, premium, if any, or interest on any new notes, or
modify any provision in the indenture with respect to the priority of the new
notes in right of payment without the consent of the holder of each new note so
affected, or (b) reduce the aforesaid percentage of new notes, the consent of
the holders of which is required for any such supplemental indenture, without
the consent of the holders of each new note then outstanding. The indenture
also contains provisions permitting the issuers and the trustee to enter into
supplemental indentures for certain limited purposes without the consent of any
holders of the new notes.
Concerning the Trustee
U.S. Bank National Association is acting as the trustee under the
indenture and will be the paying and registrar for the new notes.
45
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
United States Tax Consequences
Alston & Bird LLP, counsel to the issuers, has advised us that the
following reflects its opinion as to the material United States federal income
tax consequences associated with the exchange of the old notes for the new notes
pursuant to the exchange offer and the ownership and disposition of the new
notes. Except where noted, this discussion deals only with those holders who
hold the old notes and new notes as capital assets and does not deal with
special situations, such as those of brokers, dealers in securities or
currencies, financial institutions, tax-exempt entities, insurance companies,
persons liable for alternative minimum tax, United States persons whose
functional currency is not the U.S. dollar, persons holding old notes or new
notes as part of a hedging, integrated, conversion or constructive sale
transaction or a straddle, and traders in securities that elect to use a
mark-to-market method of accounting for their securities holdings. The following
summary does not address any state, local or non-United States tax consequences
or United States federal tax consequences (such as estate or gift tax) other
than those pertaining to the income tax.
Furthermore, this discussion is based on provisions of the Internal Revenue
Code of 1986, as amended, the treasury regulations promulgated thereunder, and
administrative and judicial interpretations of the foregoing, all as in effect
as of the date hereof and all of which are subject to change, possibly with
retroactive effect. Moreover, substantial uncertainty, resulting from a lack of
definitive judicial or administrative authority and interpretation, exists with
respect to various aspects of the exchange offer, as discussed below. This
discussion represents our counsel's legal judgment, which will not be binding in
any manner on the Internal Revenue Service or the courts. No ruling has been or
will be requested from the IRS on any tax matters relating to the tax
consequences of the exchange offer, and no assurance can be given that the IRS
will not successfully challenge certain of the conclusions set forth below. This
discussion does not address tax consequences of the purchase, ownership, or
disposition of the new notes to holders of new notes other than those holders
who acquired their new notes pursuant to the exchange offer. If a partnership
holds the old notes or new notes, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership.
Partners of partnerships that hold old notes or will acquire new notes pursuant
to the exchange offer should consult their own tax advisors.
As used herein, the term U.S. Holder means a holder of old notes or new
notes that is, for United States federal income tax purposes:
(1) an individual who is a citizen or resident of the United States;
(2) a corporation or partnership created or organized in or under the
law of the United States or of any political subdivision thereof;
(3) an estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its source; or
(4) a trust if (a) a United States court is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust or (b) the trust was in existence on August 20, 1996, was treated
as a United States person prior to that date, and elected to continue to be
treated as a United States person.
Each U.S. Holder and non-U.S. Holder should consult its tax advisor
regarding the particular tax consequences to such holder of the exchange of the
old notes for the new notes pursuant to the exchange offer, the ownership and
disposition of the old notes and/or the new notes, as well as any tax
consequences that may arise under the laws of any other relevant foreign, state,
local, or other taxing jurisdiction.
U.S. Holders
Exchange Offer
The exchange of old notes for new notes should not be considered a taxable
exchange for federal income tax purposes because the new notes should not
constitute a material modification of the terms of the old notes. Accordingly,
such
46
exchange should have no federal income tax consequences to a U.S. Holder,
and the basis of a U.S. Holder in a new note will be the same as the adjusted
tax basis in the old note exchanged therefor.
Payment of Interest
Stated interest payable on the new notes generally will be included in the
gross income of a U.S. Holder as ordinary interest income at the time accrued or
received, in accordance with such U.S. Holder's method of accounting for United
States federal income tax purposes.
Amortizable Bond Premium
Generally, if the tax basis of a debt obligation exceeds its stated
redemption price at maturity, the holder may elect to treat such excess as
amortizable bond premium, in which case the amount required to be included in
income each year with respect to interest on the obligation will be reduced by
the amount of amortizable bond premium allocable to such year, determined on the
basis of the obligation's yield to maturity. Any election to amortize bond
premium applies to all taxable debt obligations held at the beginning of the
first taxable year to which the election applies or acquired thereafter, and may
not be revoked without the consent of the Internal Revenue Service.
Sale, Exchange and Retirement of Notes
A U.S. Holder generally will recognize capital gain or loss upon the sale,
exchange, retirement at maturity, or other taxable disposition of the new notes
equal to the difference between the amount realized by such holder (less an
amount equal to any accrued and unpaid interest not previously included in
income, which will be treated as ordinary interest income) and such holder's
adjusted tax basis in the notes. The deductibility of capital losses may be
subject to limitations.
A U.S. Holder, other than an initial purchaser of the old notes, should be
aware that a sale or other disposition of the new notes may be affected by the
market discount provisions of the code. These rules generally provide that if a
U.S. Holder of the old notes purchased such notes, subsequent to the original
offering, at a market discount in excess of a statutorily defined de minimis
amount, and thereafter recognizes gain upon a disposition (including a partial
redemption) of the new notes received in exchange for such old notes, the lesser
of such gain or the portion of the market discount that accrued while the old
notes and the new notes were held by such holder will be treated as ordinary
interest income at the time of disposition. The market discount rules also
provide that a U.S. Holder who acquires the new notes at a market discount may
be required to defer a portion of any interest expense that may otherwise be
deductible on any indebtedness incurred or maintained to purchase or carry the
new notes until the U.S. Holder disposes of such notes in a taxable transaction.
If a U.S. Holder of the new notes elects to include market discount in income
currently, neither of the foregoing rules would apply.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of
principal and interest on the new notes and to the proceeds of the sale of new
notes made to U.S. Holders other than certain exempt recipients (such as
corporations). A backup withholding tax will apply to such payments if the U.S.
Holder fails to file a Form W-9, fails to provide a taxpayer identification
number, furnishes an incorrect taxpayer identification number, fails to certify
foreign or other exempt status from backup withholding, or fails to report in
full dividend and interest income. Backup withholding is not an additional tax.
Any amounts withheld from a payment to a U.S. Holder under the backup
withholding rules will be allowed as a credit against the holder's United States
federal income tax liability and may entitle the holder to a refund, provided
that the required information is furnished to the IRS.
Non-U.S. Holders
Subject to the discussion of backup withholding below, the interest income
and gains that a non-U.S. Holder derives in respect of the old notes and the new
notes generally will be exempt from United States federal income taxes,
including withholding tax.
Payments of interest or principal in respect of the new notes to a holder
that is a non-U.S. Holder will not be subject to withholding of United States
federal income tax, provided that, in the case of payments of interest:
47
(1) the income is effectively connected with the conduct by such non-U.S.
Holder of a trade or business carried on in the United States and the non-U.S.
Holder complies with applicable identification requirements (described below
under "Backup Withholding and Information Reporting"); or
(2) the non-U.S. Holder and/or each securities clearing organization, bank,
or other financial institution that holds the new notes on behalf of such
non-U.S. Holder in the ordinary course of its trade or business, in the chain
between the non-U.S. Holder and the paying agent, complies with applicable
identification requirements (described below under "Backup Withholding and
Information Reporting") to establish that the holder is a non-U.S. Holder and in
addition, that the following requirements of the portfolio interest exemption
under the code are satisfied:
o the non-U.S. Holder does not actually or constructively own 10%
or more of the voting stock of Denny's Corporation or Denny's
Holdings;
o the non-U.S. Holder is not a controlled foreign corporation with
respect to Denny's Corporation and Denny's Holdings; and the
non-U.S. Holder is not a bank whose receipt of interest on the
new notes is described in Section 881(c)(3)(A) of the code.
Any gain realized by a non-U.S. Holder on the sale or exchange of the new notes
generally will be exempt from U.S. federal income tax, including withholding
tax, unless:
(1) such gain is effectively connected with the conduct of a trade or
business in the United States (or if a tax treaty applies, such gain is
attributable to a permanent establishment of the non-U.S. Holder);
(2) in the case of a non-U.S. Holder that is an individual, such
non-U.S. Holder is present in the United States for 183 days or more
during the taxable year in which such sale, exchange, or other
disposition occurs; or
(3) in the case of gain representing accrued interest, the
requirements of the portfolio interest exemption are not satisfied.
If the interest income paid on the new notes or gain recognized from a sale
or exchange of the new notes is effectively connected with the conduct of a
trade or business in the United States by a non-U.S. Holder, such non-U.S.
holder will generally be taxed under the same rules that govern the taxation of
a U.S. Holder. In addition, if such holder is a foreign corporation, it may be
subject to an additional branch profits tax.
Backup Withholding and Information Reporting
Payment of the proceeds of a sale of a note or payment of interest will be
subject to information reporting requirements and backup withholding tax unless
the beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption provided that the paying agent
does not actually know, or has reason to know, that the holder is actually a
U.S. Holder). Recently promulgated treasury regulations provide certain
presumptions under which a non-U.S. Holder will be subject to backup withholding
and information reporting unless such holder certifies as to its non-U.S. status
or otherwise establishes an exemption. In addition, the recent treasury
regulations change certain procedural requirements related to establishing a
holder's non-United States status. Non-U.S. Holders should consult with their
tax advisors regarding the above issues.
Any amounts withheld from a payment to a non-U.S. Holder under the backup
withholding rules will be allowed as a credit against the holder's United States
federal income tax liability and may entitle the holder to a refund, provided
that the required information is furnished to the IRS.
Applicable identification requirements generally will be satisfied if there
is delivered to a securities clearing organization either directly, or
indirectly, by the appropriate filing of a Form W-8IMY:
(1) IRS Form W-8BEN signed under penalties of perjury by the non-U.S.
Holder, stating that such holder of the new notes is not a United
States person and providing such non-U.S. Holder's name and
address;
48
(2) with respect to non-U.S. Holders of the new notes residing in a
country that has a tax treaty with the United States who seek an exemption
or reduced tax rate (depending on the treaty terms), Form W-8BEN. If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the non-U.S. Holder qualifies under the portfolio interest
rules set forth in the code and files a W-8BEN; or
(3) with respect to interest income "effectively connected" with the
conduct by such non-U.S. Holder of a trade or business carried on in the
United States, Form W-8ECI;
provided that in any such case:
o the applicable form is delivered pursuant to applicable
procedures and is properly transmitted to the United States
withholding agent, otherwise required to withhold tax; and
o none of the entities receiving the form has actual knowledge or
reason to know that the holder is a U.S. Holder.
LEGAL MATTERS
Certain legal matters in connection with the exchange offer will be passed
upon for us by Alston & Bird LLP, Charlotte, North Carolina.
EXPERTS
The financial statements as of December 27, 2000 and December 26, 2001, and
for each of the three fiscal years in the period ended December 26, 2001
included and incorporated by reference in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
included and incorporated by reference herein, and has been so included and
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
49
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Denny's Corporation
Denny's Corporation is a Delaware corporation. Reference is made to Section
102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) pursuant
to Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (4) for any
transaction from which a director derived an improper personal benefit.
Reference is also made to Section 145 of the DGCL, which provides that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation or is or was serving at the
request of such corporation as an officer, director, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such officer, director, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify officers, directors, employees and agents in
an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer, director, employee or agent is adjudged to be liable to the
corporation. Where an officer, director, employee or agent is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses that such officer, director,
employee or agent actually and reasonably incurs.
Denny's Corporation's Restated Certificate of Incorporation and By-Laws
provide for indemnification of its officers and directors to the full extent
permitted under Delaware law. Specifically, Articles Sixth and Seventh of the
Restated Certificate of Incorporation provide for indemnification of officers
and directors to the extent permitted by Section 145 of the DGCL and the
elimination of liability of directors to the extent permitted by Section
102(b)(7) of the DGCL, and Article 5, Section 14 of the By-Laws provides for
indemnification of officers and directors to the extent permitted by Section 145
of the DGCL. Consequently, Denny's Corporation maintains officers' and
directors' liability insurance for the benefit of its officers and directors.
The Employment Agreement dated as of January 7, 1998 between Denny's Corporation
and James B. Adamson and the Employment Agreement dated January 2, 2001 between
Denny's Corporation and Nelson J. Marchioli also provide for the indemnification
of Messrs. Adamson and Marchioli by Denny's Corporation to the extent permitted
by Delaware law and, in connection therewith, calls for the advancement of
attorneys' fees and expenses (subject to repayment in certain circumstances).
Denny's Holdings, Inc.
Denny's Holdings, Inc. is a New York corporation. Article 7, Section 722 of
the New York Business Corporation Law (the "Business Corporation Law") states
that a corporation may indemnify any person made, or threatened to be made, a
party to an action or proceeding (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for
II-1
any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
Section 722 also states that a corporation may indemnify any person made,
or threatened to be made, a party to an action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with an appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation, except
that no indemnification under this paragraph shall be made in respect of (1) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (2) any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
court in which the action was brought, or, if no action was brought, any court
of competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Officers and directors of Denny's Holdings, Inc. are covered by the
officers' and directors' liability insurance maintained by Denny's Corporation.
Officers and directors of Denny's Holdings, Inc. are also covered by the
indemnification provisions of Denny's Corporation's Restated Certificate of
Incorporation and By-Laws (as described above) by virtue of the fact that such
persons are serving in such capacities at the request of the Denny's
Corporation.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit
No. Description
------- -----------
2.1 - Joint Plan of Reorganization of Flagstar Companies,
Inc. ("FCI"), and Flagstar Corporation
("Flagstar"), as amended November 7, 1997 and as
confirmed by order of the United States Bankruptcy
Court for the District of South Carolina entered
November 12, 1997 (incorporated by reference to
Exhibit 2.1 to FCI's Form 8-K, dated November 12,
1997).
4.1 - Indenture relating to the 111/4% Senior Notes
(including the form of security) dated as of
January 7, 1998, between Denny's Corporation and
First Trust National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to
Denny's Corporation's Form 8-K filed January 15,
1998 (the "1998 Form 8-K")).
4.2 - Warrant Agreement (including the form of warrant)
(incorporated by reference to Exhibit 10.1 to
the Form 8-A of Denny's Corporation filed January
7, 1998 relating to Denny's Corporation's
common stock warrants).
4.3 - Rights Agreement, dated as of December 15, 1998,
between Denny's Corporation and Continental
Stock Transfer and Trust Company, as Rights Agent
(including Form of Right Certificate)
(incorporated by reference to Exhibit 1 to the
Form 8-A of Denny's Corporation filed December
15, 1998 relating to preferred stock purchase
rights).
4.4 - Indenture dated April 15, 2002, relating to the
123/4% Senior Notes (including the form of
security) among Denny's Corporation and Denny's
Holdings, Inc. and U.S. Bank National
Association, as Trustee (incorporated by reference
to Exhibit 4.6 of Denny's Corporation's Form
S-4/A filed December 28, 2001).
5.1 - Form of Opinion of Alston & Bird LLP regarding
legality of the New Notes.
8.1 - Form of Opinion of Alston & Bird LLP regarding tax
matters.
10.1 - Consent Order dated March 26, 1993 between the U.S.
Department of Justice, Flagstar
II-2
and Denny's, Inc.(incorporated by reference to
Exhibit 10.42 to the Registration Statement on
Form S-2 (No.33-49843) of Flagstar (the "Form
S-2")).
10.2 - Fair Share Agreement dated July 1, 1993 between
Flagstar and the NAACP (incorporated by reference
to Exhibit 10.43 to the Form S-2).
10.3 - Amended Consent Decree dated May 24, 1994
(incorporated by reference to Exhibit 10.50 to
FCI's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Form 10-K")).
10.4 - Consent Decree dated May 24, 1994 among certain
named claimants, individually and on behalf of all
others similarly situated, Flagstar and Denny's,
Inc. (incorporated by reference to Exhibit 10.51 to
the 1994 Form 10-K).
10.5 - Employment Agreement, dated as of January 10,
1995, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.42 to the
1994 Form 10-K).
10.6 - Amendment to Employment Agreement, dated as of
February 27, 1995, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.44 to the
1994 Form 10-K).
10.7 - Second Amendment to Employment Agreement, dated
December 31, 1996, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.47 to
FCI's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K")).
10.8 - Employment Agreement between Denny's Corporation
and James B. Adamson, amended and restated as of
January 7, 1998 (incorporated by reference to
Exhibit 10.1 to Denny's Corporation's Quarterly
Report on Form 10-Q for the quarter ended March 31,
2002 (the "1999 First Quarter Form 10-Q")).
10.9 - Addendum Agreement, dated April 7, 2000, between
Denny's Corporation and James B. Adamson
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 29, 2000 (the "2000
First Quarter Form 10-Q")).
10.10 - Amendment, dated February 6, 2001, to Addendum
Agreement between Denny's Corporation and James B.
Adamson dated April 7, 2000 (incorporated by
reference to Exhibit 10.2 to Denny's Corporation's
Quarterly Report on Form 10-Q for the quarter ended
March 28, 2001 (the "2001 First Quarter Form
10-Q")).
10.11 - Form of Agreement dated December 3, 1997
providing certain retention incentives and
severance benefits for company management
(incorporated by reference to Exhibit 10.2 to the
1999 First Quarter Form 10-Q).
10.12 - Credit Agreement, dated January 7, 1998, among
Denny's, Inc., El Pollo Loco, Inc., Flagstar
Enterprises, Inc., Flagstar Systems, Inc. and
Quincy's Restaurants, Inc., as borrowers, Denny's
Corporation, as a guarantor, the lenders named
therein, and The Chase Manhattan Bank, as
administrative agent (the "Advantica Credit
Agreement") (incorporated by reference to Exhibit
10.1 to the 1998 Form 8-K).
10.13 - Amendment No. 1 and Waiver, dated as of March 16,
1998, relating to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.53 to the
Registration Statement (No. 333-4581) of Denny's
Corporation).
10.14 - Amendment No. 2 and Waiver, dated as of May 21,
1998, relating to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended July 1, 1998).
10.15 - Amendment No. 3 and Waiver, dated as of July 16,
1998, to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
10.16 - Amendment No. 4, dated as of November 12, 1998,
to the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.35 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 30, 1998).
II-3
10.17 - Amendment No. 5, dated March 12, 1999, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.3 to the 1999 First
Quarter Form 10-Q).
10.18 - Amendment No. 6, dated December 20, 1999, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.37 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 29, 1999).
10.19 - Amendment No. 7, dated as of June 20, 2000, to
the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.3 to Denny's Corporation's
Quarterly Report on Form 10-Q for the quarter ended
June 28, 2000 (the "2000 Second Quarter Form
10-Q")).
10.20 - Amendment No. 8, dated as of December 26, 2000,
to the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.26 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 27, 2000 (the "2000 Form 10-K")).
10.21 - Amendment No. 9, dated October 18, 2001, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.29 to Denny's Corporation's
2001 S-4/A filed December 28, 2001).
10.22 - Waiver and Agreement, dated as of June 12, 2002
(Amendment No. 10) to the Advantica Credit
Agreement (incorporated by reference to Exhibit
10.1 to Denny's Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 26, 2001
(the "2001 Third Quarter Form 10-Q")).
10.23 - Waiver and Agreement, dated as of June 27, 2002
(Amendment No. 11) to the Advantica Credit
Agreement (incorporated by reference to Exhibit
10.2 to the 2001 Third Quarter Form 10-Q).
10.24 - Denny's Corporation's Director Stock Option Plan,
as adopted January 28, 1998 and amended through
January 24, 2001 (incorporated by reference to
Exhibit 10.1 to the 2001 First Quarter 10-Q).
10.25 - Merger Amendment, dated March 15, 1999, to the
Denny's Corporation' Stock Option Plan and the
Denny's Corporation's Officer Stock Option Plan
(incorporated by reference to Exhibit 10.4 to the
1999 First Quarter Form 10-Q).
10.26 - Denny's Corporation's Stock Option Plan as
amended through May 19, 1999 (incorporated by
reference to Exhibit 10.2 to the 2000 Second
Quarter Form 10-Q).
10.27 - Form of Agreement, dated February 9, 2000,
providing certain retention incentives and
severance benefits for company management
(incorporated by reference to Exhibit 10.2 to the
2000 First Quarter Form 10-Q).
10.28 - Employment Agreement dated January 2, 2001 between
Denny's Corporation and Nelson J. Marchioli.
(incorporated by reference to Exhibit 10.3 to the
2001 First Quarter Form 10-Q).
10.29 - Stipulation and Agreement of Settlement, dated
February 19, 2002, by and among FRD, the Creditors
Committee, Denny's Corporation, Denny's, Inc.,
FRI-M Corporation, Coco's and Carrows, and as filed
with the Bankruptcy Court on February 19, 2002
(incorporated by reference to Exhibit 99.1 to
Denny's Corporation's Form 8-K dated February 19,
2001).
10.30 - Form of Note Exchange and Registration Rights
Agreement entered into among Denny's Corporation,
Denny's Holdings, Inc. and each holder of old
notes.
10.31 - Credit Agreement, dated as of December 16, 2002,
among Denny's, Inc. and Denny's Realty, Inc.,
as borrowers, Denny's Corporation, Denny's
Holdings, Inc. and DFO, Inc., as guarantors, the
lenders named therein, JPMorgan Chase Bank, as
administrative agent, Foothill Capital
Corporation, as syndication agent, and J.P. Morgan
Securities Inc., as sole advisor, sole lead
arranger and sole bookrunner (incorporated by
reference to Exhibit 99.1 to Denny's Corporation's
Form 8-K dated December 19, 2002).
10.32 - Guarantee and Collateral Agreement, dated as of
December 16, 2002, among Denny's Corporation,
Denny's Holdings, Inc., Denny's, Inc., Denny's
Realty, Inc. and each other subsidiary loan party
and JPMorgan Chase Bank, as collateral agent
(incorporated by reference to Exhibit 99.2 to
Denny's Corporation's Form 8-K dated December 19,
2002).
12.1 - Computation of Ratio of Earnings to Fixed Charges
II-4
13.1 - Denny's Corporation's Quarterly Report on Form
10-Q for the quarter ended September 25, 2002.
21.1 - Subsidiaries of Denny's Corporation (incorporated
by reference to Exhibit 21 to Denny's Annual
Report on Form 10-K for the year ended December
26, 2001).
23.1 - Consent of Deloitte & Touche LLP.
23.2 - Consent of Alston & Bird LLP (included in Exhibits
5.1 and 8.1).
24.1 - Powers of Attorney for the directors and officers
of Denny's Corporation and Denny's Holdings,
Inc. (included on pages II-8 and II-9 hereof).
25.1 - Statement of Eligibility of Trustee on Form T-1
(incorporated by reference to Exhibit 25.1 of
Denny's Corporation's Form S-4/A filed December 6,
2001).
99.1 - Form of Letter of Transmittal for the Old Notes.
99.2 - Form of Notice of Guaranteed Delivery for the Old
Notes.
99.3 - Form of Guidelines for Certification of Taxpayer
Identification Number or Substitute Form W-9.
II-5
(b) Financial Statement Schedules:
None.
Item 22. Undertakings
Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted against the Registrant by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Spartanburg, State of
South Carolina and the City of New York, State of New York, respectively, on
December 20, 2002.
DENNY'S CORPORATION
By: /s/ Rhonda J. Parish
---------------------
Rhonda J. Parish
Executive Vice President,
General Counsel and Secretary
DENNY'S HOLDINGS, INC.
By: /s/ James H. Allyn
--------------------
James H. Allyn
Vice President and Secretary
II-7
DENNY'S CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Denny's Corporation hereby severally constitute Rhonda J. Parish
and Andrew F. Green, and each of them singly, our true and lawful attorneys with
full power to them, and each of them singly, to sign for us and in our names in
the capacities indicated below, the registration statement filed herewith and
any and all amendments to said registration statement, including any
registration statement filed pursuant to Rule 462(b), and generally to do all
such things in our names and in our capacities as officers and directors to
enable Denny's Corporation to comply with the provisions of the Securities Act
of 1933, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signature as they may be signed by our said
attorneys, or any of them, to said registration statement and any and all
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on December 20, 2002.
Signature Title
/s/ Nelson J. Marchioli President and Chief Executive Officer, Director
---------------------------------------------------------- (Principal Executive Officer)
Nelson J. Marchioli
/s/ Andrew F. Green Senior Vice President (Principal Financial Officer
---------------------------------------------------------- and Principal Accounting Officer)
Andrew F. Green
/s/ Vera K. Farris Director
----------------------------------------------------------
Vera K. Farris
/s/ Darrell Jackson Director
----------------------------------------------------------
Darrell Jackson
/s/ Robert E. Marks Director
----------------------------------------------------------
Robert E. Marks
/s/ Lloyd I. Miller, III Director
----------------------------------------------------------
Lloyd I. Miller, III
/s/ Charles F. Morgan Director
----------------------------------------------------------
Charles F. Moran
/s/ Elizabeth A. Sanders Director
----------------------------------------------------------
Elizabeth A. Sanders
/s/ Donald R. Shepherd Director
----------------------------------------------------------
Donald R. Shepherd
/s/ Raul R. Tapia Director
----------------------------------------------------------
Raul R. Tapia
II-8
DENNY'S HOLDINGS, INC.
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Denny's Holdings, Inc. hereby severally constitute James H, Allyn
our true and lawful attorney with full power to him to sign for us and in our
names in the capacities indicated below, the registration statement filed
herewith and any and all amendments to said registration statement, including
any registration statement filed pursuant to Rule 462(b), and generally to do
all such things in our names and in our capacities as officers and directors to
enable Denny's Holdings, Inc. to comply with the provisions of the Securities
Act of 1933, and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signature as they may be signed by our said
attorney to said registration statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on December 20, 2002.
Signature Title
/s/ Samuel S. Sontag President and Treasurer, Director (Principal Executive
---------------------------------------------------------- Officer, Principal Financial Officer and Principal
Samuel S. Sontag Accounting Officer)
/s/ James H. Allyn Director
----------------------------------------------------------
James H. Allyn
II-9
EXHIBIT INDEX
Exhibit
No. Description
2.1 - Joint Plan of Reorganization of Flagstar Companies,
Inc. ("FCI"), and Flagstar Corporation
("Flagstar"), as amended November 7, 1997 and as
confirmed by order of the United States
Bankruptcy Court for the District of South
Carolina entered November 12, 1997 (incorporated by
reference to Exhibit 2.1 to FCI's Form 8-K, dated
November 12, 1997).
4.1 - Indenture relating to the 111/4% Senior Notes
(including the form of security) dated as of
January 7, 1998, between Denny's Corporation and
First Trust National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to
Denny's Corporation's Form 8-K filed January 15,
1998 (the "1998 Form 8-K")).
4.2 - Warrant Agreement (including the form of warrant)
(incorporated by reference to Exhibit 10.1 to
the Form 8-A of Denny's Corporation filed January
7, 1998 relating to Denny's Corporation's
common stock warrants).
4.3 - Rights Agreement, dated as of December 15, 1998,
between Denny's Corporation and Continental
Stock Transfer and Trust Company, as Rights Agent
(including Form of Right Certificate)
(incorporated by reference to Exhibit 1 to the
Form 8-A of Denny's Corporation filed December
15, 1998 relating to preferred stock purchase
rights).
4.4 - Indenture dated April 15, 2002, relating to the
123/4% Senior Notes (including the form of
security) among Denny's Corporation and Denny's
Holdings, Inc. and U.S. Bank National
Association, as Trustee (incorporated by reference
to Exhibit 4.6 of Denny's Corporation's Form
S-4/A filed December 28, 2001).
5.1 - Form of Opinion of Alston & Bird LLP regarding
legality of the New Notes.
8.1 - Form of Opinion of Alston & Bird LLP regarding tax
matters.
10.1 - Consent Order dated March 26, 1993 between the U.S.
Department of Justice, Flagstar and Denny's,
Inc. (incorporated by reference to Exhibit 10.42
to the Registration Statement on Form S-2 (No.
33-49843) of Flagstar (the "Form S-2")).
10.2 - Fair Share Agreement dated July 1, 1993 between
Flagstar and the NAACP (incorporated by reference
to Exhibit 10.43 to the Form S-2).
10.3 - Amended Consent Decree dated May 24, 1994
(incorporated by reference to Exhibit 10.50 to
FCI's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Form 10-K")).
10.4 - Consent Decree dated May 24, 1994 among certain
named claimants, individually and on behalf of all
others similarly situated, Flagstar and Denny's,
Inc. (incorporated by reference to Exhibit 10.51 to
the 1994 Form 10-K).
10.5 - Employment Agreement, dated as of January 10,
1995, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.42 to the
1994 Form 10-K).
10.6 - Amendment to Employment Agreement, dated as of
February 27, 1995, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.44 to the
1994 Form 10-K).
10.7 - Second Amendment to Employment Agreement, dated
December 31, 1996, between FCI and James B. Adamson
(incorporated by reference to Exhibit 10.47 to
FCI's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K")).
10.8 - Employment Agreement between Denny's Corporation
and James B. Adamson, amended and restated as of
January 7, 1998 (incorporated by reference to
Exhibit 10.1 to Denny's Corporation's Quarterly
Report on Form 10-Q for the quarter ended March 31,
2002 (the "1999 First Quarter Form 10-Q")).
10.9 - Addendum Agreement, dated April 7, 2000, between
Denny's Corporation and James B. Adamson
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 29, 2000 (the "2000
First Quarter Form 10-Q")).
10.10 - Amendment, dated February 6, 2001, to Addendum
Agreement between Denny's Corporation and James B.
Adamson dated April 7, 2000 (incorporated by
reference to Exhibit 10.2 to Denny's Corporation's
Quarterly Report on Form 10-Q for the quarter ended
March 28, 2001 (the "2001 First Quarter Form
10-Q")).
10.11 - Form of Agreement dated December 3, 1997
providing certain retention incentives and
severance benefits for company management
(incorporated by reference to Exhibit 10.2 to the
1999 First Quarter Form 10-Q).
10.12 - Credit Agreement, dated January 7, 1998, among
Denny's, Inc., El Pollo Loco, Inc., Flagstar
Enterprises, Inc., Flagstar Systems, Inc. and
Quincy's Restaurants, Inc., as borrowers, Denny's
Corporation, as a guarantor, the lenders named
therein, and The Chase Manhattan Bank, as
administrative agent (the "Advantica Credit
Agreement") (incorporated by reference to Exhibit
10.1 to the 1998 Form 8-K).
10.13 - Amendment No. 1 and Waiver, dated as of March 16,
1998, relating to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.53 to the
Registration Statement (No. 333-4581) of Denny's
Corporation).
10.14 - Amendment No. 2 and Waiver, dated as of May 21,
1998, relating to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended July 1, 1998).
10.15 - Amendment No. 3 and Waiver, dated as of July 16,
1998, to the Advantica Credit Agreement
(incorporated by reference to Exhibit 10.1 to
Denny's Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
10.16 - Amendment No. 4, dated as of November 12, 1998,
to the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.35 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 30, 1998).
10.17 - Amendment No. 5, dated March 12, 1999, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.3 to the 1999 First
Quarter Form 10-Q).
10.18 - Amendment No. 6, dated December 20, 1999, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.37 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 29, 1999).
10.19 - Amendment No. 7, dated as of June 20, 2000, to
the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.3 to Denny's Corporation's
Quarterly Report on Form 10-Q for the quarter ended
June 28, 2003 (the "2000 Second Quarter Form
10-Q")).
10.20 - Amendment No. 8, dated as of December 26, 2000,
to the Advantica Credit Agreement (incorporated by
reference to Exhibit 10.26 to Denny's Corporation's
Annual Report on Form 10-K for the year ended
December 27, 2000 (the "2000 Form 10-K")).
10.21 - Amendment No. 9, dated October 18, 2001, to the
Advantica Credit Agreement (incorporated by
reference to Exhibit 10.29 to Denny's Corporation's
2001 S-4 filed December 28, 2001).
10.22 - Waiver and Agreement, dated as of June 12, 2002
(Amendment No. 10) to the Advantica Credit
Agreement (incorporated by reference to Exhibit
10.1 to Denny's Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 26, 2001
(the "2001 Third Quarter Form 10-Q")).
10.23 - Waiver and Agreement, dated as of June 27, 2002
(Amendment No. 11) to the Advantica Credit
Agreement (incorporated by reference to Exhibit
10.2 to the 2001 Third Quarter Form 10-Q).
10.24 - Denny's Corporation's Director Stock Option Plan,
as adopted January 28, 1998 and amended through
January 24, 2001 (incorporated by reference to
Exhibit 10.1 to the 2001 First Quarter 10-Q).
10.25 - Merger Amendment, dated March 15, 1999, to the
Denny's Corporation' Stock Option Plan and the
Denny's Corporation's Officer Stock Option Plan
(incorporated by reference to Exhibit 10.4 to the
1999 First Quarter Form 10-Q).
10.26 - Denny's Corporation's Stock Option Plan as
amended through May 19, 1999 (incorporated by
reference to Exhibit 10.2 to the 2000 Second
Quarter Form 10-Q).
10.27 - Form of Agreement, dated February 9, 2000,
providing certain retention incentives and
severance benefits for company management
(incorporated by reference to Exhibit 10.2 to the
2000 First Quarter Form 10-Q).
10.28 - Employment Agreement dated January 2, 2001 between
Denny's Corporation and Nelson J. Marchioli.
(incorporated by reference to Exhibit 10.3 to the
2001 First Quarter Form 10-Q).
10.29 - Stipulation and Agreement of Settlement, dated
February 19, 2002, by and among FRD, the Creditors
Committee, Denny's Corporation, Denny's, Inc.,
FRI-M Corporation, Coco's and Carrows, and as filed
with the Bankruptcy Court on February 19, 2002
(incorporated by reference to Exhibit 99.1 to
Denny's Corporation's Form 8-K dated February 19,
2001).
10.30 - Form of Note Exchange and Registration Rights
Agreement entered into among Denny's Corporation,
Denny's Holdings, Inc. and each holder of old
notes.
10.31 - Credit Agreement, dated as of December 16, 2002,
among Denny's, Inc. and Denny's Realty, Inc.,
as borrowers, Denny's Corporation, Denny's
Holdings, Inc. and DFO, Inc., as guarantors, the
lenders named therein, JPMorgan Chase Bank, as
administrative agent, Foothill Capital
Corporation, as syndication agent, and J.P. Morgan
Securities Inc., as sole advisor, sole lead
arranger and sole bookrunner (incorporated by
reference to Exhibit 99.1 to Denny's Corporation's
Form 8-K dated December 19, 2002).
10.32 - Guarantee and Collateral Agreement, dated as of
December 16, 2002, among Denny's Corporation,
Denny's, Inc., Denny's Holdings, Inc., Denny's
Realty, Inc. and each other subsidiary loan party
and JPMorgan Chase Bank, as collateral agent
(incorporated by reference to Exhibit 99.2 to
Denny's Corporation's Form 8-K dated December 19,
2002).
12.1 - Computation of Ratio of Earnings to Fixed Charges
13.1 - Denny's Corporation's Quarterly Report on Form
10-Q for the quarter ended September 25, 2002.
21.1 - Subsidiaries of Denny's Corporation (incorporated
by reference to Exhibit 21 to Denny's Annual
Report on Form 10-K for the year ended December
26, 2001).
23.1 - Consent of Deloitte & Touche LLP.
23.2 - Consent of Alston & Bird LLP (included in Exhibits
5.1 and 8.1).
24.1 - Powers of Attorney for the directors and officers
of Denny's Corporation and Denny's Holdings,
Inc. (included on pages II-8 and II-9 hereof).
25.1 - Statement of Eligibility of Trustee on Form T-1
(incorporated by reference to Exhibit 25.1 of
Denny's Corporation's Form S-4/A filed December 6,
2001).
99.1 - Form of Letter of Transmittal for the Old Notes.
99.2 - Form of Notice of Guaranteed Delivery for the Old
Notes.
99.3 - Form of Guidelines for Certification of Taxpayer
Identification Number or Substitute Form W-9.