-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nHF3hvO3+9NScCpkAPxmIyD5IvBDVhrLw/ou0PkKYIcUXf5XUHhI0SBWj0/f1CIt mMFpQjlyTIPXpqwFw2L51Q== 0000020041-94-000012.txt : 19941024 0000020041-94-000012.hdr.sgml : 19941024 ACCESSION NUMBER: 0000020041-94-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19940731 FILED AS OF DATE: 19941020 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHOCK FULL O NUTS CORP CENTRAL INDEX KEY: 0000020041 STANDARD INDUSTRIAL CLASSIFICATION: 2090 IRS NUMBER: 130697025 STATE OF INCORPORATION: NY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04183 FILM NUMBER: 94554264 BUSINESS ADDRESS: STREET 1: 370 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125320300 MAIL ADDRESS: STREET 1: 370 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 1994 OR [] TRANSITION REPORT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-4183 CHOCK FULL O' NUTS CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 13-0697025 (State of Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 370 Lexington Avenue, New York, New York 10017 (Address of Principal Executive Offices) (Zip Code) (212) 532-0300 (Registrant's Telephone Number, Including Area Code) Securities Registered Pursuant to Section 12(b) of the Act: Name of Each Exchange Title Of Each Class On Which Registered Common Stock, par value $.25 per share New York Stock Exchange 8% Convertible Subordinated Debentures, American Stock Exchange due September 15, 2006 7% Convertible Senior Subordinated Debentures, New York Stock Exchange due April 1, 2012 Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes x No Aggregate market value of the Common Stock ($.25 par value) held by nonaffiliates of the registrant as of October 13, 1994: $45,508,000 Number of Shares of Common Stock ($.25 par value) outstanding as of October 13, 1994: 10,422,000 DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual proxy statement for the year ended July 31, 1994 are incorporated by reference into Part III. PART I Item 1. BUSINESS Item 101 (a) and (c) of Regulation S-K The Company's primary business is the roasting, packing and marketing of a broad range of regular and decaffeinated, ground roast, instant and specialty coffees for the Foodservice and Retail Grocery Industries. These products are sold regionally throughout the United States and Canada under various well known trademarks, including Chock full o' Nuts, LaTouraine and Cain's. Best known among its products is Chock full o' Nuts brand premium, vacuum packed, all-method grind coffee. The Company is also one of the largest marketers of food service and private label coffees. The balance of the Company's business is derived from its Retail Restaurant and Cafe division (commencing in fiscal 1994) and from real estate operations. Incorporated in 1932, for many years, the Company's primary business was the operation of counter service restaurants, under the Chock full o' Nuts name. In 1953, the Company expanded its business by marketing the coffee made famous in its restaurants to consumers via supermarkets and other Retail Grocery outlets. Impactful advertising, featuring the "Heavenly Coffee" jingle, made Chock full o' Nuts brand premium coffee a market leader. In 1983, Management discontinued the Company's restaurant operations and concentrated its efforts on the sale of coffee and related food products. Since 1984, the Company's overall strategy has been to diversify within its core areas of strength by lessening its dependence on Retail Coffee. In December 1992, the Company acquired the stock of Cain's Coffee Co. ("Cain's") and certain trademarks related to that business. Cain's business consists primarily of sales of coffee and related products to Foodservice customers in parts of the Midwest and Southwest. Cain's also sells coffee and tea to Retail Grocery Customers using a direct store distribution system. In November 1992, the Company acquired a controlling interest in a partnership, which owns Dana Brown Private Brands, Inc., a company which markets and sells private label coffee and tea products to food retailers and distributors, located primarily in the Midwest. In December 1986, the Company acquired Greenwich Mills Company ("Greenwich"). Established in 1912, Greenwich is a leading manufacturer and supplier of coffee, tea and allied products to Foodservice and private label customers, the majority of which are in the Eastern United States. Greenwich's best known trademark is LaTouraine. In November 1993, the Company sold Hillside Coffee of California, Inc., whose business consisted of roasting, packing, distributing and marketing specialty coffee under the Hillside name, primarily to supermarkets. See Note 6 of notes to consolidated financial statements. In July 1993, the Company sold its interest in Jimbo's Jumbos, Incorporated ("JJI"). The business of JJI consisted primarily of (1) shelling farmers' stock peanuts into commercial and seed grades of raw peanuts for sale to commercial processors of peanuts, seed dealers and farmers and (2) processing and packaging of in-the-shell peanuts and nuts, and shelled peanuts and nuts, for sale to supermarkets. See Note 5 of notes to consolidated financial statements. Corporate Management is currently focused on the following growth initiatives: (i) Expansion of its Retail Restaurant and Cafe division; (ii) Maximizing the Company's Foodservice franchise by significantly broadening its customer base for Cain's, Chock full o' Nuts and LaTouraine brand coffee, tea and allied products; (iii) Increasing Retail Grocery Market shares for Chock full o' Nuts brand Cafe Blend, decaffeinated, instant and rich french roast coffees, which generate higher margins than ground roast, regular and economy blend coffees; and, (iv) Selectively pursuing new business development opportunities, as appropriate, which will deliver significant volume and profit growth. The following table sets forth revenues and operating results from continuing operations before interest and corporate expenses attributable to the Company's food products sales and real estate operations, for the fiscal years ended July 31, 1994, 1993 and 1992: Fiscal Years Ended July 31, 1994 1993 1992 (In Thousands) Revenues Net Sales - Food Products $263,638 $251,641 $203,640 Rentals from Real Estate 2,060 1,876 1,205 Operating Profit/(Loss): Food Products (1) 10,389 11,532 (2) (1,688) (2) Real Estate Operations 317 (9) (783) (1) See Note 6 of notes to consolidated financial statements regarding product line sold. (2) Includes restructuring charges of $3,598,000 and $5,500,000 and officers' termination benefits of $818,000 and $1,974,000 in fiscal 1993 and 1992, respectively (see Notes 11(c) and 11(d) of notes to consolidated financial statements). COFFEE AND RELATED PRODUCTS Description of Coffee Market According to certain available industry surveys and Company estimates, total United States coffee sales by manufacturers in 1993 were approximately $5 billion. Approximately 35% of total United States coffee sales in 1993 were to Foodservice customers. Foodservice Sales and Marketing In January 1985, the Company began marketing its coffee and allied products through Company sales personnel and independent food brokers to chain and independent restaurants, hospitals, airlines, schools, governmental institutions, vending and office coffee service operators and other institutional distributors ("Foodservice Customers"). In December 1986, the Company acquired Greenwich, which is a major supplier in the Eastern United States of coffee, tea and allied products to Foodservice Customers and private label customers. Greenwich's best-known label is LaTouraine which enjoys a reputation for high quality. LaTouraine also distributes hot chocolate, iced and hot tea, powdered soft drinks, soup bases, and portion controlled jams, jellies and condiments. In December 1992, the Company acquired Cain's, which is a major supplier in the Midwest and Southwest of products similar to those sold by Greenwich and LaTouraine to Foodservice Customers. Approximately 47% of sales are currently derived from processing and marketing coffee and allied products for sale to Foodservice Customers. Sales of coffee products to Foodservice Customers have traditionally been less price-sensitive and depend more on the level of customer service. They also tend to generate higher operating margins, due to lower marketing and advertising expenses, than do sales of such products to Retail customers. In addition, the absence of competitors with a dominant market position makes the Company's pricing to Foodservice Customers less susceptible, as compared to pricing to Retail customers, to changes in price in response to pricing actions of any single competitor. Retail Sales and Marketing The Company currently sells most of its Retail Grocery coffee products to supermarket chains, wholesalers and independent food outlets ("Retail Customers") through independent food brokers. The Company's retail products include coffees sold under the Chock full o' Nuts, Cain's and Safari labels. The Company's best known product, Chock full o' Nuts premium, vacuum packed, all-method grind coffee, is superior to most competitors in being able to produce more consistent, better tasting finished brews from a single, "all-method grind", regardless of the coffee maker used. The Company also sells an "extended yield" coffee, which produces more cups than equivalent quantities of standard yield coffee. Additionally the Company sells decaffeinated, instant, a Cafe blend and rich french roast coffees as well as a ready to drink iced cappuccino product, called Chock o'ccino. Finally, the Company and Greenwich roast, pack and market regular, decaffeinated and instant coffees for sale by others under a variety of private labels. In fiscal 1994 the Company's coffee sales (other than Hillside) to Retail Customers accounted for approximately 47% of sales and represented approximately 4% of total Retail Grocery coffee sales in the United States. Chock full o' Nuts all-method grind coffee is sold in most major metropolitan areas of the United States and in the provinces of Ontario and Quebec, Canada. Sales are concentrated in the New York metropolitan area, upstate New York, New England, Philadelphia, Washington, D.C. and Florida. The Company believes that its distinctive packaging design and one grind concept are important factors in the marketing of its coffee products. Marketing a single grind coffee has enabled the Company's all-method grind coffee to be consistently one of the fastest moving items off supermarket shelves in its core markets. The sales of Cain's and Safari brand products are concentrated in the Midwest and Southwest. Suppliers and Manufacturing The Company's coffee is primarily a blend of readily available Central and South American coffees. The Company purchases approximately 100 million pounds of green coffee beans annually. All such coffee is purchased from approximately 25 importers located in New York City, New Orleans and Miami, who assume the risk of delivering beans that meet the Company's quality requirements at a guaranteed price. The Company generally buys its coffee pursuant to contracts providing for delivery in 4 to 12 weeks and supplements such contracts with purchases on the spot market. All purchases are subject to inspection and approval by the United States Food and Drug Administration. Manufacturing activities for coffee and related products are presently conducted at the following facilities: Location Principal Use Brooklyn, New York............Coffee Roasting Plant, Warehouse St. Louis, Missouri...........Coffee Roasting Plant, Warehouse Hialeah, Florida..............Coffee Roasting Plant, Warehouse Rochester, New York...........Coffee Roasting Plant, Warehouse Oklahoma City, Oklahoma.......Coffee Roasting Plant and Processing Plant for Tea and Related Food Products, Warehouse Springfield, Missouri.........Processing Plant for Spices, Warehouse All of the above facilities are owned, except the Rochester, New York and Springfield, Missouri facilities, which are leased. The Company rents executive office space in New York City and maintains warehousing facilities in over forty-five locations throughout the United States. The Company believes that it has sufficient production capacity to meet its current and future needs. Competition The coffee business is highly competitive. The Company competes for Retail Customers with a number of nationally and regionally established brands. Its largest competitors are General Foods (Maxwell House, Yuban & Sanka coffees), Procter & Gamble (Folger's coffees) and The Nestle Company (Hills, MJB & Chase & Sanborn coffees), with combined annual sales accounting for approximately 80% of the United States coffee market. The profitability of the Company's coffee sales to Retail Customers is largely dependent on competitive pricing conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". There are many competitors in the business of selling coffee to Foodservice Customers. However, the Company believes that no single competitor's sales constitute more than 15% of this market. Sales of coffee, tea and allied products to Foodservice Customers have traditionally been less price-sensitive and more dependent on the level of service provided to such customers than sales of such products to Retail Customers. In addition, the absence of direct competitors with a dominant market position has traditionally made the Company's pricing to Foodservice Customers less susceptible, as compared to pricing to Retail Customers, to changes in price in response to pricing actions of any single competitor. Retail Restaurant and Cafe Division In June 1994, with the opening of a flagship store in Midtown Manhattan, the Company entered the business of operating retail cafes which offer specialty coffees, sandwiches, salads, bakery products, snacks, and other assorted food and beverage products. The cafe has an upscale motif, with woods and granite, and utilizes a quick-service format, at a moderate price structure. The Company has developed a number of formats for expansion of this retail cafe concept, including the full cafe (2500 to 3500 square feet with seating for 45-75), the mini-cafe (400-1000 square feet with limited seating), and Chock Full O'Nuts EXPRESS-Osm (a modular kiosk of 150 square feet). The Company intends to open additional locations utilizing the above formats, in central business districts, and high-volume public locations. In March 1994, the Company acquired Quikava, Inc., an operator and franchisor of double-drive thru buildings, which offer a variety of specialty coffees, espresso-based drinks, baked goods, and snacks. Quikava units are situated on major commuter thoroughfares and offer quick-service of quality beverages and snacks. The Company intends to develop additional Quikava units, both company-operated and franchised. RESEARCH AND DEVELOPMENT The Company invested a nominal amount in research and development for the three years ended July 31, 1994. EMPLOYEES The Company employs approximately 1,150 employees, 15% of whom are represented by labor unions. The Company believes that its relations with both union and non-union employees are good. REAL ESTATE OPERATIONS The Company is both lessor and lessee on certain properties and an owner of one property in New York City. Such properties had been part of the Company's former restaurant operations. OTHER MATTERS Reference is made to Notes 2, 5 and 6 of notes to consolidated financial statements with respect to the acquisition and disposition of certain assets. Item 101 (b) of Regulation S-K Segment Information is incorporated herein by reference. Item 101 (d) of Regulation S-K All of the Company's operations are located in the United States. Export sales are not significant. Item 2. PROPERTIES The Company leases certain premises which are under long-term leases expiring on various dates through 2009 and certain of which contain renewal options. Reference should be made to Note 7 of the notes to consolidated financial statements for additional information about these leases. The following table sets forth the location and certain information with respect to the Company's plants and certain other properties as of October 13, 1994, all of which premises the Company considers adequate for its present and anticipated needs. PLANTS AND OTHER PROPERTIES Approximate Square Feet Whether of Owned Or Location Principal Use Floor Space Leased (1) Brooklyn, New York Coffee Roasting Plant, Warehouse 55,000 Owned St. Louis, Missouri Coffee Roasting Plant, Warehouse 77,000 Owned Secaucus, New Jersey Warehouse and Offices 110,000 Owned Hialeah, Florida Coffee Roasting Plant, Warehouse 50,000 Owned Rochester, New York Coffee Roasting Plant, Warehouse 50,000 Leased Oklahoma City, Oklahoma Coffee Roasting Plant and Processing Plant for Tea and Related Food Products, Warehouse 150,000 Owned Springfield, Missouri Processing Plant for Spices, Warehouse 30,000 Leased 574 Fifth Avenue Real Estate New York, New York Operation 13,000 Leased 422 Madison Avenue Real Estate and Restaurant New York, New York Operation 8,750 Leased 532 Madison Avenue Real Estate New York, New York Operation 12,250 Leased 49 Broadway Real Estate New York, New York Operation 12,000 Leased 1420 Broadway Real Estate New York, New York Operation 6,750 Leased 370 Lexington Avenue Corporate New York, New York Headquarters 11,000 Leased Waverly Place corner Green Street Real Estate New York, New York Operation 2,500 Leased 336 Broadway Real Estate New York, New York Operation 10,500 Owned Castroville, California Real Estate 66,000 Owned Operation Mebane, North Carolina Real Estate Operation 138,000 Owned Queen Ann Plaza Restaurant Operation 250 Leased Norwell, Mass 190 Old Derby Street Headquarters, Quikava 1,196 Leased Hingham, Mass (1) --No Company-leased premises are owned by any officer or director of the Company. See Note 7 of notes to the consolidated financial statements. Item 3. LEGAL PROCEEDINGS None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS "Common Share Prices" and related security holder matters are incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA "Selected Financial Data" is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis of Financial Condition and Results of Operations" is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted in a separate section of this report. Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT and Item 11. EXECUTIVE COMPENSATION and Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT and Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Omitted, per General Instruction G. The information required by Part III shall be incorporated by reference from the Registrant's definitive proxy statement pursuant to Regulation 14A for the fiscal year ended July 31, 1994 which is to be filed with the Commission. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2) The response to this portion of Item 14 is submitted as a separate section of this report. (3) The response to this portion of Item 14 is submitted as a separate section of this report (see below). (b) Reports on Form 8-K: None (c) The response to this portion of Item 14 is submitted as a separate section of this report (see below). (d) The response to this portion of Item 14 is submitted as a separate section of this report. Pursuant to Regulation S-K Item 601, following is a list of Exhibits. Exhibit 3 Articles of incorporation and by laws. (a) Articles of incorporation filed herewith. (b) By-laws, filed herewith. Exhibit 4 Instruments defining the rights of security holders, including indentures. (a) Indenture dated as of September 15, 1986 between the Company and Manufacturers Hanover Trust Company ("Manufacturers") filed herewith. (b) Form of the Company's 8% Convertible Subordinated Debenture included in Exhibit 4(a) filed herewith. (c) Instrument of resignation, appointment and acceptance dated August 9, 1993 among the Company, Manufacturers and Liberty Bank and Trust Company of Oklahoma City filed herewith. (d) Indenture dated as of April 1, 1987 between the Company and IBJ Schroder Bank and Trust Company filed herewith. (e) Form of the Company's 7% Convertible Senior Subordinated Debenture included in Exhibit 4(d) filed herewith. Exhibit 9 Voting Trust Agreement, not applicable. Exhibit 10 Material contracts (a) Rights Agreement, dated as of December 30, 1987, with IBJ Schroder Bank and Trust Company, as Rights Agent, the form of Rights Certificate and Summary of Rights to Purchase Common Stock filed herewith. (b) Benefits protection trust with National Westminster Bank USA filed herewith. (c) Resolution of the Board of Directors adopting severance policy filed herewith. (d) Chock full o' Nuts Corporation Employees' Stock Ownership Plan dated December 16, 1988 filed as an exhibit to form 10-K for the fiscal year ended July 31, 1989 is incorporated herein by reference. (e) Agreement with Leon Pordy, M.D. dated July 8, 1992 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1992 is incorporated herein by reference. (f) Stock purchase agreement dated October 16, 1992 by and between Chock full o' Nuts Corporation and Nestle' Beverage Corporation filed herewith. (g) Amended and Restated Credit Agreement dated December 4, 1992 among Chock full o' Nuts Corporation and its Subsidiaries and National Westminster Bank USA and Chemical Bank filed as an Exhibit to Form 8-K dated December 10, 1992 is incorporated herein by reference. (h) Agreement and Plan of Merger by and among JJJ Acquisition Corp., Chock full o' Nuts Corporation and Jimbo's Jumbos, Incorporated dated April 22, 1993 filed as an Exhibit to Form 8-K dated July 8, 1992 is incorporated herein by reference. (i) Agreement with Joseph Breslin dated August 5, 1993 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1993 is incorporated herein by reference. (j) Stock Purchase Agreement between Chock full o' Nuts Corporation, Hillside Holding Corporation and Gourmet Coffees of America, Inc. dated October 8, 1993 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1993 is incorporated herein by reference. (k) Agreement dated November 7, 1989 by and between Chock full o'Nuts Corporation and Tetley, Inc. for the purchase of Tetley's instant Coffee business filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1990 is incorporated herein by reference. (l) Standstill Agreement by and among Chock full o'Nuts Corporation and Steven Schulman and Leon Pordy, MD dated June 21, 1991 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1991 is incorporated herein by reference. (m) Form of restricted stock agreement dated January 2, 1988 with key employees (including certain officers and directors) filed herewith. Exhibit 11 Statement re: Computation of Per Share Earnings Exhibit 12 Statement re: Computation of ratios, not applicable. Exhibit 13 Not applicable. Exhibit 18 Letter re change in accounting principles, not applicable. Exhibit 21 Subsidiaries of the registrant. Exhibit 22 Published report regarding matter submitted to vote of security holders, not applicable. Exhibit 23 Consent of experts and counsel, not applicable. Exhibit 24 Power of attorney, not applicable. Exhibit 99 Additional exhibits, not applicable. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHOCK FULL O' NUTS CORPORATION (Registrant) October 13, 1994 ------------------------------ Howard M. Leitner, President, Chief Financial and Accounting Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. October 13, 1994 October 13, 1994 Norman E. Alexander Mark A. Alexander Chairman of the Board Director October 13, 1994 October 13, 1994 Virgil Gladieux Martin J. Cullen Director Vice President and Director October 13, 1994 October 13, 1994 Stuart Z. Krinsly Marvin I. Haas Director Chief Executive Officer Vice Chairman of the Board and Chief Operating Officer October 13, 1994 October 13, 1994 Howard M. Leitner Henry Salzhauer President and Chief Director Financial Officer and Director October 13, 1994 October 13, 1994 R. Scott Schafler David S. Weil Director Director ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2), (c) and (d) LIST OF FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS YEAR ENDED JULY 31, 1994 CHOCK FULL O' NUTS CORPORATION NEW YORK, NEW YORK FORM 10-K--ITEM 14(a)(1) and (2) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND SCHEDULES The following consolidated financial statements of the Registrant and its subsidiaries are included in Item 8 Page Report of Independent Auditors 16 Consolidated Balance Sheets--July 31, 1994 and 1993 17 and 18 Consolidated Statements of Operations--Years Ended July 31, 1994, 1993 and 1992 19 Consolidated Statements of Cash Flows-- Years Ended July 31, 1994, 1993 and 1992 20 and 21 Consolidated Statements of Stockholders' Equity-- Years Ended July 31, 1994, 1993 and 1992 22 and 23 Notes to Consolidated Financial Statements 24 to 35 The following consolidated financial statement schedules of the registrant and its subsidiaries are included in Item 14(d): Page Schedule I--Marketable Securities 41 Schedule II--Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties 42 Schedule V--Property, Plant and Equipment 43 Schedule VI--Accumulated Depreciation and Amortization of Property, Plant and Equipment 44 Schedule VIII--Valuation and Qualifying Accounts 45 Schedule X--Supplementary Income Statement Information 46 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Ernst & Young LLP Report of Independent Auditors The Board of Directors and Stockholders Chock full o'Nuts Corporation New York, NY We have audited the accompanying consolidated balance sheets of Chock full o'Nuts Corporation and subsidiaries as of July 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1994. Our audits also included the financial statement schedules listed in the index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial satements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chock full o'Nuts Corporation and subsidiaries at July 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three year in the period ended July 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statment schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 4 to the consolidated financial statements, in 1994 the Company changed its method of accounting for income taxes. ERNST & YOUNG LLP October 13, 1994 CONSOLIDATED BALANCE SHEETS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994 and 1993 ASSETS 1994 1993 CURRENT ASSETS: Cash and cash equivalents $ 5,939,456 $ 5,469,159 Receivables, principally trade, less allowances for doubtful accounts and discounts of $928,000 and $1,081,000-- Notes 3 and 11(a) 31,935,437 25,319,816 Inventories--Notes 1 and 3 45,543,048 38,385,397 Net assets of product line sold -- Note 6 24,970,356 Investments in marketable securities, at cost (market value of $25,649,000) 25,786,080 Prepaid expenses and other -- Note 4 3,466,246 3,222,586 TOTAL CURRENT ASSETS 112,670,267 97,367,314 PROPERTY, PLANT AND EQUIPMENT, at cost- Note 3: Land 3,754,639 3,754,639 Buildings and improvements 18,652,079 18,241,851 Leaseholds and leasehold improvements 1,795,326 842,011 Machinery and equipment 72,603,462 68,259,875 96,805,506 91,098,376 Less allowances for depreciation and amortization 41,510,772 35,502,700 55,294,734 55,595,676 REAL ESTATE HELD FOR SALE OR DEVELOPMENT, at cost 5,404,243 5,404,243 OTHER ASSETS AND DEFERRED CHARGES--Note 11(b) 29,367,430 31,040,452 EXCESS OF COST OVER NET ASSETS ACQUIRED, net --Notes 1 and 2 6,070,268 5,896,404 $208,806,942 $195,304,089 See notes to consolidated financial statements CONSOLIDATED BALANCE SHEETS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994 and 1993 1994 1993 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 11,851,998 $ 10,804,095 Accrued expenses 17,381,839 13,605,564 Income taxes--Note 4 1,698,293 935,359 TOTAL CURRENT LIABILITIES 30,932,130 25,345,018 LONG-TERM DEBT -- Note 3 110,427,265 108,092,174 OTHER NON-CURRENT LIABILITIES-- Notes 9 and 11(c) 4,743,855 5,003,738 DEFERRED INCOME TAXES -- Note 4 4,442,000 3,878,000 STOCKHOLDERS' EQUITY--Notes 3, 8 and 9: Common stock, par value $.25 per share; Authorized 50,000,000 shares; Issued 10,898,130 and 10,592,264 shares 2,724,533 2,648,066 Additional paid-in capital 49,322,585 47,255,836 Retained earnings 16,217,803 10,457,264 68,264,921 60,361,166 Deduct: Cost of 475,522 and 275,522 shares in treasury (6,573,719) (4,723,719) Deferred compensation under stock bonus plan and employees' stock ownership plan (1,663,510) (2,227,288) Unfunded pension losses (1,766,000) (425,000) TOTAL STOCKHOLDERS' EQUITY 58,261,692 52,985,159 LEASES--Note 7 $208,806,942 $195,304,089 See notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years ended July 31, 1994, 1993 and 1992 1994 1993 1992 Revenues: Net sales $263,638,453 $251,641,474 $203,640,151 Rentals from real estate 2,059,647 1,875,578 1,204,708 265,698,100 253,517,052 204,844,859 Costs and expenses: Cost of sales 175,664,343 157,206,889 143,643,978 Selling, general and administrative expenses 77,851,623 78,687,340 54,629,684 Expenses of real estate 1,742,462 1,884,106 1,987,573 Restructuring charge -- Note 11(c) 3,597,769 5,500,000 Officers' termination benefits -- Note 11(d) 817,535 1,974,000 255,258,428 242,193,639 207,735,235 OPERATING PROFIT/(LOSS)--Note 6 10,439,672 11,323,413 (2,890,376) Interest and dividend income 867,517 861,076 2,345,803 Interest expense (8,802,413) (10,228,159) (8,683,115) Gain on sale of product line -- Note 6 12,475,246 Gain on sales of marketable securities 455,558 919,603 Other income/ (deductions)-- Note 11(g) 775,292 (1,063) 71,343 INCOME/(LOSS) BEFORE INCOME TAXES 15,755,314 2,410,825 (8,236,742) Income taxes--Note 4: Current: Federal 6,742,000 1,648,000 (153,000) State and local 348,000 348,000 175,000 Deferred 781,000 (647,000) (2,437,000) 7,871,000 1,349,000 (2,415,000) INCOME/(LOSS) FROM CONTINUING OPERATIONS 7,884,314 1,061,825 (5,821,742) Discontinued operations -- Note 5: Income from operations, net of income taxes of $1,339,000 and $2,012,000 1,103,029 1,909,720 Loss on disposition (3,171,240) (2,068,211) 1,909,720 NET INCOME/(LOSS) $ 7,884,314 $ (1,006,386) $(3,912,022) Earnings/(loss) per share--Note 1: Primary: Continuing operations $ .75 $ .10 $(.55) Discontinued operations (.20) .18 Net income/(loss) $ .75 $(.10) $(.37) Fully diluted: Continuing operations $ .56 $ .10 $(.55) Discontinued operations (.20) .18 Net income/(loss) $ .56 $(.10) $(.37) See notes to consolidated financial statements CONSOLIDATED STATEMENTS OF CASH FLOWS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993 and 1992 1994 1993 1992 Operating Activities - Continuing Operations: Net income/(loss) $ 7,884,314 $1,061,825 $(5,821,742) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 6,187,476 6,983,539 5,467,831 Amortization of deferred compensation and deferred charges 4,430,010 5,311,264 3,372,716 Restructuring charge 2,900,000 5,500,000 (Gain) on sales of marketable securities (455,558) (919,603) Deferred income taxes 781,000 (647,000) (2,437,000) Gain on sale of product line (12,475,246) Other, net (1,533,353) (2,844,800) (2,377,905) Changes in operating assets and liabilities, net of effects from acquired companies: (Increase)in accounts receivable (4,226,971) (307,577) (2,514,355) (Increase)/decrease in inventory (7,151,651) (3,631,870) 2,416,342 Decrease in prepaid expenses 617,452 149,693 1,678,146 Increase in accounts payable, accrued expenses and income taxes 659,932 4,309,899 4,029,030 NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (4,827,037) (1) 12,829,415 8,393,460 Investing Activities - Continuing Operations: Purchases of marketable securities (29,117,568) (275,591) (40,720,414) Proceeds from sale and collection of principal of marketable securities 3,331,488 23,595,522 41,770,674 Purchases of property, plant and equipment (5,680,956) (8,057,739) (8,436,695) Acquisition of businesses (473,788) (56,019,777) Proceeds from sale of product line 38,055,704 Increase in net assets of product line sold (1,265,892) Sale of business 32,917,500 Dividend from discontinued operations 2,637,864 NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 4,848,988 (7,840,085) (4,748,571) CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993 and 1992 FINANCING ACTIVITIES - CONTINUING OPERATIONS Purchase of treasury stock (1,850,000) Principal payments of long-term debt (35,497,348) (2,486,335) Proceeds from long-term debt 2,355,091 36,578,345 Other (56,745) (2,400,459) NET CASH PROVIDED BY/ (USED IN) FINANCING ACTIVITIES 448,346 (1,319,462) (2,486,335) INCREASE IN CASH AND CASH EQUIVALENTS - CONTINUING OPERATIONS 470,297 3,669,868 1,158,554 Cash and cash equivalents at beginning of year - continuing operations 5,469,159 2,529,123 1,370,569 CASH AND CASH EQUIVALENTS AT END OF YEAR - CONTINUING OPERATIONS $5,939,456 $6,198,991 (2) $2,529,123 Supplemental Information Cash paid during the year: 1994 1993 1992 Interest $8,103,742 $9,769,319 $8,335,165 Income taxes 5,129,630 $1,611,825 $ 968,499 (1) Net cash used in operating activities in 1994 is, large part, due to income taxes of approximately $6,000,000 related to the gain on sale of product line. Under FASB Statement No. 95, "Statement of Cash Flows", the pre-tax gain on sale of the product line was deducted in arriving at cash flow from operating activities but the related income taxes were not similarly treated. (2) Includes $729,832 of cash and cash equivalents included in net assets of product line sold. See notes to consolidated financial statements CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993 and 1992 Common Stock Issued In Treasury Shares Amount Shares Amount In Thousands Balance at July 31, 1991, as reported 9,846 $2,462 291 $4,981 Restatement due to adoption of FASB 109 Balance at July 31, 1991, as restated 9,846 2,462 291 4,981 Net (loss) 3% stock dividend 279 70 Conversion of debentures 67 16 Deferred compensation under stock bonus plan and employees' stock ownership plan: Issuance of shares (15) (257) Amortization Decrease in proportionate share of subsidiary's equity related to public offering of subsidiary's stock Other Reversal of unfunded pension losses Balance at July 31, 1992 10,192 2,548 276 4,724 Net (loss) 3% stock dividend 300 75 Conversion of debentures 100 25 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization Other Increase in unfunded pension losses Balance at July 31, 1993 10,592 $2,648 276 $4,724 Net income 3% stock dividend 303 76 Conversion of debentures 3 1 Purchase of treasury stock 200 1,850 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization Increase in unfunded pension losses Balance at July 31, 1994 10,898 $2,725 476 $6,574 See notes to consolidated financial statements CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993, and 1992 Deferred Compensation Under Stock Bonus Plan and Employees' Unfunded Additional Stock Ownership Pension Paid-In Retained Plan Losses Capital Earnings In Thousands Balance at July 31, 1991,as reported $3,531 $217 $44,928 $21,430 Restatement due to adoption of FASB 109 1,646 Balance at July 31, 1991, as restated 3,531 217 44,928 19,784 Net (loss) (3,912) 3% stock dividend 1,849 (1,919) Conversion of debentures 553 Deferred compensation under stock bonus plan and employees' stock ownership plan: Issuance of shares 1,070 813 Amortization (1,512) Decrease in proportionate share of subsidiary's equity related to public offering of subsidiary's stock (4,406) Other 131 Reversal of unfunded pension losses (67) Balance at July 31, 1992 3,089 150 43,868 13,953 Net (loss) (1,006) 3% stock dividend 2,415 (2,490) Conversion of debentures 825 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization (862) Other 148 Increase in unfunded pension losses 275 Balance at July 31, 1993 2,227 425 47,256 10,457 Net income 7,884 3% stock dividend 2,048 (2,123) Conversion of debentures 19 Purchase of treasury stock Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization (563) Increase in unfunded pension losses 1,341 Balance at July 31, 1994 $1,664 $1,766 $49,323 $16,218 See notes to consolidated financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994, 1993 and 1992 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned, except for one subsidiary Jimbo's Jumbos, Incorporated ("JJI") as to which the Company owned 73% and which was sold in July 1993 (see Note 5). Significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market and consist of: July 31, 1994 1993 Finished goods $24,684,609 $24,657,182 Raw materials 16,889,428 9,139,425 Supplies 3,969,011 4,588,790 $45,543,048 $38,385,397 Property, Plant and Equipment: Depreciation and amortization of property, plant and equipment are computed by the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. Pre-opening Costs: Retail restaurant and cafe pre-opening costs are charged to operations as incurred. Excess of Cost over Net Assets Acquired: Excess of cost over net assets acquired is being amortized on a straight-line basis over periods of 40 and 15 years. Accumulated amortization amounted to $1,353,000 and $1,168,000 at July 31, 1994 and 1993, respectively. Other Intangibles: Other intangibles consist principally of trademarks, covenants not to compete and customer lists. Such items are being amortized on a straight-line basis over periods of 40, 5 and 7.5 years, respectively. Per Share Data: Primary per share data is based on the following weighted average number of common shares outstanding during each year retroactively adjusted for stock dividends:10,482,000 in 1994, 10,567,000 in 1993 and 10,490,000 in 1992. Fully diluted per share data, assuming conversion of debentures, is based on 21,960,000 common shares outstanding for the year ended July 31, 1994. Assumed conversion of debentures would have had an anti-dilutive effect for the years ended July 31, 1993 and 1992. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 2--ACQUISITIONS On March 11, 1994, the Company acquired for approximately $467,000 all the operating assets and liabilities of a company engaged in the commercial franchising and operation of drive-through food service establishments primarily engaged in the sale of gourmet coffee complimented by fresh bakery goods, sandwiches and ancillary products. The acquisition is being accounted for as a purchase. Based on a preliminary allocation of the purchase price, the excess of cost over net assets acquired (approximately $360,000) is being amortized over a period of 15 years using the straight-line method. The pro forma effects on the Company's operations as if this business had been acquired on August 1, 1992 are not material. In December 1992, the Company acquired the stock of Cain's Coffee Co. ("Cains") and certain trademarks related to that business from Nestle' Beverage Company and an affiliate for approximately $52,000,000 in cash. Cain's business consists primarily of sales of coffee and related products to food service customers in parts of the Midwest and Southwest. In connection with the acquisition, which has been accounted for as a purchase transaction, the Company acquired assets with a fair value of approximately $55,750,000 (including trademarks, covenant not to compete and customer list of $20,900,000, included in other assets and deferred charges on the consolidated balance sheet at July 31, 1994) and assumed liabilities of approximately $3,750,000. The Company used the proceeds (approximately $20,500,000) from the sale of a substantial portion of its marketable securities to finance a portion of the purchase price and financed the remainder through additional borrowings from its banks. In November 1992, the Company acquired a controlling interest in a partnership which owns Dana Brown Private Brands, Inc., a company which markets and sells coffee and tea products, servicing food retailers and distributors located primarily in the Midwest. The purchase price was $2,000,000, plus approximately $2,500,000 for the cost of inventory. The pro forma effects on the Company's operations as if this business had been acquired on August 1, 1991 are not material. The following pro forma unaudited results of operations assume the acquisition of Cain's occurred at the beginning of fiscal 1992 and gives effect to certain adjustments, including depreciation of property, plant and equipment, amortization of intangibles and interest expense, resulting from the acquisition and related financing. Amounts for 1992 and 1993 include the pre-acquisition results of operations for Cain's for the year ended June 30, 1992 and the four months ended October 31, 1992. Year Ended July 31 (in thousands, except per share) 1993 1992 Net sales $275,000 $269,325 Income/(loss) from continuing operations 1,269 (4,323) Income/(loss) from continuing operations per share .12 (.41) Net (loss) (799) (2,413) Net (loss) per share (.08) (.23) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 3--LONG TERM DEBT Long-term debt consists of the following: July 31 1994 1993 7% Convertible senior subordinated debentures due 2012 $ 51,693,000 $ 51,713,000 8% Convertible subordinated debentures due 2006 43,268,000 43,268,000 Revolving credit and term loan 15,466,265 13,111,174 $110,427,265 $108,092,174 The 7% and 8% debentures require annual sinking fund payments of $3,000,000 and $3,750,000, respectively, which after giving effect to previous conversions and redemptions, commence April 1, 2000 and September 15, 1998, respectively. The debentures are convertible at the option of the debenture holders into shares of the Company's common stock at a price of $8.48 per share and $8.04 per share, respectively (subject to adjustment). During the years ended July 31,1993 and 1992, $437,000 and $437,000 of 8% debentures were converted into 51,000 and 50,000 shares of common stock, respectively. During the years ended July 31,1994, 1993 and 1992, $20,000, $438,000 and $150,000 of 7% debentures were converted into 2,000, 49,000 and 17,000 shares of common stock, respectively. As of July 31, 1994, approximately 11,477,000 common shares are reserved for issuance upon conversion of debentures Under the Company's amended and restated revolving credit and term loan agreements (collectively the "Loan Agreements") with National Westminster Bank USA and Chemical Bank (the "Banks"), the Company may, from time to time, borrow funds from the Banks, provided that the total principal amount of all such loans outstanding at any time may not exceed $40,000,000. Interest (7.25% at July 31, 1994) on all such loans is equal to the prime rate, subject to adjustment based on the level of loans outstanding. Outstanding borrowings under the Loan Agreements may not exceed certain percentages of and are collateralized by, among other things, the trade accounts receivable and inventories, and substantially all of the machinery and equipment and real estate of the Company and its subsidiaries. All loans made under the term loan agreement ($10,000,000 at July 31, 1994) are to be repaid in December 1997. Outstanding loans under the revolving credit agreements are to be repaid in December 1997. Pursuant to the terms of the Loan Agreements, the Company and its subsidiaries, among other things, must maintain a minimum net worth and meet ratio tests for liabilities to net worth and coverage of fixed charges and interest, all as defined. The Loan Agreements also provide, among other things, for restrictions on dividends (except for stock dividends) and requires repayment of outstanding loans with excess cash flow, as defined. As of July 31, 1994, long-term debt matures as follows: $16,234,265 (year ending July 31, 1998), $3,750,000 (year ending July 31, 1999)and $90,443,000 thereafter. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 4--INCOME TAXES The provision for income taxes for continuing operations differs from the expected Federal income tax for the reasons shown in the following table: 1994 1993 1992 Federal income tax provision/(credit) expected at the statutory rate $5,514,360 $ 819,681 $(2,800,492) Effect on Federal income tax of: Difference between tax and book basis of product line sold 1,721,214 State and local income taxes, net of Federal income tax benefit 226,200 229,680 115,500 Amortization of excess of cost over net assets acquired 88,200 178,160 178,160 Other 321,026 121,479 91,832 $7,871,000 $1,349,000 $(2,415,000) Deferred tax liabilities and assets in thousands are comprised of the following at July 31, 1994 1993 Net deferred non-current tax liabilities: Net difference between tax and book basis of property, plant and equipment $6,216 $6,465 Unfunded pension liabilities (931) Compensation under stock bonus plan and employees' stock ownership plan (358) (329) Restructuring charges (1,990) Other (485) (268) $4,442 $3,878 Net deferred current tax assets: Restructuring charges $1,767 Net difference between tax and book basis of inventory 410 $ 410 Officers' termination benefits 211 299 Allowance for doubtful accounts and discounts 400 400 Other (166) 424 Accrued cash bonus 233 $2,622 $1,766 In February 1992, the Financial Accounting Standards Board issued Statement No. 109, "Accounting for Income Taxes" ("FASB 109"). The Company adopted the new method of accounting for income taxes in the first quarter of its fiscal year ended July 31, 1994 and restated its fiscal 1993, 1992, 1991 and 1990 financial statements. The effect of adopting FASB 109 was to increase income from continuing operations by $147,000 in 1993 and 1992 and $12,000 in 1991 and 1990. The cumulative effect of adopting FASB 109 as of July 31, 1990, decreased the beginning balance of retained earning by $1,670,000. Under FASB 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of FASB 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the differences originated. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 5--DISCONTINUED OPERATIONS In April 1993, the Company and Jimbo's Jumbos, Incorporated ("JJI") entered into an agreement and plan of merger to merge JJI with and into JJJ Acquisition Corp. (a company controlled by John W. Kluge and his affiliates). Pursuant to the merger, which was consummated on July 8, 1993, the Company, as well as all other stockholders of JJI, received $6.93 per share for each share owned. The proceeds ($32,917,500) were used to reduce outstanding bank debt incurred for the acquisition of Cain's (see Note 2). A loss of $3,171,000 was incurred in connection with the sale and was charged to discontinued operations for the year ended July 31, 1993. The business of JJI consisted primarily of (1) shelling farmers' stock peanuts into commercial and seed grades of raw peanuts for sale to commercial processors of peanuts, seed dealers and farmers and (2) processing and packaging of in-shell peanuts and nuts, and shelled peanuts and nuts, for sale to supermarkets. The Company restated its financial statements to present the operating results of JJI as a discontinued operation. Operating profits from discontinued operations were as follows: 1993 1992 Net sales $45,722,099 $55,033,125 Costs and expenses: Cost of sales 37,240,237 43,187,627 Selling, general and administrative expenses 5,413,440 7,363,184 42,653,677 50,550,811 Operating profit $ 3,068,422 $ 4,482,314 On December 13, 1991, JJI, a then wholly owned subsidiary, completed an initial public offering of 1,500,000 of its common shares at $6 a share. The transaction, together with 250,000 restricted common shares issued by JJI to its executive officers, reduced the Company's ownership interest to 73%. JJI realized net cash proceeds of approximately $8,000,000 from sale of shares, after underwriting discounts and commissions and expenses of the offering. The sales resulted in a decrease of $4,406,000 in the Company's proportionate share of JJI's equity, which amount was charged to additional paid-in capital. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 6--PRODUCT LINE SOLD In October 1993, the Company and Gourmet Coffees of America ("GCA") entered into an agreement to sell Hillside Coffee of California, Inc. ("Hillside") to GCA. Hillside's business consisted of roasting, packing, distributing and marketing specialty coffee to supermarkets. Pursuant to the agreement which was consummated on November 19, 1993, the Company received (a) $38,500,000 and (b) shares of stock representing approximately one-half of one percent of the equity of GCA. The net assets and liabilities of Hillside were reflected as a current asset at July 31, 1993 reflecting the intended use of proceeds as short-term investments. The Company recorded an approximate $6,200,000 after tax gain upon consummation of the sale. The operating profits of Hillside, before intercompany management charges, for the period August 1, 1993 to November 19, 1993 and fiscal 1993 and 1992 included in the results of operations are as follows: Period From August 1, 1993 to July 31, July 31, November 19, 1993 1993 1992 Net sales $9,556,000 $ 27,720,163 $ 25,594,869 Costs and expenses: Cost of sales 4,089,000 10,974,986 11,624,256 Selling, general and administrative expenses 3,288,000 11,240,716 9,418,619 7,377,000 22,215,702 21,042,875 Operating profit $2,179,000 $ 5,504,461 $ 4,551,994 NOTE 7 -- LEASES The Company and subsidiaries lease manufacturing plants, warehouses, office space and restaurant locations and related premises. Leases which provide for payment of property taxes, utilities and certain other expenses, expire on various dates through 2009 and contain renewal options. As of July 31, 1994, the Company's obligation for future minimum rental payments, assuming the exercise of renewal options, aggregated $16,575,000. Payments required in the following five fiscal years amount to $4,188,000 (1995), $3,560,000 (1996), $2,058,000 (1997), $1,607,000 (1998) and $1,352,000 (1999). Rental expense charged to continuing operations under operating leases for the years ended July 31, 1994, 1993 and 1992 was $4,496,000, $1,797,000 and $2,517,000, respectively. As of July 31, 1994, future minimum rental payments due from tenants under sub-leases of retail facilities and related premises aggregated $12,659,000. Amounts receivable in the following five fiscal years amount to $1,870,000 (1995), $1,621,000 (1996), $1,403,000 (1997), $1,395,000 (1998) and $1,326,000 (1999). NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 8 -- STOCKHOLDERS' EQUITY A non-contributory employee stock ownership plan ("ESOP") has been established to acquire shares of the Company's common stock for the benefit of all eligible employees. The Company has made loans to the ESOP to be repaid in equal annual installments over 8 years with interest primarily at 9% and 10%. Deferred compensation equal to the loans has been recorded as a reduction of stockholders' equity representing the Company's prepayment of future compensation expense. As the Company makes annual contributions to the ESOP, these contributions will be used to repay the loans to the Company, together with accrued interest. As the loans are repaid, common stock is allocated to ESOP participants and deferred compensation is reduced by the amount of the principal payment on the loans. The Company has a Warrant Dividend Plan which provides for distribution to shareholders of a right to purchase one share of the Company's common stock currently for $24.85 (subject to anti-dilution adjustments) as a dividend on each of the Company's outstanding common shares. These rights are not currently exercisable and will only become exercisable upon the happening of certain events. Under certain circumstances, the rights entitle the holders to receive, upon payment of the then current exercise price of the right, that number of shares of Company common stock having a market value of two times the then current exercise price of the right. The rights will expire on December 30, 1997 and are redeemable at $.05 per right at any time prior to the occurrence of certain events. The Company's incentive compensation plan provides, among other things, for incentive or non-qualified stock options, stock appreciation rights, performance units, restricted stock and incentive bonus awards. During the year ended July 31, 1994, non-qualified stock options for the purchase of 109,000 shares, at a price of $8.50 per share, were granted to key executives under the plan. At July 31, 1994, there were outstanding options for the aforementioned shares. On August 29, 1994, a non qualified stock option for the purchase of 250,000 shares, at a price of $5.75 per share, was granted to the Chief Executive Officer under the plan. Approximately 26,000 of such shares are subject to stockholder approval. Options granted are exercisable at the fair market value at date of grant and, subject to termination of employment, expire ten years from the date of grant, are non-transferable other than on death, and are exercisable in three equal annual installments commencing three years from date of grant. Under the incentive compensation plan, as of July 31, 1994, 63,000 common shares are outstanding which were issued to key executives in 1987 and 1988. These shares are subject to restricted stock agreements which provide that the shares will vest ratably over periods through 2001. Such shares are subject, upon the occurrence of certain events, to either forfeiture or accelerated vesting. The fair value of the shares on the dates of issuance is being charged to operations as compensation during the period the restrictions remain in effect. At July 31, 1994, 224,000 shares were available under the plan. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 9--PENSION PLANS The Company has non-contributory defined benefit pension plans covering all employees who have completed one year of service, have attained age twenty and one-half and are not covered by union-sponsored plans. The benefits are based on years of service and the employee's compensation during the last 60 months of employment. The pension plans are funded to accumulate sufficient assets to provide for accrued benefits. In addition, contributions are made to multi-employer plans which provide defined benefits to union employees. A summary of the components of net periodic pension cost for the defined benefit plans for the three years ended July 31, 1994 and total contributions charged to pension expense for the union-sponsored plans follows (in thousands): 1994 1993 1992 Service cost-benefits earned during the year $1,471 $1,058 $ 897 Interest cost on projected benefit obligation 1,782 1,599 1,580 Actual return on plan assets (1,654) (1,600) (1,575) Net amortization and deferral 156 (4) (29) NET PENSION COST OF DEFINED PLANS 1,755 1,053 873 UNION-SPONSORED PLANS 422 505 1,397 TOTAL PENSION EXPENSE $2,177 $1,558 $2,270 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 9--PENSION PLANS--Continued The following table sets forth the funded status and amounts recognized in the consolidated balance sheet at July 31, for the defined benefit pension plans (in thousands): 1994 1993 Plans Plan Plans Whose Whose Whose Accumulated Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets Benefits Exceed Assets Actuarial present value of benefit obligations: Vested benefit obligation $(21,780) $( 174) $(19,991) Accumulated benefit obligation $(22,124) $( 174) $(20,363) Projected benefit obligation $(24,320) $( 174) $(21,933) Plan assets, consisting primarily of U.S. treasury notes, other U.S. agency issues, guaranteed insurance contracts and corporate obli- gations, at fair value 20,202 291 19,178 Projected benefit obligation (in excess of)/less than plan assets (4,118) 117 (2,755) Unrecognized prior service cost 395 449 Unrecognized net loss 5,884 36 4,537 Unrecognized net asset at August 1, 1987; net of amortization (745) (75) (757) Adjustment required to recognize minimum liability (3,338) Net pension (liability) asset recognized in the consolidated balance sheet $ (1,922) $ 78 $ 1,474 The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8.25% and 4%, respectively, at July 31, 1994 and 1993. The expected long-term rate of return on plan assets was 8.5%, 8.5% and 9% in 1994, 1993 and 1992, respectively. Provisions of FASB Statement No. 87 (the Statement) require the Company, under certain circumstances, to record a minimum pension liability relating to unfunded accumulated benefit obligations, establish an intangible asset relating thereto and reduce stockholders' equity, net of future tax benefits. At July 31, 1994, this minimum pension liability was remeasured, as required by the Statement. As a result, the minimum pension liability was adjusted to $1,922,000; the related intangible asset was adjusted to $395,000; and the amount by which stockholders' equity had been reduced was adjusted to $1,766,000 (net of applicable deferred income taxes of $1,177,000 in 1994). The minimum pension liability at July 31, 1994 arises from an increase in pension fund liabilities due to the inclusion of Cain's employees in the Plan effective January 1, 1994 (see Note 2) and unrecognized net losses in periodic pension cost due to experience losses, Plan amendments, changes in actuarial assumptions regarding assumed returns on pension fund assets and related discounts of accumulated benefit obligations. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 10--QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited quarterly results of continuing operations for the years ended July 31, 1994 and 1993: Fiscal 1994 Three Months Ended October 31 January 31 April 30 July 31 (Thousands of Dollars Except Per Share Data) Net sales $70,936 $62,108 $61,467 $69,127 Gross profit $25,505 $20,662 $20,160 $21,647 INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 506 $ 7,244(1) $ (270) $ 404 Per share: Primary $ .05 $ .69(1) $ (.03) $ .04 Fully diluted $ .05 $ .39 $ (.03) $ .04 Fiscal 1993 Three Months Ended October 31 January 31 April 30 July 31 (Thousands of Dollars Except Per Share Data) Net sales $50,373 $65,726 $67,668 $67,874 Gross profit $17,479 $24,395 $25,766 $26,795 INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 705 $ 1,621 $ 488 $(1,752) (2) Per share: Primary $ .07 $ .16 $ .05 $ (.18) (2) Fully diluted $ .07 $ .12 $ .05 $ (.18) (2) (1) Includes gain on sale of Hillside Coffee of California, Inc. of $7,068,000 ($.67 per share). See Note 6. (2) Includes restructuring charge of $2,232,000 ($.21 per share) and officers' termination benefits of $507,000 ($.05 per share), each net of income tax benefit. See Notes 11(c) and (d). NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 11--OTHER ITEMS a. Receivables other than trade at July 31, 1994 and 1993 amount to $3,242,000 and $964,000, respectively. See Note 11(c). b. Other assets and deferred charges consist of (in thousands): July 31, 1994 1993 Deferred financing costs (1) $ 4,065 $ 4,665 Non-compete agreements 6,170 7,862 Trademarks 4,793 4,923 Customer lists 6,972 8,126 Real estate and equipment held for rental, at cost net of accumulated depreciation and amortization of $1,654 and $1,628 617 643 Other 6,750 4,821 $29,367 $31,040 (1) Being amortized over the terms of the related indebtedness (see Note 3). c. The Company recorded a charge in the fourth quarter of fiscal 1993 and 1992 of $3,598,000 and $5,500,000, respectively, to provide for the estimated cost of consolidating and closing certain production facilities. Such charge consists primarily in fiscal 1993 of accrued expenses (of which $2,100,000 is included in current liabilities at July 31, 1993 and $800,000, in addition to the amount provided in fiscal 1992, is included in other non-current liabilities at such date) and in fiscal 1992 of a loss of $3,272,000 on the write-down of machinery and equipment and certain other assets and accrued expenses of $2,228,000 (included in other non current liabilities at July 31, 1992) related to closing such facilities. The Company expects the restructuring to be completed during fiscal 1995. The after tax charge for such restructuring was $2,232,000 ($.21 per share) in fiscal 1993 and $3,630,000 ($.35 per share) in fiscal 1992. As of July 31, 1994, the balance of these accrued expenses is included in current liabilities in the amount of $4,726,000. In connection with closing a business and termination of a pension plan the Company has recorded a liability for an underfunded pension plan of approximately $1,500,000 and a similar amount receivable from the previous owner of such business pursuant to the acquisition agreement. The previous owner of the business is contesting the liability to the Company. The Company, based upon its interpretation of the acquisition agreement, believes the previous owner of the business is responsible for an amount approximating the underfunded pension liability and has commenced litigation seeking such amount. d. In August 1993 and July 1992, respectively, Joseph Breslin and Dr. Leon Pordy, then Chairman of the Board and Chief Executive Officer terminated their employment with the Company. In connection therewith, $818,000 and $1,974,000, respectively, was charged to operations in the fourth quarter of fiscal 1993 and 1992 for compensation benefits (including 5,714 and 200,000 restricted shares of the Company's common stock which became subject to accelerated vesting) to which Joseph Breslin and Dr. Pordy were entitled as a result of their terminations. The after-tax charge for such benefits was $507,000 ($.05 per share) and $1,303,000 ($.12 per share), respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTE 11--OTHER ITEMS--Continued e. In December 1990, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FASB 106") which was adopted in fiscal 1994. The Company does not provide postretirement benefits other than pensions to its employees and, accordingly, FASB 106 does not have a material effect on the Company's financial condition or results of operations. f. The Company believes that the fair value of its 7% and 8% convertible subordinated debentures approximates $42,905,000 and $40,239,000, respectively, as indicated by the public trading prices of such debt. g. In fiscal 1994, other income includes $700,000 from the sale of the Company's private label tea and drink mix business. NOTE 12 -- INDUSTRY SEGMENT INFORMATION The Company's financial information by industry segment for 1994, 1993 and 1992 may be found on page 40 and is incorporated herein. SELECTED FINANCIAL DATA (1) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES YEAR ENDED JULY 31 1994 1993 1992 1991 1990 (Dollar Amounts in Thousands, Except Per Share Amounts) Net sales $263,638 $251,641 $203,640 $200,037 $196,393 Income/(loss) from continuing operations 7,884 1,062 (5,822) 1,380 1,173 Working capital 81,738 72,022 45,027(2) 44,947(2) 70,482 Working capital ratio 3.6 to 1 3.8 to 1 3.2 to 1 3.9 to 1 4.7 to 1 Total assets 208,807 195,304 184,648 183,260 170,896 Long-term debt 110,427 108,092 107,053 108,862 106,097 Stockholders' equity 58,262 52,985 52,406 58,445 43,352 Per common share (3): Income/(loss) from continuing operations .75 .10 (.55) .15 .13 Stock dividends declared 3% 3% 3% 3% 3% Stockholders' equity 5.59 4.99 4.98 5.60 4.59 (1) Restated to reflect discontinued operations (see Note 5 of notes to consolidated financial statements). (2) Does not include $23,053 in 1992 and $23,184 in 1991 of marketable securities classified as non current. (3) Per share data has been retroactively adjusted for a 3% stock dividend in July of each year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS On October 8, 1993, the Company and Gourmet Coffees of America, Inc. ("GCA") entered into an agreement to sell Hillside Coffee of California, Inc. ("Hillside") to GCA. Pursuant to the agreement, which was consummated on November 19, 1993, the Company received (a) $38,500,000 in cash and (b) 75,000 shares of stock representing approximately one-half of one percent of the equity of GCA. A pre-tax gain of approximately $12,475,000 was recorded on the sale and approximately $25,000,000 of the proceeds have been invested in short term marketable securities. Hillside's business consisted of roasting, packing, distributing and marketing specialty coffee to supermarkets. In December 1992, the Company acquired the stock of Cain's Coffee Co. ("Cains") and certain trademarks related to that business from Nestle' Beverage Co. and an affiliate for $52,000,000 in cash. The business of Cains consists primarily of sales of coffee and related products to Foodservice customers in parts of the Midwest and Southwest. In November 1992, the Company acquired a controlling interest in a partnership which owns Dana Brown Private Brands, Inc. ("Dana Brown"), a company which markets and sells coffee and tea products, servicing food retailers and distributors located primarily in the Midwest. The purchase price was $2,000,000, plus approximately $2,500,000 for the cost of inventory. In July 1993, the Company consummated the sale of its interest in Jimbo's Jumbos, Incorporated ("JJI"). The Company has presented the operating results of JJI as a discontinued operation in the consolidated financial statements for the two years ended July 31, 1993. The discussion and analysis that follows relates solely to continuing operations of the Company, including those of specialty coffee (see Note 6 of notes to consolidated financial statements). Net sales increased $11,997,000 or 4.8% for the year ended July 31, 1994, compared to the prior year. The increase in net sales was primarily due to sales of Cains and Dana Brown (both acquired in the second quarter of the prior fiscal year)and increased selling prices on operations included in both the current and prior year, partially offset by the loss of sales from Hillside (due to its disposition) and reduced coffee pounds sold in operations included in both the current and the prior year. Cain's and Dana Brown were accounted for as purchases, and, therefore, were not included prior to their respective dates of acquisition. Operating profits from food products were $10,389,000, a decrease of 35% for the year ended July 31, 1994, compared to $15,948,000 for the prior year before deducting restructuring charges and officer's termination benefits. The decrease in operating profits resulted primarily from decreased gross margins in operations included in both the current and prior year and reduced operating profits from Hillside (due to its disposition), partially offset by the operations of Cain's (included for the entire period for the current year) and reduced selling, general and adminstrative expenses for operations included in both the current and prior year. The reduced gross margins were attributable to the inability to increase selling prices (due to competition) commensurate with the increased costs of coffee and a decrease in coffee pounds sold. Selling, general and administrative expenses decreased due to reduced advertising, brokerage and payroll costs. Income from continuing operations was $7,884,000 or $.75 per share, compared to $1,062,000 or $.10 per share for the prior year. The difference was primarily due to the gain on sale of Hillside Coffee of California, Inc. (the Company's specialty coffee product line) in fiscal 1994 of $6,224,000 after tax effect or $.59 per share, the restructuring charges and officer's termination benefits in fiscal 1993 aggregating $2,737,000 after tax effect or $.27 per share and reduced interest expense, partially offset by decreased operating profits from food products and reduced income taxes on the income excluding the gain on sale in fiscal 1994 and the aforementioned unusual charges in fiscal 1993. Net sales increased $48,001,000 or 24% for the year ended July 31, 1993 compared to the prior year. The increase in net sales was due to the business of Cains and Dana Brown (which generated net sales of $51,014,000 in the year ended July 31, 1993) and increased coffee pounds sold, partially offset by a decrease in the average selling price of coffee. For the year ended July 31, 1993, operating profits from food products, before deducting restructuring charges and officer's termination benefits, were $15,948,000 or an increase of 176% from the prior year. The increases resulted primarily from increased gross margins, partially offset by increases in selling, general and administrative expenses for operations included in both fiscal 1993 and 1992, and the operations of Cain's and Dana Brown. Increased gross margins were due to an increase in coffee pounds sold and a decrease in average cost of green coffee greater than the decrease in the average selling price of coffee. Selling, general and administrative expenses increased primarily due to greater advertising, promotion, coupon and delivery costs, partially offset by decreased compensation costs and professional fees. The Company has provided in 1993 for the estimated cost ($3,598,000) of consolidating and closing certain production facilities. The charges consist primarily of accrued expenses and a loss on the write down of certain assets related to the restructing. Operations have also been charged for compensation benefits ($818,000) relating to the termination of employment of the Company's former Chairman of the Board and Chief Executive Officer. Income from continuing operations was $1,062,000 or $.10 per share for the year ended July 31, 1993 compared to a loss of ($5,822,000) or ($.55) per share for the prior year. The primary reasons for the difference are the increased operating profits from food products operations, partially offset by increased interest expense and reduced investment income, as well as the loss from real estate operations in fiscal 1992 and the provision for income taxes in fiscal 1993 versus the income tax credit in fiscal 1992. In recent years, inflation has been relatively low and has not had a significant impact on the Company's sales or profitability. The effect of specific price inflation on inventory and related cost of sales is generally not significant because of rapid inventory turnover for coffee. LIQUIDITY AND CAPITAL RESOURCES As of July 31, 1994, working capital was approximately $81,738,000 and the ratio of current assets to current liabilities was 3.6 to 1. As of July 31, 1994, the Company had unused borrowing capacity of approximately $24 million under its credit facilities of $40 million with National Westminster Bank USA and Chemical Bank (see Note 3 of notes to consolidated financial statements). The Company received proceeds from the sale of Hillside, after applicable income taxes, of approximately $30,000,000 (see Note 6 of notes to consolidated financial statements) which will be used for working capital, expansion of the Retail Restaurant and Cafe division and other business purposes. The Company believes that its cash flow from operations and its amended and restated revolving credit and term loan agreements with its banks provide sufficient liquidity to meet its working capital, expansion and capital requirements. The Company does not have any material commitments for capital expenditures or environmental matters. CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES COMMON SHARE PRICES The Company's Common Stock is traded on the New York Stock Exchange under the symbol CHF. The Company has approximately 14,000 shareholders of record as of October 15, 1994. 1994 1993 High Low High Low 1st Quarter 9 5/8 7 1/8 7 7/8 6 3/4 2nd Quarter 10 1/4 7 1/2 10 1/4 6 3/4 3rd Quarter 8 3/8 6 7/8 10 8 3/8 4th Quarter 7 3/8 5 5/8 9 3/4 7 3/4 The Company distributed a 3% stock dividend on July 29, 1994 and July 30, 1993. Pursuant to certain provisions of a revolving credit and term loan agreement, the Company may not declare or pay any dividend (except for stock dividends). SEGMENT INFORMATION CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Year Ended July 31 1994 1993 1992 (Amounts in Thousands) Net sales - food products $263,638 $ 251,641 $203,640 Rental revenues $ 2,060 $ 1,876 $ 1,205 Operating profit/(loss): Food products $ 10,389 $ 11,532(1) $ (1,688)(1) Real estate 317 (9) (783) Eliminations (266) (200) (419) $ 10,440 $ 11,323 $ (2,890) Identifiable assets: Food products $153,751 $ 170,287 $105,692 Real estate 9,913 7,356 7,268 Corporate 45,143 17,661 71,688 $208,807 $ 195,304 $184,648 Depreciation and amortization: Food products $ 6,077 $ 6,901 $ 5,377 Real estate 56 24 34 Corporate 55 59 57 $ 6,188 $ 6,984 $ 5,468 Capital expenditures: Food products $ 5,643 $ 7,887 $ 8,397 Corporate 38 171 40 $ 5,681 $ 8,058 $ 8,437 (1) Includes restructuring charge in fiscal 1993 and 1992, respectively, of $3,598,000 and $5,500,000 and officer's termination benefits in fiscal 1993 and 1992, respectively, of $818,000 and $1,974,000. The food products segment is engaged in the (a) roasting, packing and marketing of regular, instant, decaffeinated and specialty coffees and (b) packing and marketing of regular and decaffeinated tea for sale to retail, Foodservice and private label customers. Additionally, other related food products are marketed and sold to Foodservice customers. See Notes 5 and 6. Operations of real estate represent rental and other income principally from the Company's former restaurant facilities. All of the Company's operations are located in the United States. Export sales are not significant. Identifiable assets under the caption "Corporate" include cash and cash equivalents, investments in marketable securities and short-term investments of $31,726,000 (1994), $5,469,000 (1993) and $25,883,000 (1992). Item 14 (d) CHOCK FULL O'NUTS CORPORATION AND SUBISIDIARIES SCHEDULE 1 -- MARKETABLE SECURITIES Column A Column B Column C Column D Column E Issuer and Title Balance of Each Issue Principal Market Sheet Amount Cost Value Amount Year Ended July 31, 1994: U.S. Government and U.S. Government agency Obligations $18,534,000 $18,548,374 $18,499,552 $18,548,374 Toyota Mtr Cr Corp 5,000,000 5,035,816 5,018,150 5,035,816 Quebec Prov CDA Deb 1,000,000 1,011,288 1,007,260 1,011,288 Corporate Bonds and other 276,000 190,602 124,152 190,602 Commercial Paper 1,000,000 1,000,000 1,000,000 1,000,000 $25,810,000 $25,786,080 $25,649,114 $25,786,080 Item 14 (d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES Column A Column B Column C Column D Column E Balance at (1) (2) (1) (2) Beginning of Amounts Amounts Not Name of Debtor Period Additions Collected Written Off Current Current Year ended July 31, 1994: Amount receivable Dennis Duke $28,655 $28,655 Year ended July 31, 1993: Amount receivable Dennis Duke $130,233 $101,578 $ 28,655 Year ended July 31, 1992: Amount receivable Dennis Duke $220,233 $ 90,000 $130,233 Item 14(d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT Column A Column B Column C Column D Column E Column F Balance at Other Changes Balance Beginning Additions at Add at End Classification of Period Cost Retirements (Deduct) of Period Year Ended July 31, 1994: Land $ 3,754,639 $3,754,639 Buildings and improvements 18,241,851 $207,373 $202,855 (e) 18,652,079 Leaseholds and lease- 6,931 (f) hold improvements 842,011 823,873 $12,489 135,000 (a) 1,795,326 Machinery and equip- 30,000 (a) ment 68,259,875 4,649,710 133,268 (202,855)(e) 72,603,462 $91,098,376 $5,680,956 $145,757 $171,931 $96,805,506 Year Ended July 31, 1993: Land $ 3,419,639 $ 335,000 (b) $3,754,639 Buildings and 1,965,000 (b) improvements 15,283,858 $368,322(b) 624,671 (e) 18,241,851 Leaseholds and 194,000 (b) leasehold (59,844)(e) improvements 1,026,443 750,884(b) $ 33,254 (1,036,218)(g) 842,011 Machinery 18,028,541 (b) and (9,893,939)(g) equipment 55,012,991 6,938,533(b) 1,261,424 (564,827)(e) 68,259,875 $74,742,931 $8,057,739 $1,294,678 $9,592,384 $91,098,376 Year Ended July 31, 1992: Land $ 3,119,639 $ 300,000 $ 3,419,639 Buildings and improvements 13,066,097 2,242,342(b) $ 24,581 15,283,858 Leaseholds and lease- hold improvements 1,013,434 13,009 1,026,443 Machinery and equip- $ 9,348 (f) ment 44,835,129 5,920,116(b) 132,602 4,381,000 (d) 55,012,991 $62,034,299 $8,475,467 $157,183 $4,390,348 $74,742,931 (a) Acquisition of drive - through food service establishments. (b) Acquisition of Cain's Coffee Company, Inc. (c) Principally additions to coffee manufacturing plants. (d) Acquisition of Hillside Coffee of California, Inc., including in 1992 final allocation purchase price. (e) Reclassifications. (f) Reclassification from/(to) Other Assets. (g) Reclassification to net assets of product line held for sale. Depreciation and amortization are based on the following estimated useful lives: Life Years Buildings and improvements 33 to 40 Leaseholds and leasehold improvements 15 to 50 Machinery and equipment 5 to 20 Item 14 (d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY PLANT AND EQUIPMENT Column A Column B Column C Column D Column E Column F Balance at Other Changes Balance Beginning Additions at Add at End Classification of Period Cost Retirements (Deduct) of Period Year Ended July 31, 1994: Buildings and improvements $ 3,529,865 $605,249 $ 4,135,114 Leaseholds and lease-hold improvements 248,066 93,017 $12,489 $2,225 (b) 330,819 Machinery and equipment 31,724,769 5,489,210 169,140 37,044,839 $35,502,700 $6,187,476 $181,629 $2,225 $41,510,772 Year Ended July 31, 1993: Buildings and improvements $ 2,964,120 $ 565,745 $3,529,865 Leaseholds and lease- $ (20,471)(d) hold improvements 210,207 120,800 $ 31,495 (30,975)(a) 248,066 Machinery and equip- 30,975 (a) ment 28,971,199 6,296,994 945,680 (2,628,719)(d) 31,724,769 $32,145,526 $6,983,539 $977,175 $(2,649,190) $35,502,700 Year Ended July 31, 1992: Buildings and improvements $ 2,475,510 $ 488,610 $2,964,120 Leaseholds and lease-hold improvements 139,877 67,077 $3,253 (a) 210,207 Machinery 4,671 (b) and (3,253)(a) equipment 21,460,308 4,877,884 $118,411 2,750,000 (c) 28,971,199 $24,075,695 $5,433,571 $118,411 $2,754,671 $32,145,526 (a) Reclassifications. (b) Reclassifications from/(to) Other Assets. (c) Write-down of machinery and equipment included in restructuring charge (see Note 11(c) of notes to consolidated financial statements). (d) Reclassification to net assets of product line held for sale. Item 14(d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS Column A Column B Column C Column D Column E Additions Balance at Charged to Balance Beginning Costs and at End Description of Period Expenses Other Deductions(1) of Period Year ended July 31, 1994: Allowance for doubtful accounts and discounts $1,081,000 $1,940,779 $24,664 $2,118,443 $928,000 Year ended July 31, 1993: Allowance for doubtful accounts and discounts $1,043,000 $1,787,000 $142,000(2) $1,891,000 $1,081,000 Year ended July 31, 1992: Allowance for doubtful accounts and discounts $1,088,000 $4,288,000 $4,333,000 $1,043,000 (1) Discounts taken by customers and uncollectible accounts written-off, net of recoveries. (2) Net addition due to acquisition of Cain's Coffee Co. and reclassification to net assets held for sale. Item 14(d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION Column A Column B Charged to Costs and Item Expenses Year ended July 31, 1994: Advertising $4,099,533 Depreciation and amortization of intangible assets $3,159,448 Maintenance and repairs $3,100,763 Year ended July 31, 1993: Advertising $5,361,972 Depreciation and amortization of intangible assets $4,544,096 Maintenance and repairs $2,662,914 Year ended July 31, 1992: Advertising $2,717,467 Depreciation and amortization of intangible assets $2,770,988 Items not presented are either not applicable or less than 1% of net sales. EXHIBIT 11 - STATMENT RE: COMPUTATION OF PER SHARE EARNINGS YEAR ENDED JULY 31, 1994 1993 1994 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) PRIMARY AVERAGE SHARES OUTSTANDING 10,482 10,567 10,490 INCOME/(LOSS) FROM CONTINUING OPERATIONS $7,884 $1,062 ($5,822) NET INCOME/(LOSS) $7,884 ($1,006) ($3,912) PER SHARE AMOUNTS: INCOME/(LOSS) FROM CONTINUING OPERATIONS $0.75 $0.10 ($0.56) NET INCOME/(LOSS) $0.75 ($0.10) ($0.37) FULLY DILUTED AVERAGE SHARES OUTSTANDING 10,482 10,567 10,490 ASSUMED CONVERSION OF CONVERTIBLE DEBENTURES 11,478 11,206 11,277 TOTAL 21,960 21,773 21,767 INCOME/(LOSS) FROM CONTINUING OPERATIONS $7,884 $1,062 $(5,822) ADD CONVERTIBLE DEBENTURES INTEREST AND AMORTIZATION OF DEFERRED CHARGES, NET OF INCOME TAXES 4,373 4,796 4,755 TOTAL $12,257 $5,858 $(1,067) NET INCOME/(LOSS) $7,884 ($1,006) ($3,912) ADD CONVERTIBLE DEBENTURES INTEREST AND AMORTIZATION OF DEFERRED CHARGES, NET OF INCOME TAXES 4,373 4,796 4,755 TOTAL $12,257 $3,790 $843 PER SHARE AMOUNTS: INCOME/(LOSS) FROM CONTINUING OPERATIONS $0.56 $0.27 ($0.05) NET INCOME $0.56 $0.17 $0.04 EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT As of October 13, 1994, the Company had directly and indirectly the following active subsidiaries, all of which are included in the Company's consolidated financial statements furnished herewith: Subsidiaries of Chock full o'Nuts Corporation Hillside Holding Corporation Delaware 100% Chock Realty Corporation California 100% Chock Coffeemaker Acquisition, Inc. New York 100% CFN of New York, Inc. New York 100% Cain's Coffee Co. Delaware 100% Cain's Holding Company Delaware 100% DB Private Brands, Inc. Missouri 100% Quikava, Inc. Massachusetts 100% EX-3.A1 2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________ EXHIBITS TO FORM 10-K ANNUAL REPORT (Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934) For Fiscal Year Ended July 31, 1994 Commission File Number 1-4183 ______________________________________ CHOCK FULL O'NUTS CORPORATION (Exact name of Registrant as specified in its charter) EXHIBIT 3(a) CERTIFICATE OF INCORPORATION - - -of- FEDERAL NUT CO., INC. (Pursuant to Article Two of the Stock Corporation Law) WE THE UNDERSIGNED, for the purpose of forming a corporation pursuant to Article two of the Stock Corporation Law of the State of New York, do hereby certify as follows: FIRST: The name of the proposed corporation is: FEDERAL NUT CO., INC. SECOND: The purposes for which this corporation is formed, are to do any all things set forth, to the same extent as natural born persons might or could do, to wit; (1) For the purpose of selling wholesale and retail, nuts, shelled and unshelled, candies, fruits, ice cream, soda water, drinks, sandwiches and other kindred merchandise. (2) To purchase, own, hold, sell and lease real estate and real property of every kind and nature, which may be necessary for the conduct of business of this corporation. (3) To acquire the good will, patents, copyrights, rights and property of any person, firm, association or corporation, and to pay for the same in cash, stock of this company, bonds or otherwise, and to hold or in any manner dispose of the whole or part of the property so purchased excepting as herein before set forth; or to conduct in any manner that is lawful the whole or part of the business acquired, provided said business is within the authorization of the stock corporation law and to exercise all the powers necessary or convenient in and about the conducting and management of said business. (4) In general, to do all things, to the same extent as are incidental and conducive to the attainment of the objects of the said corporation in the furtherance of its business the said corporation or a private party might or could do, in or about carrying out of the aforesaid purpose. (5) To borrow money without or with pledge or mortgage upon all or any of its property real or personal as security, and to loan and advance money upon mortgages on real and personal property or on either of them. (6) To take, buy, purchase, exchange, hire, lease or otherwise acquire real estate and property, either improved or unimproved, and any interest or right therein, and to own, hold, control, maintain, manage and develop the same in any State of the United States. (7) To purchase, exchange, hire or otherwise acquire such personal property chattels, rights, easements, permits, privileges and franchises as may be lawfully purchased, exchanged, hired or acquired under Article Two of the Stock Corporation Law of the State of New York. (8) To sell, manage, improve, develop, assign, transfer, convey, lease, sub-lease, pledge or otherwise alienate or dispose of, and to mortgage or otherwise encumber the lands, buildings, real property, chattels real and personal, and other property of the corporation, real and personal, wheresoever situate, and any and all legal and equitable rights therein. (9) To transact the business of buying, selling, dealing in, leasing and renting and managing real estate and any interest therein for its own account, as agent or broker, or upon commission. (10) To purchase, acquire, hold, sell, assign, and transfer, mortgage pledge and otherwise dispose or the shares of the capital stock, bonds, debentures or other evidences of indebtedness of any corporation, domestic or foreign and while the holder thereof, to exercise all rights and privileges of ownership, including the right to vote thereon, and to issue in exchange therefor its own stock, bonds and other obligations. The foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the general powers of the company and the enjoyment thereof as conferred by the Laws of the State of New York, upon corporations organized under Article Two of the Stock Corporation Law of the State of New York. THIRD: The amount of the capital stock shall be $20,000.00 and is to consist of 200 shares of the par value of $100.00. FOURTH: The office of the corporation is to be located in the County of New York City and State of New York. FIFTH: The duration of the said corporation shall be perpetual. SIXTH: The number of directors shall be three and the said directors need not be stockholders of the corporation. - - -2- SEVENTH: The names and post office addresses of the directors until the first annual meeting of the stockholders are: NAMES POST-OFFICE ADDRESSES JESSE L. GOLDBERG 305 Broadway, Borough Of Manhattan, City of New York SYDNEY H. SILVERMAN 305 Broadway, Borough Of Manhattan, City of New York JULIUS GAFFNER 305 Broadway, Borough Of Manhattan, City of New York EIGHTH: The names and post office addresses of the subscribers of this certificate of incorporation and a statement of the number of shares which each agrees to take in the corporation, are as follows. NAMES P.O. OFFICE ADDRESSES NO. OF SHARES JESSE L. GOLDBERG 305 Broadway, Borough Of Manhattan, City of New York ONE SYDNEY H. SILVERMAN 305 Broadway, Borough Of Manhattan, City of New York ONE JULIUS GAFFNER 305 Broadway, Borough Of Manhattan, City of New York ONE NINTH: All of the subscribers of this certificate are of full age, and that at least two-thirds of them are citizens of the United States, and at least one of them is a resident of the State of New York, and at least one of the persons named as a director is a citizen of the United States and a resident of the State of New York. TENTH: That the meeting of the Board of Directors shall be held in the State of New York only. IN WITNESS WHEREOF, we have signed and acknowledged this certificate in duplicate, this 3rd day of November. - - -3- STATE OF NEW YORK COUNTY OF NEW YORK SS: On this 3rd day of November, 1938, before me personally came JESSE L. GOLDBERG, SYDNEY H. SILVERMAN, AND JULIUS GAFFNER, to know to be the persons described in and who executed the foregoing certificate of incorporation and they thereupon severally duly acknowledged to me that they executed the same. - - -4- CERTIFICATE OF INCORPORATION - - -of- FEDERAL NUT CO. INC. (Pursuant to Article Two of the Stock Corporation Law of the State of New York). CERTIFICATE OF DESIGNATION TO THE SECRETARY OF STATE ALBANY, NEW YORK The undersigned corporation, FEDERAL NUT CO., INC., pursuant to Section 24 of the Stock Corporation Law, does hereby designate and appoint the Secretary of State of New York as its agent upon whom process in any action or proceeding against it may be served within the State of New York, pursuant to law. The address to which the Secretary of State shall mail a copy of any process against the corporation which may be served upon him is Federal Nut Co., Inc., 250 West 54th Street, in the Borough of Manhattan, City, County and State of New York. IN WITNESS WHEREOF, the corporation has caused this Certificate of Designation to be duly executed by its authorized officer, to wit, its President, and the seal of the corporation hereunto affixed this 29 day of November, 1949. FEDERAL NUT CO., INC. By:________________________ William Schwarz - President STATE OF NEW YORK COUNTY OF NEW YORK as: ______________________________________ On this 29 day of November, 1949, before me came WILLIAM SCHWARZ, to me known, who being by me duly sworn, did depose and say that he resides at No. 15 Shore Road, Mamaronack, Westchester County, New York; that he is the President of Federal Nut Co., Inc., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation and that he signed his name thereto by like order. FEDERAL NUT CO., INC. - - ---------------------------------------- CERTIFICATE OF DESIGNATION Pursuant to Section 24 of the Stock Corporation Law. - - ----------------------------------------- STATE OF NEW YORK DEPARTMENT OF STATE JESSE L. GOLDBERG ATTORNEY AT LAW 305 BROADWAY NEW YORK, NY STATE OF NEW YORK CITY OF NEW YORK COUNTY OF NEW YORK Lillian Mandl, being duly sworn, deposes and says: That she is the Secretary of FEDERAL NUT CO., INC., the corporation described in the foregoing certificate and as such, is the custodian of the stock book and ledger of the said corporation. That there do not appear on the books of the aforesaid corporation the names of any other holders and owners of the capital stock of the aforesaid corporation, except those mentioned herein, and that the same are all of the stockholders of record of the said corporation. That the persons who executed the annexed consent, to increase the capital stock of the said corporation are all of the stockholders of record of the said corporation. Sworn to before me this 22nd day of November, 1949. STATE OF NEW YORK CITY OF NEW YORK COUNTY OF NEW YORK WILLIAM SCHWARZ and LILLIAN MANDL, President and Treasurer, respectively, of FEDERAL NUT CO., INC., the corporation described in the foregoing certificate, being duly sworn, depose and say: 1. The number of additional shares which the corporation is hereby authorized to issue are 24,800 shares, and that such additional 24,800 shares shall have the par value of $100.00 each. The original number of shares, namely 200, of the par value of $100.00 each,are hereby increased by 24,800 shares of the par value $100.00 each, as aforesaid. 2. That the total number of shares which the corporation shall now have shall be 25,000 shares of the par value of $100.00 each, and that the original 200 shares of the par value of $100.00 each shall remain as such. FEDERAL NUT CO., INC. BY:_____________________ WILLIAM SCHWARZ - PRESIDENT _____________________ LILLIAN MANDL - TREASURER Sworn to me before this 29 day of November, 1949. 11. The total number of shares which the corporation shall henceforth have will be 25,000 shares, each of the par value of $100.00 and none with no par value. IN WITNESS WHEREOF, we have executed the foregoing certificate in duplicate this 22nd day of November, 1949. _____________________L.S. _____________________L.S. STATE OF NEW YORK CITY OF NEW YORK COUNTY OF NEW YORK On this 22nd day of November, 1949, before me personally came WILLIAM SCHWARZ and LILLIAN MANDL, to me known to be the individuals described in and who executed the foregoing certificate of increase of capital stock, and they duly severally acknowledged to me that they executed the same. CERTIFICATE OF INCREASE OF THE CAPITAL STOCK OF FEDERAL NUT CO., INC. (Pursuant to Section 36 of the Stock Corporation Law.) WE, the undersigned, being all of the stockholders of FEDERAL NUT CO., INC., for the purposes of increasing the capital stock of FEDERAL NUT CO., INC., do hereby certify as follows: 1. The name of the corporation is FEDERAL NUT CO., INC. 2. The certificate of incorporation was filed in the Office of the Secretary of State on the 7th day of November, 1932 and in the Office of the Clerk of the County of New York on the 11th day of November, 1932. 3. That the certificate of incorporation is amended in order to increase the capital stock and to authorize additional shares of the same class stock now existing, namely, common stock of the par value of $100.00 each. 4. That the original Certificate filed herein is amended so that same shall read, 25,000 shares of the par value of $100.00 each instead and in lieu of the present provision of 200 shares of the par value of $100.00 each. 5. That the provision in the original Certificate providing for 200 shares of stock of the par value of $100.00 each is hereby stricken out. 6. The total amount of the authorized capital stock is the sum of $20,000.00, consisting of 200 shares of the par value of $100.00 each. 7. Total number of shares which it already authorized to issue is 200 shares, and the total number thereof having a par value of $100.00, and there are no shares with no par value. 8. The shares already authorized are common shares, consisting of 200 shares. 9. The number of shares issued and outstanding are 50 shares of common stock. 10. The amount to which the capital stock is increased is $2,500,000.00 - - -1- CERTIFICATE OF INCREASE OF THE CAPITAL STOCK - - -OF- FEDERAL NUT CO., INC. (Pursuant to Section 36 of the Stock Corporation Law.) JESSE L. GOLDBERG ATTORNEY AT LAW 305 BROADWAY NEW YORK, NY CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION - - -of- FEDERAL NUT CO., INC. Pursuant to Section 36 of the Stock Corporation Law. We, WILLIAM SCHWARZ AND MICHAEL J. OKOLA, BEING RESPECTIVELY, the President of FEDERAL NUT CO., INC. and the Secretary thereof, hereby certify: 1. The name of the corporation is FEDERAL NUT CO., INC. 2. The Certificate of Incorporation was filed in the Office of the Office of the Secretary of the State on the 7th day of November, 1932, and in the Office of the Clerk of the County of New York on the 11th day of November, 1932. 3. That the Certificate of Incorporation was amended on December 1st, 1949, and that such Certificate of Increase of the Capital Stock of the said Corporation was duly filed with the Secretary of State at Albany, New York, on the 1st day of December, 1949. 4. That the original Certificate filed herein provided for two hundred (200) shares of stock of the par value of One Hundred ($100.00) Dollars each. 5. That the Certificate of Increase of the Capital Stock of FEDERAL NUT CO., INC. filed December 1st, 1949 had stricken from the said Certificate the provision therein providing for two hundred (200) shares of stock of the par value of One Hundred ($100.00) Dollars each and in lieu - - -1- thereof, provided for the authority to issue capital stock in the sum of Two Million Five Hundred Thousand ($2,500,000.00) Dollars consisting of twenty-five thousand (25,000) shares each of the par value of One Hundred ($100.00) Dollars and none with no par value. 6. That the Certificate of Incorporation is further amended herein in order to increase the capital stock and to authorize additional shares of a different class of stock now existing, namely, preferred stock having a par value of One Hundred ($100.00) Dollars each and none have been or shall be issued having no par value. 7. The amount of the capital stock which the Corporation is hereafter to have shall be twenty-five thousand (25,000) shares of common stock each of the par value of One Hundred ($100.00) Dollars, and ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars making a total authorized capital stock of Three Million Five Hundred Thousand ($3,500,000.00) Dollars consisting of twenty-five thousand (25,000) shares of common stock of the par value of One Hundred ($100.00) Dollars aggregating Two Million Five Hundred Thousand ($2,500,000.00) Dollars, and ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars having an aggregate of One Million ($1,000,000.00) Dollars, and no stock whether common or preferred shall be issued having no par value. 8. (a) The total number of shares which the Corporation may henceforth have is twenty-five thousand (25,000) shares of common stock as previously authorized, each of the - - -2- par value of One Hundred ($100.00) Dollars, and shall continue to have said par value of One Hundred ($100.00) Dollars, and ten thousand (10,000) new shares which shall be preferred each of the par value of One Hundred ($100.00) Dollars, as hereinafter provided. The twenty-five thousand (25,000) shares of common stock already authorized are to continue to be the common or voting stock and all existing privileges and rights of voting of such stock are to remain as heretofore. (b) The designations, preferences, privileges and voting powers of the preferred stock and the restrictions and qualifications thereof are as follows: The holders of the preferred stock shall be entitled to cumulative dividends at the rate four and one-half (4 () per cent per annum on the par value thereof in preference and priority to the payment of any dividends on common stock. The holders of the preferred stock shall be entitled to the redemption of their stock, in whole or in part, immediately upon the acqui- sition by the corporation of surplus, and shall be paid for such stock the sum of One Hundred ($100.00) Dollars for each share together with all accrued dividends due thereon at the time of redemption. In the event of dissolution or liquidation of the corporation of the sale of its assets, whether voluntary or involuntary, and/or upon the distribution of the company's capital, there shall first be paid to the holders of said preferred stock, the par value thereof and the amount of all unpaid accrued dividends; the remaining assets and funds of the corporation shall be divided among and paid to the holders of the common stock, wholly, solely and entirely. The corporation shall have the right at any time to redeem or purchase the said preferred stock, or any number of shares thereof, issued and out- standing at the price herein above set forth, and the corporation may apply, pursuant to Section 28 of the Stock Corporation Law, toward the redemp- tion or purchase of its preferred stock as here- in provided any part of its surplus funds - - -3- and/or an amount of its capital which shall not be greater than the capital represented by the shares redeemed or purchased, but under no circumstances shall the corporation apply any other or further part of its capi- tal toward the redemption of purchase of such stock. The redemption or purchase shall not be effected where the effect of any such re- demption or purchase and application of capital thereto shall be to reduce the actual value of the assets of the corporation to an amount less than the total amount of its debts and liabilities plus the amount of its capital reduced by the amount of the capital so applied. Whenever any shares of such preferred stock shall be redeemed or purchased out of capital or surplus, the corporation may, by resolution of its Board of Directors, retire said shares, thereupon this corporation shall in con- nection with retirement of such shares cause to be filed pursuant to Section 28 of the Stock Corporation Law a certificate of reduction capital. IN WITNESS WHEREOF, we have made and subscribed this certificate this 20 day of July 1950. _________________________ President __________________________ Secretary STATE OF NEW YORK CITY OF NEW YORK COUNTY OF NEW YORK On this 20 day of July, 1950, before me personally came WILLIAM SCHWARZ and MICHAEL J. OKOLA, to me known and known to me to be the same persons described in and who executed the foregoing certificate and they duly severally acknowledged to me that they executed the same. ________________________ - - -4- STATE OF NEW YORK CITY OF NEW YORK COUNTY OF NEW YORK WILLIAM SCHWARZ and MICHAEL J. OKOLA, being duly sworn, depose and say: That he, WILLIAM SCHWARZ, is the President, and he, MICHAEL J. OKOLA, is the Secretary of FEDERAL NUT CO., INC. That they have been duly authorized to execute and file the foregoing Certificate of Amendment of the Certificate of Incorporation of FEDERAL NUT CO., INC. for the increase in the number of shares, namely, by ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars, by the votes cast in person or by proxy of the holders of record of all the outstanding shares of stock of FEDERAL NUT CO., INC. entitled to vote thereon with relation to the proceedings provided for in the above Certificate; and that they gave been authorized to execute and file the same by the votes cast in person or by proxy of the holders of record of all of the outstanding shares of the common stock effected by the change entitled to vote thereon; and that they have been duly authorized to execute the foregoing Certificate of Amendment increasing the capital stock by the creation of preferred stock as therein provided by the votes of the holders of record of all of the outstanding stock of the said corporation entitled to vote at a stockholders' meeting at which such votes were cast with relation the proceedings provided for in the foregoing Certificate. That such votes were cast at a stockholders' meeting on the 21st day of June, 1950, at No. 250 West 54th Street, in the Borough of Manhattan, City and State of New York, - - -5- upon notice pursuant to Section 45 of the Stock Corporation Law. Sworn to before me this 20th day of July, 1950. __________________________ PRESIDENT __________________________ SECRETARY - - -6- STATE OF NEW YORK COUNTY OF NEW YORK WILLIAM SCHWARZ and SAMUEL OSTROVE, being duly severally sworn, do depose and say, and each for himself, deposes and says: That he, WILLIAM SCHWARZ, is the President of FEDERAL NUT CO., INC., and he, SAMUEL OSTROVE, is the Assistant-Treasurer thereof. That the number of additional shares which the Corporation is authorized to issue by virtue of the foregoing Certificate of Amendment is, ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars, thus making a total authorized capital stock of Three Million Five Hundred Thousand ($3,500,000.00) Dollars, consisting of twenty-five thousand (25,000) shares of common stock of the par value of One Hundred ($100.00) Dollars aggregating Two Million Five Hundred Thousand ($2,500,000.00) Dollars and ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars having an aggregate of One Million ($1,000,000.00) Dollars, and no stock whether common or preferred shall be issued having no par value. The amended Certificate of Incorporation seeks authorization to issue new and additional ten thousand (10,000) shares of preferred stock each of the par value of One Hundred ($100.00) Dollars, thus increasing the total authorized capital stock of this Corporation to Three Million Five Hundred Thousand ($3,500,000.00) Dollars. None of the shares of stock are changed. The par value of shares of stock which the Corporation is authorized to issue is not increased. - - -1- The sum total of the increased authorization is to empower the Corporation to issue ten thousand (10,000) shares of preferred stock of the par value of One Hundred ($100.00) Dollars in addition to the twenty-five thousand (25,000) shares of common stock of the par value of One Hundred ($100.00) Dollars which it had heretofore been authorized to issue. Sworn to before me this 24th day of July, 1950. ____________________________________ William Schwarz - President ____________________________________ Samuel Ostrove - Assistant Treasurer - - ------------------------------------ CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INFORMATION - - -OF- FEDERAL NUT CO., INC. (Pursuant to section 36 of the Stock Corporation Law.) - - ---------------------------------------- Dated: July 20, 1950. Jesse L. Goldberg Attorney at Law 305 Broadway New York, N.Y. CERTIFICATE OF CHANGE OF NAME OF FEDERAL NUT CO. INC. TO CHOCK FULL O'NUTS CORP. (Pursuant to Sec. 40 of the General Corporation Law) WE, the undersigned, constituting the holders of record of all of the outstanding shares of capital stock entitled to vote on a change in the name of said corporation, CERTIFY: 1. The name of this corporation is Federal Nut Co. Inc. 2. The certificate of incorporation was filed in the office of Secretary of State on November 7, 1932. 3. The new name to be assumed by this corporation is CHOCK FULL O'NUTS CORP. IN WITNESS WHEREOF, the undersigned have subscribed and acknowledged this certificate in duplicate this 27th day of December 1955. __________________________L.S. __________________________L.S. STATE OF NEW YORK COUNTY OF NEW YORK On this 27th day of December 1955, before me came WILLIAM BLACK and L. MANDL, to me known to me to be the individuals mentioned and described in and who executed the foregoing certificate and they duly acknowledged to me that they executed the same. STATE OF NEW YORK COUNTY OF NEW YORK MICHAEL J. OKOLA, being duly sworn, deposes and says: That he is the Secretary of FEDERAL NUT CO. Inc. That the persons who executed the foregoing certificate of change of name of said corporation constitute the holders of all of the outstanding shares of stock of the corporation entitled to vote on change in the name of said corporation. Subscribed and sworn to me before me this 27th day of December 1955. _________________________ - - ---------------------------------------- CERTIFICATE OF CHANGE OF NAME OF FEDERAL NUT CO. INC. TO CHOCK FULL O'NUTS CORP. (Pursuant to Sec. 40 of the General Corporation Law) - - ---------------------------------------- STATE OF NEW YORK DEPARTMENT OF STATE GOLDBERG & LAPAN 425 LEXINGTON AVE. NEW YORK, N.Y. RESTATED CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORP. _________________ Pursuant to Section 40 of the Stock Corporation Law _________________ We, the undersigned, WILLIAM BLACK and LILLIAN MANDL, being the holders of record of all the outstanding shares of Chock Full O'Nuts Corp., a New York stock corporation (hereinafter sometimes referred to as the "Corporation") entitled to vote with relation to the proceedings provided for in this Certificate, do hereby certify as follows: 1. The name of the Corporation is CHOCK FULL O'NUTS CORP. The name under which the Corporation was originally incorporated was FEDERAL NUT CO., INC. 2. The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of New York on November 7, 1932. 3. The Certificate of Incorporation as now in full force and effect is hereby amended to effect changes authorized in subdivision 2 of Section 35 of the Stock Corporation Law, namely to change the name of the Corporation to Chock Full O'Nuts Corporation; to change the address to which the Secretary of State shall mail a copy of process in any action or proceeding against the Corporation which may be served upon him; to eliminate from the enumeration and descriptions of shares which the Corporation is authorized to issue all of the previously authorized shares, of Preferred Stock, par value $100 per share, none of which has been issued; to change all of the 25,000 previously authorized and presently outstanding shares of Common Stock, par value $100 per share, of the Corporation from 25,000 shares, par value $100 per share, of the Corporation to 800,000 shares, par value $1 per share, to authorize 200,000 additional shares of Common Stock, par value $1 per share, and in conformity therewith to decrease the capital stock of the Corporation to $1,000,000; to provide that no holder of Common Stock shall be entitled to any preemptive right to subscribe for shares or other securities of the Corporation; to change the purposes and powers of the Corporation; to increase the number of directors so as to provide that the number of directors of the Corporation shall be not less than five (5) nor more than eleven (11); and to insert provisions for the regulation and conduct of the Corporation; and said Certificate of Incorporation, as amended and supplemented by all certificate heretofore filed pursuant to law and as further amended hereby, is restated to set forth its entire text as follows: CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION FIRST: The name of the Corporation is CHOCK FULL O'NUTS CORPORATION SECOND: The purposes of the Corporation are as follows: (1) To manufacture, produce, purchase or otherwise acquire, prepare, sell at wholesale or retail, distribute and deal in coffee, sandwiches, doughnuts, cakes, pies, - - -1- nuts, shelled and unshelled, candies, fruits, ice cream, soda water, drinks and all kinds of foods, food products and all products, by products, ingredients and commodities of every kind and description; to engage in any type of food business and in any activity necessary of incidental to any business of the Corporation. (2) To manufacture, produce, purchase, lease or otherwise acquire, hold, own, mortgage, pledge, sell, lease or otherwise dispose of, import, export, distribute and deal in and with goods, wares, merchandise and personal property of every kind and description; to engage in the business of wholesale and retail merchants dealing in all types of commodities and merchandise; to establish, operate and manage stores, warehouses, disposition depots, purchasing offices and other facilities; to grant to others the right to carry on any kind of lawful business on premises of the Corporation; to carry on a general trading, manufacturing, mercantile, commercial and industrial business, or any part thereof, in any part of the world. (3) To purchase, lease or otherwise acquire, hold, own, improve, maintain, develop, encumber, mortgage, pledge, sell, exchange, lease or otherwise dispose of and to deal and trade in, any and all lands, real property, leaseholds, and any and all interests and rights in land or other property, real, personal, or mixed; to build erect, construct, purchase, lease, or otherwise acquire, hold, own, maintain, operate, develop, improve, alter, repair, lease, mortgage, pledge, sell, convey, exchange or otherwise dispose of, buildings, plants, structures, facilities and improvements of every kind and description. (4) To acquire, by purchase, underwriting, subscription, participation in syndicates or otherwise, become interested in, invest in, hold, own, sell, exchange, mortgage, pledge, hypothecate or otherwise dispose of, turn to account or realize upon, all forms of securities, including shares of stock, bonds, debentures, notes, evidences of indebtedness, certificates of interest and other rights, interests and obligations, and to deal in and with the same, and to issue in exchange, therefor or in payment thereof its own stocks, bonds or other obligations or securities, or otherwise pay therefor, or to acquire the same in any lawful manner without any such exchange or other payment; to exercise in respect thereof any and all rights, powers and privileges or individual ownership or interest therein, including the right to vote thereon for any and all purposes and to consent or otherwise act with respect thereto; to do any and all acts and things for the preservation, protection, improvement and enhancement in value of such securities or designed to accomplish any such purpose; to aid by loan, subsidy, guaranty, or in any other manner, those issuing, creating or responsible for any such securities, all to such extent as a corporation organized under Article Two of the Stock Corporation Law may then lawfully do. (5) To acquire all or any part of the good will, rights, property, and business of any person, entity, partnership, association or corporation; to pay for the same in cash or in stock, bonds, or other securities or obligations of the Corporation, or otherwise; to hold, utilize and in any manner dispose of the whole or any part of the rights and property so acquired, and to assume in connection therewith any liabilities of any such person, entity, partnership, association or corporation and to conduct in any lawful manner the whole or any part of the business thus acquired. (6) To apply for, obtain, register, purchase, lease, or otherwise acquire, hold, own, use, introduce, develop, and sell, assign, lease, pledge, or otherwise dispose of or turn to account letters patent of the United States of America or of any foreign country, - - -2- inventions, improvements, formulae, processes, patents rights, licenses, and privileges, copyrights, trade-marks and trade names, or pending applications therefor, and any and all labels, designs, prints and brands, and to use, exercise, develop and take or grant licenses or other rights in respect of or otherwise turn to account any of the foregoing. (7) To the extent permitted by law, to borrow money for its corporate purposes; to draw, make, accept, endorse, execute, issue and negotiate promissory notes, bills of exchange, warrants, warehouse receipts, bonds; debentures and other negotiable or transferable instruments. (8) To make advances or loans with or without security so far as may be permitted to a corporation organized under Article Two of the Stock Corporation Law. (9) To the extent permitted by law, to guarantee the payment of dividends upon stocks, or the principal of and/or interest upon bonds, notes and other evidences of indebtedness of, or to guarantee the performance of the contracts or other undertakings of, or otherwise aid, in any manner, any corporation, firm or individual in which the Corporation shall be directly or indirectly interested either through ownership of its stock, bonds, securities, or other obligations, or otherwise. (10) To cause to be formed, consolidated, merged, reorganized or liquidated, and to promote, take charge of and aid in by way permitted by law the formation, consolidation, merger, reorganization or liquidation of any corporation, association, firm or entity. (11) To make, execute and carry out any and all contracts and agreements which may deemed proper by its officers in the conduct of its business. (12) To purchase, acquire, hold, sell and reissue shares of its own capital stock to the extent permitted by the Certificate of Incorporation as amended, and the laws of the State of New York. In general, to do any and all of the acts and things herein set forth to the same extent as natural persons could do, and in any part of the world, as principal, factor, agent, contractor, or otherwise, either alone or in company with any person, trustee, entity, syndicate, partnership; association or corporation; to establish and maintain offices and agencies within and anywhere outside of, the State of New York and to exercise all or any of its corporate powers and rights in the State of New York and in any and all other states, territories, districts, possessions or dependencies of the United States of America and in any other countries or places. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the purposes herein set forth and to do every other act and thing incidental thereto of command therewith provided the same be not forbidden by the laws of New York to corporations organized under Article Two of the Stock Corporation Law. THIRD: The total authorized amount of capital stock of the Corporation shall be $1,000,000 consisting of 1,000,000 shares of the par value of $1 each, all of the same class, designated Common Stock. No holder of Common Stock of the Corporation shall be entitled, as such, as matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever, or of securities convertible into stock of any class whatsoever whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend. - - -3- FOURTH: The office of the Corporation shall be located in the County of New York, City and State of New York. The Secretary of State of the State of New York shall mail a copy of process in any action or proceeding against the Cooperation which may be served upon him is 425 Lexington Avenue, New York 17, New York. FIFTH: The duration of the Corporation shall be perpetual. SIXTH: The number of directors of the Corporation shall be not less than five (5) not more than eleven (11). Directors need not be stockholders. SEVENTH: The names and post-office addresses of the directors until the first annual meeting of the stockholders are. NAMES POST OFFICE ADDRESSES JESSE L. GOLDBERG 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK SYDNEY H. SILVERMAN 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK JULIUS GAFFNER 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK EIGHTH: The names and post office addresses of the subscribers of this Certificate of Incorporation and a statement of the number of shares which each agrees to take in the Corporation are as follows: NAME P.O. ADDRESS NO. OF SHARES Jesse L. Goldberg 305 Broadway, NYC One Sydney H. Silverman 305 Broadway, NYC One Julius Gaffner 305 Broadway, NYC One NINTH: All of the subscribers of this Certificate of Incorporation are of full age, and that at least two-thirds of them are citizens of the United States, and at least one of them is a resident of the State of New York and at least one of the persons named as a director is a citizen of the United States and a resident of the State of New York. TENTH: The meetings of the Board of Directors shall be held in the State of New York only. ELEVENTH: The following provisions are inserted for the regulation and conduct of the Corporation and expressly provided that they are intended to be in furtherance and not in limitation or exhaustion of the powers conferred by statute: (1) The Board of Directors may designate three or more of its number to constitute an Executive Committee, which shall have and they exercise, subject to such limitations, if any, as may be prescribed by the By Laws or by resolution of the Board of Directors, the powers of the Board of Directors in the management of the business and affairs of the Corporation which may lawfully be delegated, provided such Executive Committee shall act only at such times as the Board of Directors is not in session and - - -4- in no case to the exclusion of the right of the Board of Directors at any time to act as a Board upon any business of the Corporation. (2) Meetings of the stockholders and directors of the Corporation for all purposes may be held at places in the State of New York other than the principal office of the Corporation or at such principal office. (3) The By Laws may prescribe the number of directors necessary to constitute a quorum, which number may be less than a majority of the whole Board of Directors but not less than the number required by law. (4) The Board of Directors from time to time shall decide whether and to what extent and at what times and under what conditions and requirements the accounts and books of the Corporation, or any of them, except the stock book, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any books or documents of the Corporation, except as conferred by the laws of the State of New York or authorized by the Board of Directors. (5) A director of the Corporation shall not, in the absence of fraud, be disqualified by his office from dealing with or contracting with the Corporation either as vendor, purchaser or otherwise, nor, in the absence of fraud, shall any transaction or contract of the Corporation be void or avoidable or affected by reason of the fact that any director or any firm of which any director is a member, or any corporation of which the director is an officer, director of stockholder, is in any way interested in such transaction or contract; provided, that at the meeting of the Board of Directors or of the Committee thereof having authority in the premises to authorize or confirm said contract or transaction, the interest of such director, firm or corporation is disclosed or known, and there shall be present a quorum of directors or of the directors constituting such Committee not so interested or connected and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Any director or directors so interested or connected shall not be liable to the Corporation or to any stockholder or creditor thereof of to any other person for any loss incurred by it under or by reason of any such contract or transaction and any such director or directors shall not be accountable for any gains or profits realized on any such contract or transaction always provided however, that such contract or transaction shall at the time it was entered into have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair. (6) The Board of Directors shall have power from time to time to fix and determine and vary the amount of the working capital of the Corporation and to direct and determine the use and disposition of any surplus or net profits over and above the capital stock paid in and in its discretion the Board of Directors may use and apply any such surplus or accummulated profits in purchasing or acquiring bonds or other obligations of the Corporation shares of its own capital stock to such extent and in such manner and upon such terms as the Board of Directors shall deem expedient, but unless otherwise expressly provided in the Certificate of Incorporation as amended any shares so such capital stock so purchased or acquired may be resold or reissued unless such shares shall have been retired in the manner provided by law for the purpose of decreasing the Corporation's capital stock. (7) Any contract, transaction or act of the Corporation or of the Board of Directors or of the Executive Committee or of any other duly constituted committee and of which - - -5- disclosure shall be made in the notice of the meeting and which shall be approved or ratified by a majority in interest of a quorum of the stockholders of the Corporation having voting power at any annual or special meeting called for such purpose shall except as otherwise provided by the laws of the State of New York be as valid and as binding as though approved or ratified by every stockholder of the Corporation; provided however, that any failure of the stockholders to approve or ratify such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or to deprive the Corporation; its directors or officers of their right to proceed with such contract, transaction or action. Any director of the Corporation may vote upon any contract or other transaction between Corporation and subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. (8) The Board of Directors may determine from time to time the amount of compensation which shall be paid to its members for attendance at meetings of the Board or of any committee of the Board. The Board of Directors shall also have power, in its discretion to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. (9) Each director of the Corporation shall be indemnified by the Corporation against expenses actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which he is made a party by reason of his being or having been a director of the Corporation, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duties as such director; such right of indemnification shall not be deemed exclusive of any other rights to which he may be entitled apart from the General Corporation Law of the State of New York. (10) Subject to the by-laws made by stockholders, the Board of Directors may make by-laws and from time to time may alter, amend or repeal any by-laws, but any by-law made by the Board of Directors may be altered or repealed by the stockholders. 4: The 25,000 shares of previously authorized Common Stock, par value $100 per share, all of which are issued, are hereby changed into 800,000 shares of Common Stock, par value $1 per share, on a 32 for 1 basis. IN WITNESS WHEREOF, we have made and subscribed this Certificate this 20th day of August 1958. ___________________________ WILLIAM BLACK ___________________________ LILLIAN MANDL - - -6- STATE OF NEW YORK COUNTY OF NEW YORK On this 20th day of August 1958, before me personally came WILLIAM BLACK and LILLIAN MANDL, to me known and known to me to be, the persons described in and who executed the foregoing Certificate and each of said persons duly acknowledged to me that he executed the same. _____________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK MICHAEL J. OKOLA, being duly sworn, deposes and says, that he is the Secretary of CHOCK FULL O'NUTS CORP., a corporation mentioned in the foregoing Certificate, and that the persons who have executed the foregoing Certificate constitute the holders of record of all the outstanding shares of said Corporation entitled to vote with relation to the proceedings provided for in said Certificate. _____________________ Secretary Subscribed and sworn to before me this 25th day of August. 1958. _________________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK WILLIAM BLACK, being duly sworn deposes and says, that he is the President of CHOCK FULL O'NUTS CORP; the number and par value of the shares changed is 25,000 shares, par value $100 per share and the number of shares resulting therefrom is 800,000 shares, par value $1 per share and the number of additional shares not resulting from a change of shares which the Corporation is authorized to issue is 200,000 shares of the par value of $1 per share. ___________________________ WILLIAM BLACK Sworn to me this 20th day of August, 1958. ___________________________ NOTARY PUBLIC - - -7- RESTATED CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORP. ______________ Pursuant to Section 40 of the Stock Corporation Law _______________ WHITE & CASE 14 WALL STREET NEW YORK, NY CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION ___________________ Pursuant to Section Thirty-six of the Stock Corporation Law. ___________________ The undersigned being the holders of record of all of the outstanding shares of Chock Full O'Nuts Corporation entitled to vote with relation to the proceedings provided for herein, hereby certify: 1. The name of the corporation is: CHOCK FULL O'NUTS CORPORATION 2. The Certificate of Incorporation was filed in the Department of State of the State of New York on November 7, 1932, under the name of Federal Nut Co., Inc. 3. The Certificate of Incorporation is amended as set forth in this certificate to effect the following changes authorized in subdivision two of Section Thirty-five of the Stock Corporation Law. (a) To eliminate from the enumeration and description of shares which the corporation is authorized to issue, 798,400 issued shares of Common Stock of the par value of 1$ per share, each held in its treasury, and (b) to reduce the amount of the capital stock by the amount of $798,400 in connection with such elimination of shares. The capital of the corporation is reduced as set forth in this certificate by eliminating the aforesaid 798,400 issued shares of Common Stock from the enumeration and description of shares which the corporation is authorized to issue. 4. Article THIRD of the Certificate of Incorporation, setting forth the amount of the capital stock and the number and par value of the shares of which it consists, is hereby amended to read as follows: "THIRD: The total authorized amount of capital stock of the company shall be $201,600, consisting of 201,600 shares of the par value of $1 each, all of the same class, designated Common Stock. 5. The capital of the corporation is hereby reduced by $798,400 , being an amount equal to the amount of capital represented by the 798,400 issued shares of Common Stock of the par value of $1 per share hereby eliminated. The surplus resulting from such reduction shall be available to be used for any purpose for which surplus may be used. IN WITNESS WHEREOF, the undersigned have made, subscribed and acknowledged this certificate. _______________________ WILLIAM BLACK _______________________ LILLIAN MANDL STATE OF NEW YORK COUNTY OF NEW YORK On this ______ day of September, 1958, before me personally came WILLIAM BLACK and LILLIAN MANDL, to me known, and known to me to be the person described in and who executed the foregoing Certificate and each of said persons duly acknowledged to me that he executed the same. _______________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK MICHAEL J. OKOLA, being duly sworn, deposes and says, that he is the Secretary of CHOCK FULL O'NUTS CORPORATION, a corporation mentioned in the foregoing Certificate and that the persons who have executed the foregoing Certificate constitute the holders of record of all the outstanding shares of said Corporation entitled to vote with relation to the proceedings provided for in said Certificate. ______________________ MICHAEL J. OKOLA Subscribed and sworn to before me this ____ day of September, 1958. __________________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK WILLIAM BLACK, being duly sworn, deposes and says that he is the President of Chock Full O'Nuts Corporation; that the actual value of the assets of said corporation is not less than the total amount of the debts and liabilities of the corporation plus the proposed amount of its capital. ____________________ WILLIAM BLACK Sworn to me before me this _____ day of September, 1958. ________________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK LILLIAN MANDL, being duly sworn, deposes and says that he is the Treasurer of Chock Full O'Nuts Corporation; that the actual value of the assets of said corporation is not less than the total amount of the debts and liabilities of the corporation plus the proposed amount of its capital. ________________________ LILLIAN MANDL Sworn to before me this 26th day of September, 1958 ________________________ NOTARY PUBLIC CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION _________________________________________ Pursuant to Section Thirty-six of the Stock Corporation Law ___________________ WHITE & CASE 14 WALL STREET NEW YORK, N.Y. RESTATED CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORP. _________________ Pursuant to Section 40 of the Stock Corporation Law _________________ We, the undersigned, WILLIAM BLACK and LILLIAN MANDL, being the holders of record of all the outstanding shares of Chock Full O'Nuts Corp., a New York stock corporation (hereinafter sometimes referred to as the "Corporation") entitled to vote with relation to the proceedings provided for in this Certificate, do hereby certify as follows: 1. The name of the Corporation is CHOCK FULL O'NUTS CORP. The name under which the Corporation was originally incorporated was FEDERAL NUT CO., INC. 2. The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of New York on November 7, 1932. 3. The Certificate of Incorporation as now in full force and effect is hereby amended to effect changes authorized in subdivision 2 of Section 35 of the Stock Corporation Law, namely to change 1,600 previously authorized shares of Common Stock, par value $1 per share of the Corporation which are issued into 800,000 shares of Common Stock, par value $1 per share and in conformity therewith to increase the capital stock of the Corporation from $201,600 to $1,000,000; and said Certificate of Incorporation, as amended and supplemented by all certificates heretofore filed pursuant to law and as further amended hereby, is restated to set forth its entire text as follows: CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION FIRST: The name of the Corporation is CHOCK FULL O'NUTS CORPORATION SECOND: The purposes of the Corporation are as follows: (1) To manufacture, produce, purchase or otherwise acquire, prepare, sell at wholesale or retail, distribute and deal in coffee, sandwiches, doughnuts, cakes, pies, nuts, shelled and unshelled, candies, fruits, ice cream, soda water, drinks and all kinds of foods, food products and all products, by products, ingredients and commodities of every kind and description; to engage in any type of food business and in any activity necessary of incidental to any business of the Corporation. (2) To manufacture, produce, purchase, lease or otherwise acquire, hold, own, mortgage, pledge, sell, lease or otherwise dispose of, import, export, distribute and deal in and with goods, wares, merchandise and personal property of every kind and description; to engage in the business of wholesale and retail merchants dealing in all types 1 of commodities and merchandise; to establish, operate and manage stores, warehouses, disposition depots, purchasing offices and other facilities; to grant to others the right to carry on any kind of lawful business on premises of the Corporation; to carry on a general trading, manufacturing, mercantile, commercial and industrial business, or any part thereof, in any part of the world. (3) To purchase, lease or otherwise acquire, hold, own, improve, maintain, develop, encumber, mortgage, pledge, sell, exchange, lease or otherwise dispose of and to deal and trade in, any and all lands, real property, leaseholds, and any and all interests and rights in land or other property, real, personal, or mixed; to build erect, construct, purchase, lease, or otherwise acquire, hold, own, maintain, operate, develop, improve, alter, repair, lease, mortgage, pledge, sell, convey, exchange or otherwise dispose of, buildings, plants, structures, facilities and improvements of every kind and description. (4) To acquire, by purchase, underwriting, subscription, participation in syndicates or otherwise, become interested in, invest in, hold, own, sell, exchange, mortgage, pledge, hypothecate or otherwise dispose of, turn to account or realize upon, all forms of securities, including shares of stock, bonds, debentures, notes, evidences of indebtedness, certificates of interest and other rights, interests and obligations, and to deal in and with the same, and to issue in exchange, therefor or in payment thereof its own stocks, bonds or other obligations or securities, or otherwise pay therefor, or to acquire the same in any lawful manner without any such exchange or other payment; to exercise in respect thereof any and all rights, powers and privileges or individual ownership or interest therein, including the right to vote thereon for any and all purposes and to consent or otherwise act with respect thereto; to do any and all acts and things for the preservation, protection, improvement and enhancement in value of such securities or designed to accomplish any such purpose; to aid by loan, subsidy, guaranty, or in any other manner, those issuing, creating or responsible for any such securities, all to such extent as a corporation organized under Article Two of the Stock Corporation Law may then lawfully do. (5) To acquire all or any part of the good will, rights, property, and business of any person, entity, partnership, association or corporation; to pay for the same in cash or in stock, bonds, or other securities or obligations of the Corporation, or otherwise; to hold, utilize and in any manner dispose of the whole or any part of the rights and property so acquired, and to assume in connection therewith any liabilities of any such person, entity, partnership, association or corporation and to conduct in any lawful manner the whole or any part of the business thus acquired. (6) To apply for, obtain, register, purchase, lease, or otherwise acquire, hold, own, use, introduce, develop, and sell, assign, lease, pledge, or otherwise dispose of or turn to account letters patent of the United States of America or of any foreign country, inventions, improvements, formulae, processes, patents rights, licenses, and privileges, copyrights, trade-marks and trade names, or pending applications therefor, and any and all labels, designs, prints and brands, and to use, exercise, develop and take or grant licenses or other rights in respect of or otherwise turn to account any of the foregoing. (7) To the extent permitted by law, to borrow money for its corporate purposes; to draw, make, accept, endorse, execute, issue and negotiate promissory notes, bills of exchange, warrants, warehouse receipts, bonds; debentures and other negotiable or transferable instruments. (8) To make advances or loans with or without security so far as may be permitted to a corporation organized under Article Two of the Stock Corporation Law. - - -2- (9) To the extent permitted by law, to guarantee the payment of dividends upon stocks, or the principal of and/or interest upon bonds, notes and other evidences of indebtedness of, or to guarantee the performance of the contracts or other undertakings of, or otherwise aid, in any manner, any corporation, firm or individual in which the Corporation shall be directly or indirectly interested either through ownership of its stock, bonds, securities, or other obligations, or otherwise. (10) To cause to be formed, consolidated, merged, reorganized or liquidated, and to promote, take charge of and aid in by way permitted by law the formation, consolidation, merger, reorganization or liquidation of any corporation, association, firm or entity. (11) To make, execute and carry out any and all contracts and agreements which may deemed proper by its officers in the conduct of its business. (12) To purchase, acquire, hold, sell and reissue shares of its own capital stock to the extent permitted by the Certificate of Incorporation as amended, and the laws of the State of New York. In general, to do any and all of the acts and things herein set forth to the same extent as natural persons could do, and in any part of the world, as principal, factor, agent, contractor, or otherwise, either alone or in company with any person, trustee, entity, syndicate, partnership; association or corporation; to establish and maintain offices and agencies within and anywhere outside of, the State of New York and to exercise all or any of its corporate powers and rights in the State of New York and in any and all other states, territories, districts, possessions or dependencies of the United States of America and in any other countries or places. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the purposes herein set forth and to do every other act and thing incidental thereto of command therewith provided the same be not forbidden by the laws of New York to corporations organized under Article Two of the Stock Corporation Law. THIRD: The total authorized amount of capital stock of the Corporation shall be $1,000,000 consisting of 1,000,000 shares of the par value of $1 each, all of the same class, designated Common Stock. No holder of Common Stock of the Corporation shall be entitled, as such, as matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever, or of securities convertible into stock of any class whatsoever whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend. FOURTH: The office of the Corporation shall be located in the County of New York, City and State of New York. The Secretary of State of the State of New York shall mail a copy of process in any action or proceeding against the Corporation which may be served upon him is 425 Lexington Avenue, New York 17, New York. - - -3- FIFTH: The duration of the Corporation shall be perpetual. SIXTH: The number of directors of the Corporation shall be not less than five (5) not more than eleven (11). Directors need not be stockholders. SEVENTH: The names and post-office addresses of the directors until the first annual meeting of the stockholders are. NAMES POST OFFICE ADDRESSES JESSE L. GOLDBERG 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK SYDNEY H. SILVERMAN 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK JULIUS GAFFNER 305 BROADWAY BOROUGH OF MANHATTAN, CITY OF NEW YORK EIGHTH: The names and post office addresses of the subscribers of this Certificate of Incorporation and a statement of the number of shares which each agrees to take in the Corporation are as follows: NAME P.O. ADDRESS NO. OF SHARES Jesse L. Goldberg 305 Broadway, NYC One Sydney H. Silverman 305 Broadway, NYC One Julius Gaffner 305 Broadway, NYC One NINTH: All of the subscribers of this Certificate of Incorporation are of full age, and that at least two-thirds of them are citizens of the United States, and at least one of them is a resident of the State of New York and at least one of the persons named as a director is a citizen of the United States and a resident of the State of New York. TENTH: The meetings of the Board of Directors shall be held in the State of New York only. ELEVENTH: The following provisions are inserted for the regulation and conduct of the Corporation and expressly provided that they are intended to be in furtherance and not in limitation or exhaustion of the powers conferred by statute: (1) The Board of Directors may designate three or more of its number to constitute an Executive Committee, which shall have and they exercise, subject to such limitations, if any, as may be prescribed by the By Laws or by resolution of the Board of Directors, the powers of the Board of Directors in the management of the business and affairs of the Corporation which may lawfully be delegated, provided such Executive Committee shall act only at such times as the Board of Directors is not in session and in no case to the exclusion of the right of the Board of Directors at any time to act as a Board upon any business of the Corporation. (2) Meetings of the stockholders and directors of the Corporation for all purposes may be held at places in the State of New York other than the principal office of the Corporation or at such principal office. (3) The By Laws may prescribe the number of directors necessary to constitute a quorum, which number may be less than a majority of the whole Board of Directors but not less than the number required by law. - - -4- (4) The Board of Directors from time to time shall decide whether and to what extent and at what times and under what conditions and requirements the accounts and books of the Corporation, or any of them, except the stock book, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any books or documents of the Corporation, except as conferred by the laws of the State of New York or authorized by the Board of Directors. (5) A director of the Corporation shall not, in the absence of fraud, be disqualified by his office from dealing with or contracting with the Corporation either as vendor, purchaser or otherwise, nor, in the absence of fraud, shall any transaction or contract of the Corporation be void or avoidable or affected by reason of the fact that any director or any firm of which any director is a member, or any corporation of which the director is an officer, director of stockholder, is in any way interested in such transaction or contract; provided, that at the meeting of the Board of Directors or of the Committee thereof having authority in the premises to authorize or confirm said contract or transaction, the interest of such director, firm or corporation is disclosed or known, and there shall be present a quorum of directors or of the directors constituting such Committee not so interested or connected and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Any director or directors so interested or connected shall not be liable to the Corporation or to any stockholder or creditor thereof of to any other person for any loss incurred by it under or by reason of any such contract or transaction and any such director or directors shall not be accountable for any gains or profits realized on any such contract or transaction always provided however, that such contract or transaction shall at the time it was entered into have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair. (6) The Board of Directors shall have power from time to time to fix and determine and vary the amount of the working capital of the Corporation and to direct and determine the use and disposition of any surplus or net profits over and above the capital stock paid in and in its discretion the Board of Directors may use and apply any such surplus or accumulated profits in purchasing or acquiring bonds or other obligations of the Corporations shares of its own capital stock to such extent and in such manner and upon such terms as the Board of Directors shall deem expedient, but unless otherwise expressly provided in the Certificate of Incorporation as amended any shares so such capital stock so purchased or acquired may be resold or reissued unless such shares shall have been retired in the manner provided by law for the purpose of decreasing the Corporation's capital stock. (7) Any contract, transaction or act of the Corporation or of the Board of Directors or of the Executive Committee or of any other duly constituted committee and of which disclosure shall be made in the notice of the meeting and which shall be approved or ratified by a majority in interest of a quorum of the stockholders of the Corporation having voting power at any annual or special meeting called for such purpose shall except as otherwise provided by the laws of the State of New York be as valid and as binding as though approved or ratified by every stockholder of the Corporation; provided however, that any failure of the stockholders to approve or ratify such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or to deprive the Corporation; its directors or officers of their right to proceed with such contract, transaction or action. Any director of the Corporation may vote upon any contract or other transaction between Corporation and subsidiary or - - -5- affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. (8) The Board of Directors may determine from time to time the amount of compensation which shall be paid to its members for attendance at meetings of the Board or of any committee of the Board. The Board of Directors shall also have power, in its discretion to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. (9) Each director of the Corporation shall be indemnified by the Corporation against expenses actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which he is made a party by reason of his being or having been a director of the Corporation, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duties as such director; such right of indemnification shall not be deemed exclusive of any other rights to which he may be entitled apart from the General Corporation Law of the State of New York. (10) Subject to the by-laws made by stockholders, the Board of Directors may make by-laws and from time to time may alter, amend or repeal any by-laws, but any by-law made by the Board of Directors may be altered or repealed by the stockholders. 4. The 1,600 previously authorized shares of Common Stock, par value $1 per share which are issued are hereby changed into 800,000 shares of Common Stock, par value $1 per share on a 500 for 1 basis. The 200,000 previously authorized shares of Common Stock, par value $1 per share, which are unissued shall remain unchanged. IN WITNESS WHEREOF, we have made and subscribed this Certificate this ____ day of September, 1958. _______________________ WILLIAM BLACK _______________________ LILLIAN MANDL - - -6- STATE OF NEW YORK COUNTY OF NEW YORK On this ______ day of September, 1958, before me personally came WILLIAM BLACK and LILLIAN MANDL, to me known, and known to me to be the person described in and who executed the foregoing Certificate and each of said persons duly acknowledged to me that he executed the same. ______________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK MICHAEL J. OKOLA, being duly sworn, deposes and says, that he is the Secretary of CHOCK FULL O'NUTS CORPORATION, a corporation mentioned in the foregoing Certificate and that the persons who have executed the foregoing Certificate constitute the holders of record of all the outstanding shares of said Corporation entitled to vote with relation to the proceedings provided for in said Certificate. ______________________ MICHAEL J. OKOLA Subscribed and sworn to before me this ____ day of September, 1958. __________________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK WILLIAM BLACK and LILLIAN MANDL, being severally sworn, do depose and say and each for himself of herself deposes and says that he, the said William Black, is the President and she, the said Lillian Mandl is Treasurer of CHOCK FULL O'NUTS CORPORATION; that by resolution of the directors of said corporation a sum at least equal to the amount of the increase in the aggregate par value of the issued shares provided for in the foregoing Certificate has been transferred from surplus to capital. _______________________ WILLIAM BLACK _______________________ LILLIAN MANDL Subscribed and sworn to before me this ____ day of September, 1958. __________________________ NOTARY PUBLIC STATE OF NEW YORK COUNTY OF NEW YORK - - -7- WILLIAM BLACK, being duly sworn deposes and says, that he is the President of CHOCK FULL O'NUTS CORPORATION; the number and par value of the shares changed is 1,600 shares, par value $1 per share, and the number of shares resulting there from is 800,000 shares, par value $1 per share. ______________________ WILLIAM BLACK Sworn to before me this ____ day of _________ 1958 ________________________ NOTARY PUBLIC - - -8- RESTATED CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORP. ______________ Pursuant to Section 40 of the Stock Corporation Law _______________ WHITE & CASE 14 WALL STREET NEW YORK, NY CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION ___________________ Pursuant to Section Thirty-six of the Stock Corporation Law. ___________________ The undersigned being respectively the Executive Vice-President and the Assistant Secretary of Chock Full O'Nuts Corporation, hereby certify: 1. The name of this corporation is CHOCK FULL O'NUTS CORPORATION The name under which it was originally incorporated was FEDERAL NUT CO. INC. 2. The Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of New York on November 7, 1932. 3. The Restated Certificate of Incorporation was filed in said office on September 30, 1958. 4. The provision of said Restated Certificate of Incorporation contained in ARTICLE ELEVENTH, Section (8) thereof, which is hereby amended, presently reads as follows: "(8) The Board of Directors may determine from time to time the amount of compensation which shall be paid to its members for attendance at meetings of the Board or of any committee of the Board. The Board of Directors shall also have power, in its discretion, to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time." 5. The Certificate of Incorporation is hereby amended pursuant to subdivision 2(J) of Section 35 of the Stock Corporation 1. Law, so that said provision is to read in full as follows: "(8) The Board of Directors may determine from time to time the amount of compensation which shall be paid to its members for attendance at meetings of the Board or of any committee of the Board. The Board of Directors shall also have power, in its discretion, to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time." IN WITNESS WHEREOF, we have subscribed this Certificate this 9th day of November, 1959. ___________________________ FREDERIC T. TANSILL ___________________________ HERBERT WATSON STATE OF NEW YORK CITY OF NEW YORK On this 9th day of November, 1959, before me personally came FREDERIC T. TANSILL and HERBERT WATSON, to me known and known to me to persons described in and who executed the foregoing Certificate of Amendment, and they thereupon severally duly acknowledged to me that they executed the same. 2. STATE OF NEW YORK COUNTY OF NEW YORK FREDERIC T. TANSILL and HERBERT WATSON, being severally sworn, do depose and say and each for himself deposes and says: 1. That he, Frederic T. Tansill, is the Executive Vice- President, and that he, Herbert Watson, is Assistant Secretary of Chock Full O'Nuts Corporation, referred to in the foregoing Certificate of Amendment, who subscribed and acknowledged said Certificate of Amendment on behalf of said Corporation. 2. That they have been authorized to execute and file such Certificate of Amendment by the votes cast in person or by proxy of the holders of record of two-thirds of the outstanding shares of each class entitled to vote at the stockholders meeting at which such votes were cast with relation to the proceedings provided for in said Certificate of Amendment and that neither the Certificate of Incorporation nor the Restated Certificate of Incorporation, filed pursuant to law, requires a larger proportion of votes. 3. That such votes were cast at a stockholders meeting held on November 5, 1959, upon notice, pursuant to Section 45 of the Stock Corporation Law. Sworn to before me this 9th day of November 1959. _________________________ FREDERIC T. TANSILL _________________________ HERBERT WATSON 3. CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION (Pursuant to Section 36 of the Stock Corporation Law) ISIDORE LAPIN ATTORNEY AT LAW 425 LEXINGTON AVENUE NEW YORK, N.Y. 4. EX-3.A2 3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION __________________ Pursuant to Section Thirty-six of Stock Corporation Law ___________________ We, the undersigned, FREDERICK T. TANSILL, Executive Vice President, and MICHAEL J. OKOLA, Secretary of CHOCK FULL O'NUTS CORPORATION, a New York Stock Corporation (hereinafter sometimes referred to as the "Corporation"), do hereby certify as follows: 1. The name of the Corporation is CHOCK FULL O'NUTS CORPORATION and the name under which it was originally incorporated was Federal Nuts Co., Inc. 2. The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of New York on November 7, 1932. 3. The Certificate of Incorporation is hereby amended, effective as of the close of business on November 10, 1960, as set forth in this Certificate to effect changes authorized in subdivision 2 of Section 35 of the Stock Corporation Law, namely, to change all of the 1. previously authorized shares of Common Stock, par value $1 per share, issued and unissued, of the Corporation, from 1,000,000 shares, par value $1.00 per share, to 4,000,000 shares, par value $.25 per share, to authorize 1,000,000 new shares of such Common Stock, par value $.25 per share, and in conformity therewith to increase the amount of capital stock of the Corporation form $1,000,000 to $1,250,000. 4. To accomplish such amendment the first paragraph of Article THIRD of the Certificate of Incorporation, setting forth the amount of th e capital stock and the number and par value of the shares of which it consists, is hereby amended to read as follows: "THIRD: The total authorized amount of the capital stock of capital stock of the Corporation shall be $1,250,000 of 5,000,000 shares of the par value of $.25 each, all of the same class, designated Common Stock." 5. The 1,000,000 previously authorized shares of Common Stock, par value $1 per share, of which 854,295 are issued and 145,705 are unissued, are hereby changed into 4,000,000 shares of Common Stock, par value $.25 per share, upon the following terms: Each issued and unissued share of previously authorized Common Stock, pare value $1 per share, is changed into four shares of Common Stock par value $.25 per share, authorized hereby. In addition, 1,000,000 new shares of such Common Stock, par value $.25 per share, are authorized hereby, making a total of 5,000,000 shares of such Common Stock. 2. IN WITNESS WHEREOF, we have made subscribed and acknowledged this Certificate this 7th day of November 1960. Frederic T. Tansill Executive Vice President Michael J. Okola Secretary 3. STATE OF NEW YORK ) COUNTY OF NEW YORK ) On this 7th day of November, 1960, before me personally came Frederic T. TANSILL and MICHAEL J. OKOLA, to me known and know to me to be the persons described in and who executed the foregoing Certificate and they severally duly acknowledged to me that the executed the same. Isidore Lapan Notary Public 4. STATE OF NEW YORK ) COUNTY OF NEW YORK ) FREDERIC T. TANSILL and MICHAEL J. OKOLA, being duly and severally sworn, each for himself, deposes and says: that he, the said Frederic T. Tansill, is Executive Vice President, and he, the said Michael J. Okola, is Secretary of Chock Full o'Nuts Corporation; that they have been authorized to execute and file the foregoing Certificate of Amendment by the votes, cast in person or by proxy, of the holders of record of two-thirds of the outstanding shares entitled to vote at the Stockholders' meeting at which such votes were cast with relation to the proceedings provided for in the foregoing Certificate of Amendment; that neither the Certificate of Incorporation nor any other certificates filed pursuant to law requires a larger proportion of votes; and that such votes were cast at a stockholders' meeting held on the 3rd day of November, 1960, upon notice pursuant to Section 45 of the Stock Corporation Law. Frederic T. Tansill Michael J. Okola Subscribed and sworn to before me this 7th day of November, 1960 Isidore Lapan Notary Public 5. STATE OF NEW YORK ) COUNTY OF NEW YORK ) MICHAEL J. OKOLA, being duly sworn, for himself, deposes and says; that he, the said Michael J. Okola, is Secretary of Chock Full O'Nuts Corporation; that (a) the number of additional shares not resulting from a change of shares which the Corporation is authorized by the foregoing Certificate to issue, is 1,000,000 shares and the par value thereof is $.25 per share; (b) the number of shares changed as provided in subparagraph 5 of paragraph (c) of subdivision 2 of Section 35 of the Stock Corporation Law is 1,000,000 shares and the par value thereof is $1 per share, and the number of shares resulting from such change is 4,000,000 shares and the par value thereof is $.25 per share; and (c) the number of shares not resulting from a change of shares of which the par value has been increased, is none. Michael J. Okola Subscribed and sworn to before me this 7th day of November, 1960 Isidore Lapan 6. CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION Pursuant to Section Thirty-six of the Stock Corporation White & Case 14 Wall Street New York, NY 7. CERTIFICATE OF MERGER OF 180TH BRINKERHOFF REALTY CORP., WITH CHOCK FULL O'NUTS CORPORATION ================================================ Certificate of Merger of 180th Brinkerhoff Realty corp., with Chock Full O'Nuts Corporation, pursuant to Section 85, of the Stock Corporation Law. The undersigned, FREDERIC T. TANSILL, Executive Vice President, and MICHAEL J. OKOLA, Secretary, pursuant to Section 85 of the Stock corporation Law, certify: 1. Chock Full o'Nuts Corporation is a stock corporation duly organized and existing under the laws of the State of New York. 2. This Corporation owns all of the capital stock of 180th Brinkerhoff Realty Corp., which is a stock corporation organized under the laws of the State of New York, for, and engaged in business incidental to that of this corporation. 3. At a meeting of the Board of Directors of this corporation duly called and held on the 28th day of November, 1962 the following resolution was adopted: WHEREAS, the corporation, Chock Full o'Nuts Corporation now owns all of the stock of 180th Brinkerhoff Realty Corp., organized under the laws of the State of New York, and engaged in business incidental to that of this corporation, and it is deemed expedient that this corporation shall acquire and become, and be possessed of all the estate, property, rights, privileges and franchises of the said 180th Brinkerhoff Realty Corp; now, therefore, be it RESOLVED, that Chock Full O'Nuts Corporation merge such other corporation, and assume all of its obligations; and be it further RESOLVED, that the president, or a vice president, and the secretary, or an assistant secretary, of this corporation be directed to execute in the name and under the seal of this corporation, a certificate of ownership and of the adoption of this resolution and the date of the adoption thereof and file the same in the office of Secretary of State of New York; and be it further 1. RESOLVED, that the officers of this corporation be empowered and directed to do all other acts and things whatsoever, whether within the State of New York or elsewhere, which may be in any way requisite or proper for the full and complete accomplishment of said merger. IN WITNESS WHEREOF, this certificate is executed under the seal and signature of this corporation, affixed by its Executive Vice-President and its Secretary, this 24th day of December 1962. BY: Executive Vice President BY: Secretary STATE OF NEW YORK ) COUNTY OF NEW YORK ) On this 24th day of December, in the year 1962, before me personally came Frederic T. Tansill and Michael J. Okola, to me know who, being by me duly sworn, did depose and say and each for himself deposes and says that he, Frederic T. Tansill resides in the Borough of Manhattan, City and State of New York, and is the Executive Vice President of Chock Full o'Nuts Corporation, the corporation described in and which executed the foregoing instrument ; that he Michael J. Okola, resides in Westchester County, State of New York; and is the Secretary thereof; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporation seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. Isidore Lapan Notary Public 2. CERTIFICATE OF MERGER OF 180TH BRIKNERHOFF REALTY CORP. WITH CHOCK FULL O'NUTS CORPORATION Pursuant to Section 85, of the Stock Corporation Law - - ---00000--- Isidore Lapan Attorney at Law 425 Lexington Avenue New York, New York 3. CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION Under Section 805 of the Business Corporation - - ---00000---- We, the undersigned, GAYLORD M. LaMOND and MICHAEL J. OKOLA, the President and Secretary respectively of CHOCK FULL O'NUTS CORPORATION, hereby certify: 1. The same of the corporation is CHOCK FULL O'NUTS CORPORATION. The name under which it was formed is Federal Nut Co., Inc. 2. The Certificate of Incorporation of the corporation was filed by the Department of State on November 7, 1932. 3. The Certificate of Incorporation is amended as authorized by Section 801 of the Business Corporation Law to effect the following amendment: ARTICLE ELEVENTH, Section 2 of the Certificate of Incorporation, dealing with the place of meetings of directors and stockholders and providing generally that such meetings are to be held in the State of New York is hereby amended to read as follows: "ELEVENTH (2): Meetings of the Stockholders and Directors may be held at such times and places as shall be determined from the time to time by the Board of Directors." 1. 4. The foregoing amendment to the Certificate of Incorporation was authorized by vote of the holders of a majority of all the outstanding shares entitled to vote thereon at a meeting of shareholders held on November 3, 1966. IN WITNESS WHEREOF, the undersigned have hereunto signed this Certificate this 9th day of November, 1966. Gaylord M. LaMond, President Michael J. Okola, Secretary VERIFICATION OF CERTIFICATE OF AMENDMENT - - ---------------------------------- STATE OF NEW YORK ) COUNTY OF NEW YORK ) MICHAEL J. OKOLA, being duly sworn, deposes and says; that he is one of the persons who signed the foregoing Certificate; that he signed said Certificate of Amendment in the capacity set forth under his signature thereon; that he has read the foregoing Certificate of Amendment and knows that contents thereof; and the statements contained therein are true to his own knowledge. Michael J. Okola, Secretary Sworn before me this 9th day of November, 1966. Alan R. Geist Notary Public 3. CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION Under Section 805 of the Business Corporation Law - - -------000000------ Alan R. Geist Attorney-at-Law 425 Lexington Avenue New York, New York CERTIFICATE OF MERGER OF ACME NUT PRODUCTS, INC., CENTRAL NUT PRODUCTS, INC., CIRCLE NUT PRODUCTS, INC., COUNTY NUT PRODUCTS, INC., COURT NUT PRODUCTS, INC., EXCHANGE NUTS PRODUCTS, INC., FIFTY-FOURTH MADISON CORP., 532 CORP., 52 LEX CORP., 451 FULTON CORP., FULTON NUT PRODUCTS, INC., 1420-40 CORP, HOYT NUT PRODUCTS, INC., INERBOROUGH NUT PRODUCTS, INC., MADISON NUT PRODUCTS, INC., MODERN NUT PRODUCTS, INC., PARK CHOCK CORP., PEARL NUT PRODUCTS, INC., PERWAL REALTY CORP., RITZ NUT PRODUCTS, INC., SUPREME NUT PRODUCTS, INC., WALL NUT PRODUCTS, INC., W.B. CORP., WORTH NUT PRODUCTS, INC., 521 LEX CORP., PARK BROADWAY CORP., 300 MADISON CORP. AND 60 WEST 34TH ST. CORP. INTO CHOCK FULL O'NUTS CORPORATION ============================= Under Section 905 of the Business Corporation Law - - ---------------------------------------- Pursuant to the provisions of Section 905 of the Business Corporation Law, the undersigned hereby certify: FIRST: That the name of each of the subsidiary corporations is: ACME NUT PRODUCTS, INC., CENTRAL NUT PRODUCTS, INC., CIRCLE NUT PRODUCTS, INC., COUNTY NUT PRODUCTS, INC., COURT NUT PRODUCTS, INC., EXCHANGE NUT PRODUCTS, INC., FIFTY-FOURTH MADISON CORP., 532 CORP., 52 LEX CORP., 451 FULTON CORP., FULTON NUT PRODUCTS, INC., 1420-40 CORP., HOYT NUT PRODUCTS, INC., INTERBOROUGH NUT PRODUCTS, INC., MADISON NUT PRODUCTS, INC., MODERN NUT PRODUCTS, INC., PARK CHOCK CORP., PEARL NUT PRODUCTS, INC., PERWAL REALTY CORP., RITZ NUT PRODUCTS, INC., SUPREME NUT PRODUCTS, INC., WALL NUT PRODUCTS, INC., W.B. CORP., WORTH NUT PRODUCTS, INC. 1. 421 LEX CORP., PARK BROADWAY CORP., (formed under the name 152 WEST 34TH ST. CORP.,), 300 MADISON CORP., AND 60 WEST 34TH STREET, CORP., and the name of the surviving corporation is CHOCK FULL O'NUTS CORPORATION (formed under the name FEDERAL NUT CORPORATION.) SECOND: That the designation and number of outstanding shares of each class of each subsidiary corporation and the number of each class owned by the surviving corporation are as follows: Name of Corporation Number of Designation Number of Shares of Class Shares Owned Outstanding by Surviving Corporation _____________________ _________ ____________ ___________ Acme Nut Products, Inc. 5 Common Stock 5 $100 Par Value Central Nut Products, Inc. 5 Common Stock 5 $100 Par Value Circle Nut Products, Inc. 5 Common Stock 5 $100 Par Value County Nut Products, Inc. 5 Common Stock 5 $100 Par Value Court Nut Products, Inc. 5 Common Stock 5 $100 Par Value Exchange Nut Products, Inc. 5 Common Stock 5 $100 Par Value Fifty-Fourth Madison Corp. 5 Common Stock 5 No Par Value 532 Corp. 5 Common Stock 5 No Par Value 52 Lex Corp. 5 Common Stock 5 No Par value 451 Fulton Corp. 5 Common Stock 5 No Par Value Fulton Nut Products, Inc. 5 Common Stock 5 $100 Par Value 1420-40 Corp. 5 Common Stock 5 No Par Value 2. Hoyt Nut Products, Inc. 5 Common Stock 5 No Par Value Interborough Nut Products, Inc. 5 Common Stock 5 $100 Par Value Madison Nut Products, Inc. 5 Common Stock 5 $100 Par Value Modern Nut Products, Inc. 5 Common Stock 5 $100 Par Value Park Chock Corp. 5 Common Stock 5 $100 Par Value Pearl Nut Products, Inc. 5 Common Stock 5 $100 Par Value Perwal Realty Corp. 5 Common Stock 5 $100 Par Value Ritz Nut Products, Inc. 5 Common Stock 5 $100 Par Value Supreme Nut Products, Inc. 5 Common Stock 5 $100 Par Value Wall Nut Products, Inc. 5 Common Stock 5 $100 Par Value W.B. Corp. 5 Common Stock 5 No Par Value Worth Nut Products, Inc. 5 Common Stock 5 No Par Value 521 Lex Corp. 5 Common Stock 5 No Par Value Park Broadway Corp. 5 Common Stock 5 No Par Value 300 Madison Corp. 5 Common Stock 5 No Par Value 60 West 34th St. Corp. 5 Common Stock 5 No Par Value THIRD: The merger shall be effective on July 31, 1967. 3. FOURTH: That the date when the Certificate of Incorporation of each of said corporation was filed in the Office of the Department of State of New York, is as follows: Name of Corporation Date of Incorporation Chock Full o'Nuts Corporation November 7, 1932 Acme Nut Products, Inc. November 2, 1950 Central Nut Products, Inc. March 19, 1935 Circle Nut Products, Inc. September 17, 1934 County Nut Products, Inc. May 15, 1950 Court Nut Products, Inc. March 13, 1952 Exchange Nut Products, Inc. May 8, 1952 Fifty-fourth Madison Corp. October 24, 1957 532 Corp. August 18, 1958 52 Lex Corp. February 18, 1960 451 Fulton Corp. August 19, 1964 Fulton Nut Products, Inc. July 17, 1945 1420-40 Corp. November 30, 1959 Hoyt Nut Products, Inc. June 11, 1958 Interborough Nut Products, Inc. November 17, 1932 Madison Nut Products, Inc. January 4, 1940 Modern Nut Products, Inc. March 25,1936 Park Chock Corp. November 12, 1959 Pearl Nut Products, Inc. November 2, 1958 Perwal Realty Corp. April 13, 1951 Ritz Nut Products, Inc. December 6, 1950 Supreme Nut Products, Inc. November 2, 1950 Wall Nut Products September 22, 1950 W.B. Corp. November 24, 1958 Worth Nut Products, Inc. June 2, 1947 521 Lex Corp. March 23, 1962 Park Broadway Corp. May 4, 1962 300 Madison Corp. June 8, 1962 60 West 34th St. Corp. July 5, 1962 FIFTH: That the merger was adopted by the Directors of the surviving corporation. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalties of perjury, this 24th day of July, 1967. CHOCK FULL O'NUTS CORPORATION Gaylord M. LaMond, President Michael J. Okola, Secretary 4. CERTIFICATE OF MERGER OF ACME NUT PRODUCTS, INC., CENTRAL NUT PRODUCTS, INC., CIRCLE NUT PRODUCTS, INC., COUNTY NUT PRODUCTS, INC., COURT NUT PRODUCTS, INC., EXCHANGE NUTS PRODUCTS, INC., FIFTY-FOURTH MADISON CORP., 532 CORP., 52 LEX CORP., 451 FULTON CORP., FULTON NUT PRODUCTS, INC., 1420-40 CORP, HOYT NUT PRODUCTS, INC., INERBOROUGH NUT PRODUCTS, INC., MADISON NUT PRODUCTS, INC., MODERN NUT PRODUCTS, INC., PARK CHOCK CORP., PEARL NUT PRODUCTS, INC., PERWAL REALTY CORP., RITZ NUT PRODUCTS, INC., SUPREME NUT PRODUCTS, INC., WALL NUT PRODUCTS, INC., W.B. CORP., WORTH NUT PRODUCTS, INC., 521 LEX CORP., PARK BROADWAY CORP., 300 MADISON CORP. AND 60 WEST 34TH ST. CORP. INTO CHOCK FULL O'NUTS CORPORATION ============================= Under Section 905 of the Business Corporation Law - - ---------------------------------------- Alan R. Geist Attorney-at-Law 425 Lexington Avenue New York, New York 5. CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION ____________ Under Section 805 of the Business Corporation Law ___________ Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned Harry Giest and Stanley Cohen, being respectively President and Secretary of CHOCK FULL O'NUTS CORPORATION, hereby certify: FIRST: The name of the Corporation is Chock Full Corporation. The name under which the Corporation was formed is Federal Nut Co., Inc. SECOND: The Certificate of Incorporation of the Corporation was filed by the Department of State on November 7, 1932. THIRD: The Certificate of Incorporation of the Corporation is hereby amended with respect to the number of directors of the Corporation. To effect such amendment, Article SIXTH of the Certificate of Incorporation of the Corporation, 1. as heretofore amended, relating to the number of directors of the Corporation, is hereby further amended to read as follows: "SIXTH: The number of directors of the Corporation shall be determined in the manner prescribed by the by-laws. Directors need not be stockholders." FOURTH: The foregoing amendment of the Certificate of Incorporation of the Corporation was authorized by the vote of the holders of a majority of all outstanding shares of the Corporation entitled to vote on an amendment to the Certificate of Incorporation of the Corporation at a meeting of shareholders. IN WITNESS WHEREOF, this Certificate has been signed this 18th day of December, 1969. Harry Geist, President Stanley Cohen 2. STATE OF NEW YORK ) COUNTY OF NEW YORK ) STANLEY COHEN, being duly sworn, deposes and says that he is Secretary of CHOCK FULL O'NUTS CORPORATION, the Corporation described in the foregoing Certificate, that he has read and signed said Certificate and that the statements contained therein are true. Stanley Cohen Sworn to before me this 12th day of December 1969 Sheila Lynne, Notary Public 3. CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION ________________ Under Section 805 of the Business Corporation Law ________________ 4. CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION _______________ under Section 805 of the Business Corporation Law ______________ Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned, being the President and Secretary, respectively, of Chock Full o'Nuts Corporation, a New York corporation, hereby certify that: FIRST: The name of the corporation is Chock Full o'Nuts Corporation. The name under which the corporation was originally incorporated was Federal Nut Co., Inc. THIRD: the aggregate number of shares which the Corporation shall have authority to issue is 6,000,000 of Common Stock, par value $.25 per share. 1. FOURTH: The amendment of the Certificate of Incorporation was authorized by a vote of the holders of a majority of all outstanding shares entitled to vote on an amendment to the Certificate of Incorporation at a meeting of the shareholders. IN WITNESS WHEREOF, the undersigned have duly executed this Certificate this 10th day of January, 1975 and do hereby affirm that the statements contained herein are true under the penalties of perjury. Seymour Mindel, President Michael J. Okola, Secretary 2. CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION _________________ Under Section 805 of the Business Corporation Law __________________ PROSKAUER ROSE GOETZ & MENDELSOHN COUNSELORS AT LAW 800 PARK AVENUE NEW YORK, NEW YORK 3. CERTIFICATE OF MERGER OF 574 -5TH CORP. INTO CHOCK FULL O'NUTS CORPORATION (Under Section 905 of the Business Corporation Law) - - ------------------------------ We, the undersigned, being the President and Secretary, respectively, of CHOCK FULL O'NUTS CORPORATION, the corporation named herein as the surviving corporation, pursuant to Section 905 of The Business Corporation Law of the State of New York, do hereby certify that: 1. The Board of Directors has adopted a Plan of Merger setting forth the terms and conditions of merging 574 -5th Corp., the corporation named herein as the subsidiary corporation, into said surviving corporation. 2. The name of the subsidiary corporation to be merged, the Certificate of Incorporation of which was filed by the Department of State on August 12, 1959, is 574 - 5th CORP. 3. The mane of the surviving corporation, the Certificate of Incorporation of which was filed by the Department of State on November 7, 1932, is CHOCK FULL O'NUTS CORPORATION. The name which said corporation was formed is FEDERAL NUT CO., INC. 1. 4. The designation and number of outstanding shares of each class of the subsidiary corporation, all of which shares are owned by the surviving corporation, as set forth in the Plan of Merger, are as follows: Number of outstanding Designation Shares Common Stock, no par value 5 IN WITNESS WHEREOF, we have subscribed this Certificate of Merger this 6th day of May, 1980 and do hereby affirm, under the penalties of perjury, that the statements contained herein have been examined by us and are true, complete and correct. Benedict P. Cutrone, President of the Surviving Corporation William Cusumano, Secretary of the Surviving Corporation 2. CERTIFICATE OF MERGER OF 574 - 5TH CORP. INTO CHOCK FULL O' NUTS CORPORATION (Under Section 905 of the Business Corporation Law) Dreyer & Traub 90 Park Avenue New York, New York 10016 3. CERTIFICATE OF MERGER OF CHOCK FULL O' NUTS CORPORATION Under Section 805-A of the Business Corporation Law - - ----------------- FIRST: The name of the Corporation is CHOCK FULL O' NUTS CORPORATION. The name under which the corporation was originally incorporated was FEDERAL NUT CO. INC. SECOND: The Certificate of Incorporation of the corporation was filed by the Department of State on November 7, 1932. The Restated Certificate of Incorporation was filed by the Department of State on September 30, 1958. THIRD: The change in the Restated Certificate of Incorporation effected by this Certificate of Change is to change the post office address to which the Secretary of State of New York shall mail a copy of any process against the corporation served upon said Secretary of State. FOURTH: To accomplish the foregoing change, Article FOURTH of the Restated Certificate of Incorporation relating to the address to which a copy of any process served upon the Secretary of State shall be mailed is hereby stricken out in its entirety, and the following new Article FOURTH is substituted in lieu thereof: FOURTH: The office of the Corporation shall be located in the Country of New York, City and State of New York. The Secretary of State of the State of New York is designated as the agent of the Corporation upon whom process in any action or proceeding against it may be served. The address to which the Secretary of State of the State of New York shall mail a copy of process in any action or proceeding against the Corporation which may be served upon his is 370 Lexington Avenue (11th Floor), New York, New York 10017. 1 FIFTH: The foregoing change was approved by the Board of Directors. IN WITNESS WHEREOF, we have subscribed this document on the date set forth below and do hereby affirm, under penalties of perjury, that the statements contained therein have been examined by us and are true and correct. DATE: December 17, 1981 ___________________________ William Black, Chairman of the Board and President ___________________________ Howard Leitner, Secretary 2 CERTIFICATE OF CHANGE OF CHOCK FULL O' NUTS CORPORATION Under Section 805-A of the Business Corporation Law Dreyer & Traub Att: Cyrus Gilbert Abbe, Esq. 90 Park Avenue New York, New York 10016 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O' NUTS CORPORATION Under Section 805 of the Business Corporation Law Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned, being the President and the Secretary, respectively, of Chock Full o'Nuts Corporation, New York Corporation, hereby certify that: FIRST: The name of the corporation is Chock Full o'Nuts Corporation. The name under which the corporation was originally incorporated was Federal Nut Co. Inc. SECOND: The Certificate of Incorporation of the Corporation was filed by the Department of State of the State of New York on November 7, 1932. THIRD: The amendment to the Certificate of Incorporation effected by this Certificate, which is the increase from 6,000,000 to 12,000,000 in the number of shares of Common Stock, par value $.25 per share, which the Corporation has authority to issue, is as follows: The first paragraph of Article THIRD of the Certificate of incorporation is hereby amended to read as follows: THIRD: The aggregate number of shares which the Corporation shall have authority to issue is 12,000,000 shares of Common Stock, par value $.25 per share. 1 FOURTH: The amendment of the Certificate of Incorporation was authorized by a vote of the holders of a majority of all outstanding shares entitled to vote on an amendment to the Certificate of Incorporation at a meeting of the Shareholders. IN WITNESS WHEREOF, the undersigned have subscribed this Certificate this______ day of March 1984 and do hereby affirm that the statements contained herein are true under the penalty of perjury. __________________________ Leon Pordy, MD, President __________________________ Howard Leitner, Secretary 2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION Under Section 805 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF CHOCK FULL O'NUTS BAKERY CORP. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent corporations named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation")which is to be the surviving corporation, is Chock Full o'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co. Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the parent corporation, Chock Full o'Nuts Bakery Corp. The jurisdiction of its incorporation is New Jersey and the date its certificate of incorporation was filed in New Jersey was April 24, 1962. A Certificate of Authority for the Subsidiary Corporation to transact business in the State of New York was filed with the Department of State on April 30, 1962. THIRD: The authorized capitalization of the Subsidiary Corporation consists of 200 shares of Common Stock of one class, of which 9 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: the effective date of the merger shall be upon the date of the filing of this Certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certificate on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 31, 1985 Arthur R. Berman, President of Chock Full o'Nuts Corp. Howard Leitner, Secretary of Chock Full o'Nuts Corp. Leon Pordy,President of Chock Full o'Nuts Bakery Corp. Howard M. Leitner,Secretary Chock Full o'Nuts Bakery Corp. 1 CERTIFICATE OF MERGER OF CHOCK FULL O'NUTS BAKERY CORP. INTO CHOCK FULL O' NUTS CORPORATION (Under Section 905 of the Business Corporation Law) Dreyer & Traub 101 Park Avenue New York, New York 10178-0071 2 CERTIFICATE OF MERGER OF RHEINGOLD BREWERIES, INC. INTO CHOCK FULL O'NUTS CORPORATION It is hereby certifies, on behalf of each of the constituent corporations named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full o'Nuts Corporation. The jurisdiction of its incorporation is New York, November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the Subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the parent corporation, is Rheingold Breweries, Inc. The jurisdiction of its incorporation was filed in Delaware was March 1, 1974, under the name Rybeer Acquisition Corporation. A Certificate of Authority for the Subsidiary Corporation to transact business in the State of New York was filed with the Department of State on March 8, 1974. THIRD: The authorized capitalization of the Subsidiary Corporation consists of 1,000 shares of Common Stock of one class, of which 100 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger will be the date of the filing of this Certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certificate on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. Date: July 15, 1986 Arthur Berman President of Chock Full o'Nuts Corp. Howard Leitner Secretary of Chock Full o'Nuts Corp. Leon Pordy, MD President of Rheingold Breweries, Inc. Howard Leitner Secretary of Rheingold Breweries, Inc. 1 CERTIFICATE OF MERGER OF RHEINGOLD BREWERIES. INC INTO CHOCK FULL O'NUTS CORPORATION (Under Section 905 of the Business Corporation Law) Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF SOLINCO, INC. INTO CHOCK FULL O'NUTS CORPORATION (Under Section 905 of the Business Corporation Law) It is hereby certified, on behalf of each of the constituent corporations named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full o'Nuts Corporation. the jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Solinco, Inc. The jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was May 10, 1984, under the name Chock Inc. Acquisition, Inc. THIRD: The authorized capitalization of the Subsidiary Corporation consists of 1,000 shares of Common Stock of one class, of which 100 shares are now issued and outstanding owned by the Parent Corporation. No shares of common Stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this Certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. Date: July 15, 1986 Arthur Berman President of Chock Full o'Nuts Corporation Howard Leitner Secretary of Chock Full o'Nuts Corporation Leon Pordy, MD President of Solinco, Inc. Howard Leitner Secretary of Solinco, Inc. 1 CERTIFICATE OF MERGER OF SOLINCO, INC. INTO CHOCK FULL O'NUTS CORPORATION (Under Section 905 of the Business Corporation Law) Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF CHOCK FULL O'NUTS COFFEE CORPORATION INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full o'Nuts Corporation. the jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the Subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation is Chock Full o'Nuts Coffee Corporation. The jurisdiction of its incorporation is New York and its certificate of incorporation was filed by the Department of State on November 9, 1949 under the name Sol Cafe Products, Inc. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 55,000 shares of Class A Common Stock, of which 42,000 shares are now issued and outstanding and owned by the Parent Corporation, and 20,000 Class B Common Stock, none of which is now issued and outstanding. No shares of Common Stock of either class are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation had duly adopted a plan of merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be the date of the filing of this Certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certificate on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. July 15, 1986 Arthur Berman, President of Chock Full o'Nuts Corporation Howard Leitner, Secretary of Chock Full o'Nuts Corporation Leon Pordy, MD, President of Chock Full o'Nuts Coffee Corp. Howard Leitner, Secretary of Chock Full o'Nuts Coffee Corp. 1 CERTIFICATE OF MERGER OF CHOCK FULL O'NUTS COFFEE CORPORATION INTO CHOCK FULL O' NUTS CORPORATION (Under Section 905 of the Business Corporation Law) Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION (Under Section 805 of the Business Corporation) We are undersigned, being the President and Secretary of Chock Full o'Nuts Corporation (hereinafter the "Corporation") pursuant to Section 805 of the Business Corporation Law of the State of New York, do hereby certify: FIRST: The name of the Corporation is Chock Full o'Nuts Corporation. The name under which the Corporation was formed was Federal Nut Co., Inc. SECOND: The Certificate of Incorporation of the Corporation was filed by the Department of State on November 7, 1932. THIRD: The changes in the certificate of Incorporation effected by this Certificate of Amendment are: (a) to increase from 12,000,000 to 50,000,000 the number of shares of Common Stock, par value $.25 per share, which the Corporation has authority to issue. (b) provide for a classified Board of Direction of the Corporation divided into three classes; and (c) to provide for indemnification of directors and officers of the Corporation to the fullest extend allowed under New York law. FOURTH: To accomplish the foregoing changes, thE certificate of Incorporation of the Corporation, as now full force and effect, is hereby amended, as authorized by Section 801 of the Business Corporation Law, as follows: (a) The first paragraph of Article THIRD of the certificate of Incorporation, relating to the Corporation authorized capitalization, is hereby amended to read as follows: 1 THIRD: The aggregate number of shares which the Corporation shall have authority to issued is 50,000,000 shares of Common Stock, par value $.25 per share. (b) Article SIXTH of the Certificate of Incorporation relating to the composition of the Corporations Board of Directors, is hereby stricken out in its entirety, and the following new Article SIXTH is substituted in lieu thereof. SIXTH: (1) The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not fewer than nine or more than twenty-seven directors, the exact number of directors to be determined form time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the 1986 annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning at the 1987 annual meeting, successors to the class of directors whose term expires at the annual meeting shall be elected for a three-year term. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject however, to prior death, resignation, retirement, disqualification or removal from office. If the number of directors is changed, any increases or decreases shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal possible. (2) Newly created directorship resulting from any increase in the authorized number of directors or vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or any other cause shall be filled only by a majority of the remaining directors then in office, even if less than a quorum or by the sole remaining director. Directors elected to full vacancies shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until such director's successor shall be elected and shall qualify. The directors of any class of directors of the Corporation may be removed by the Stockholders only for cause by the affirmative vote of the holders of at least a majority of the voting power of all outstanding voting stock. (3) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right to vote separately by class or series to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation 2 applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article SIXTH unless expressly provided by such terms. (4) Wherever the term "Board of Directors" is used in this Certificate of Incorporation, such term shall mean the Board of Directors of the Corporation; provided, however, that to the extant any committee of directors of the Corporation is lawfully entitled to exercise the powers of the Board of Directors, such committee may exercise any right or authority of the Board of Directors under this Certificate of Incorporation. (5) Notwithstanding any other provision of this Certificate of Incorporation or the by-laws of this Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by Law, this Certificate, the by-laws of the Corporation or otherwise), the affirmative vote of the holders of at least seventy-five (75%) of the voting power of all outstanding voting stock shall be required to adopt any provision inconsistent with, or to amend or repeal, Paragraphs 1, 2, or 5 of this Article SIXTH. (c) Section 9 of Article ELEVENTH of the Certificate of Incorporation, relating to indemnification of officers and directors of the Corporation, is hereby amended to read as follows: (9) The Corporation shall, to the fullest extant permitted by Article 7 of the Business Corporation Law of the State of New York, as the same may be amended and supplemented, indemnify any person who is or was made or threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil criminal, administrative or investigative, including an action by or in the right of the Corporation, 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 is serving, has served or has agreed to serve in any capacity at the request of the Corporation, by reason of the fact that he, his testator or interstate, is or was or has agreed to become a director of officer of the Corporation, or is or was serving or has agreed to serve such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid or to be paid in settlement, excise taxes or penalties, and costs, charges and expenses, including attorneys' feeds, incurred in connection with such action or proceeding or any appeal therein. The Corporation may indemnify any person to whom the Corporation is permitted to provide indemnification or the advancement of expenses by applicable law, whether pursuant to rights granted pursuant to, or provided by, the New York Business Corporation Law or other rights created by (I)a 3 resolution of stockholders, (II) a resolution of the Board of Directors or (III) an agreement providing for such indemnification; it being expressly intended that this Certificate of Incorporation authorize the creation of other rights in any such manner. The right to be indemnified and to the reimbursement or advancement of expenses incurred in defending a proceeding in advance of its final disposition conferred thereunder shall not be exclusive of any other rights which any person may have or hereafter acquire." FIFTH: The foregoing amendments to the Certificate of Incorporation was authorized by vote of the board of directors followed by the vote of the holder of a majority of all outstanding shares of Corporation at a duly constituted meeting of shareholders. IN WITNESS WHEREOF, we have subscribed this Certificate this 23rd day of February ,1987. Howard Leitner, President Martin Cullen, Secretary 4 STATE OF NEW YORK ) COUNTY OF NEW YORK ) Howard M. Leitner, being duly sworn deposes and says that he is the President of Chock Full o'Nuts Corporation, the Corporation described in the foregoing Certificate that he has read and signed said Certificate and that the statements contained therein are true. Howard M. Leitner Sworn to before me this 23rd day of February, 1987. Notary Public 5 STATE OF NEW YORK ) COUNTRY OF NEW YORK ) Martin Cullen, being duly sworn deposes and says that he is the Secretary of Chock Full o'Nuts Corporation, the Corporation described in the foregoing Certificate, that he has read and signed said Certificate and that the statements therein are true. Martin Cullen Notary Public CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION (Under Section 805 of the Business Corporation Law) Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF PACIFIC NUT PRODUCTS, INC. INTO CHOCK FULL O'NUTS CORPORATION (Under Section 905 of the Business Corporation Law) It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full o'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Pacific Nut Products, Inc. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was September 29, 1934. THIRD: The authorized capitalization of the Subsidiary Corporation consists of 200 shares of Common Stock of one class, of which 50 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting. FIFTH: The effective date of the merger shall be upon the date of filing of this Certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certificate on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. Date July 22, 1997 Leon Pordy, M.D.,Chairman of the Board of Chock Full O'Nuts Corporation Martin Cullen President of Pacific Nut Products, Inc. Leon Pordy, M.D. President of Pacific Nuts Products, Inc. Howard M. Leitner Secretary of Pacific Nut Products, Inc. 1 VERIFICATION STATE OF NEW YORK ) COUNTY OF NEW YORK ) Martin Cullen, being duly sworn, deposes and says that he is one of the persons who signed the foregoing certificate of merger on behalf of the corporation named therein as the surviving corporation; that he signed said certificate in the capacity set opposite or beneath his signature thereon; that he has read the foregoing certificate and knows the contents thereof; and that the statements contained therein are true to his own knowledge. Martin Cullen, Secretary Subscribed and sworn to before me on July 22, 1987 Audrey Jane Ruppel Notary Public 2 CERTIFICATE OF MERGER OF PACIFIC NUT PRODUCTS, INC. INTO: CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF COMANCHE PROPERTIES, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Comanche Properties, Inc. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the department of State was July 24, 1964. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 200 shares of Common Stock of one class, of which 200 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 22, 1987 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., President of Comanche Properties, Inc. Howard Leitner Secretary of Comanche Properties, Inc. 1 VERIFICATION STATE OF NEW YORK ) COUNTY OF NEW YORK ) Martin Cullen, being duly sworn, deposes and says that he is one of the persons who signed the foregoing certificate of merger on behalf of the corporation named therein as the surviving corporation; that he signed said certificate in the capacity set opposite or beneath his signature thereon; that he has read the foregoing certificate and knows the contents thereof; and that the statements contained therein are true to his own knowledge. Martin Cullen, Secretary Subscribed and sworn to before me on July 22, 1987 Audrey Jane Ruppel Notary Public 2 CERTIFICATE OF MERGER OF COMMANCHE PROPERTIES, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF PEERLESS ADVERTISING INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Peerless Advertising, Inc. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the department of State was April 20, 1961. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 100 shares of Common Stock of one class, of which 5 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 22, 1987 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., President of Peerless Advertising, Inc. Howard Leitner Secretary of Peerless Advertising, Inc. 1 VERIFICATION STATE OF NEW YORK ) COUNTY OF NEW YORK ) Martin Cullen, being duly sworn, deposes and says that he is one of the persons who signed the foregoing certificate of merger on behalf of the corporation named therein as the surviving corporation; that he signed said certificate in the capacity set opposite or beneath his signature thereon; that he has read the foregoing certificate and knows the contents thereof; and that the statements contained therein are true to his own knowledge. Martin Cullen, Secretary Subscribed and sworn to before me on July 22, 1987 Audrey Jane Ruppel Notary Public 2 CERTIFICATE OF MERGER OF PEERLESS ADVERTISING, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF PARK NUT PRODUCTS CORP. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Park Nut Product Corp. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the department of State was November 24, 1972. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 100 shares of Common Stock of one class, of which 1 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 22, 1987 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., President of Park Nut Products Corp. Howard Leitner Secretary of Park Nut Products Corp. 1 VERIFICATION STATE OF NEW YORK ) COUNTY OF NEW YORK ) Martin Cullen, being duly sworn, deposes and says that he is one of the persons who signed the foregoing certificate of merger on behalf of the corporation named therein as the surviving corporation; that he signed said certificate in the capacity set opposite or beneath his signature thereon; that he has read the foregoing certificate and knows the contents thereof; and that the statements contained therein are true to his own knowledge. Martin Cullen, Secretary Subscribed and sworn to before me on July 22, 1987 Audrey Jane Ruppel Notary Public 2 CERTIFICATE OF MERGER OF PARK NUT PRODUCTS, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF HARRISON FOODS, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Harrison Foods, Inc. The Jurisdiction of its incorporation is New Jersey and the date its certificate of incorporation was in New Jersey was April 17, 1947. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 200 shares of Common Stock of one class, of which five shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 22, 1987 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., President of Harrison Foods, Inc. Howard Leitner Secretary of Harrison Foods, Inc. 1 CERTIFICATE OF MERGER OF HARRISON FOODS, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF BROAD ESSEX, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Broad Essex, Inc. The Jurisdiction of its incorporation is New Jersey and the date its certificate of incorporation was in New Jersey was April 17, 1963. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 200 shares of Common Stock of one class, of which ten shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be upon the date of the filing of this certificate with the Department of State. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 22, 1987 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., President of Broad Essex, Inc. Howard Leitner Secretary of Broad Essex, Inc. 1 CERTIFICATE OF MERGER OF BROAD ESSEX, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O'NUTS CORPORATION Under Section 805 of the Business Corporation Law It is hereby certified that: FIRST: The name of the Corporation is Chock Full o'Nuts Corporation. SECOND: The Certificate of incorporation of the corporation was filed by the Department of State on November 7, 1932, under the original name of Federal Nut Co., Inc. THIRD: The amendment of the certificate of incorporation of the corporation effected by this certificate of amendment is as follows: To add to the certificate of incorporation a new Article TWELFTH containing a provision limiting or eliminating in certain circumstances the potential monetary liability of directors to the corporation or its stockholders by reason of their conduct as directors. FOURTH: To accomplish the foregoing amendment, a new Article TWELFTH of the certificate of incorporation of the corporation is hereby added to read as follows: TWELFTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for damages for any breach of duty in such capacity, except for the liability of any director, if a judge or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated section 719 of the New York Business Corporation Law. FIFTH: The foregoing amendment was authorized by the Board of Directors of the Corporation, followed by its adoption by a favorable vote of a majority of the stockholders of record of the corporation at a duly called and held meeting of stockholders. IN WITNESS WHEREOF, we have subscribed this document as of September 2, 1988, and do hereby affirm, under the penalties of perjury, that the statements contained herein have been examined by us and are true and correct. Howard Leitner, President Martin Cullen, Secretary 1 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHOCK FULL O' NUTS CORPORATION Under Section 805 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF ERNEST SINGHOFEN & CO., INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Ernest Singhofen Co., Inc. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was October 25, 1948 under the name of Charles F. Slover & Co., Inc. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 250 shares of Common Stock of one class, of which 112 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 29, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 7, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board of Ernest & Singhofen & Co., Inc. Martin Cullen Secretary of Ernest & Singhofen & Co., Inc. 1 CERTIFICATE OF MERGER OF ERNEST SINGHOFEN & CO., INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF MULTI-DATA SERVICES, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Multi-Data Services, Inc. The Jurisdiction of its incorporation is New Jersey and the date its certificate of incorporation was in New Jersey was March 20, 1975. No application for authority to transact business in the State of new York has been filed. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 1000 shares of Common Stock of one class. of which one share are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 11, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 28, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board of Mult-Data Services Inc. Martin Cullen Secretary of Multi-Data Services, Inc. 1 CERTIFICATE OF MERGER OF MULTI-DATA SERVICES, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF LA TOURAINE COFFEE COMPANY, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is La Touriane Coffee Company, Inc. The Jurisdiction of its incorporation is Massachusetts and the date its certificate of incorporation was in Massachusetts was November 29, 1974. An application for authority to transact business in the State of New York was filed on December 12, 1974. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 12,500 shares of Common Stock of one class, of which 100 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 31, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 28, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board of La Touraine Coffee Company, Inc. Martin Cullen Secretary of La Touraine Coffee Company, Inc. 1 CERTIFICATE OF MERGER OF LA TOURAINE COFFEE COMPANY, INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY (a Florida Corporation) INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of Sate on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Greenwich Mills Company. The Jurisdiction of its incorporation is Florida and the date its certificate of incorporation was in Florida was April 21, 1969 under the name Hill Stephens Coffee company. No application for authority to transact business in the State of New York has been filed. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 6,500 shares of Common Stock of one class, of which 500 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 31, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 28, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board Greenwich Mills Company Martin Cullen Secretary of Greenwich Mills Company 1 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY (A FLORIDA CORPORATION) INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY (a North Carolina Corporation) INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Greenwich Mills Company. The Jurisdiction of its incorporation is North Carolina the date its certificate of incorporation was in North Carolina was October 25, 1984. No application for authority to transact business in the State of New York has been filed. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 100,000 shares of Common Stock of one class, of which 100 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 31, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 28, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board Greenwich Mills Company Martin Cullen Secretary of Greenwich Mills Company 1 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY (A NORTH CAROLINA CORPORATION) INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of Sate on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("Subsidiary Corporation"), which is being merged into the Parent Corporation, is Greenwich Mills Company. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was February 24, 1912. THIRD: The authorized capitalization of the Subsidiary Corporation consist of 10,000 shares of Common Stock of one class, of which 5,911 shares are now issued and outstanding and owned by the Parent Corporation. No shares of common stock are subject to change prior to the effective date of the merger. FOURTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of the merger. FIFTH: The effective date of the merger shall be July 30, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 26, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board Greenwich Mills Company Martin Cullen Secretary of Greenwich Mills Company 1 CERTIFICATE OF MERGER OF GREENWICH MILLS COMPANY INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 2 CERTIFICATE OF MERGER OF NATHOR COFFEE CO., INC. AND A.L. RANSOHOFF CORP., INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified, on behalf of each of the constituent domestic corporation named above, as follows: FIRST: The name of the parent constituent corporation ("Parent Corporation"), which is to be the surviving corporation, is Chock Full O'Nuts Corporation. The jurisdiction of its incorporation is New York, and its certificate of incorporation was filed by the Department of State on November 7, 1932 under the name Federal Nut Co., Inc. SECOND: The name of the subsidiary constituent corporation ("First Subsidiary Corporation"), which is being merged into the Parent Corporation, is Nathor Coffee Roasting Corp. The Jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was March 26, 1936. THIRD: The authorized capitalization of the first Subsidiary Corporation consist of 150 shares of Class A Common Stock, 100 shares of Class B Common Stock and 100 shares of Preferred Stock, of which 150, 60 and 100 shares, respectively, are now issued and outstanding and owned by the Parent Corporation. No shares are subject to change prior to the effective date of merger. FOURTH: The name of the second subsidiary constituent corporation ("Second Subsidiary Corporation"), which is being merged into the Parent corporation, is A.L. Ransohoff Co., Inc. The jurisdiction of its incorporation is New York and the date its certificate of incorporation was filed by the Department of State was November 20, 1939. FIFTH: The authorized capitalization of the Second Subsidiary corporation consists of 2,000 shares of Common Stock and 100 shares of Preferred Stock, of which 2,000 and 100 shares, respectively, are now issued and outstanding and owned by the Parent corporation. No shares of capital stock are subject to change prior to the effective date of the merger. SIXTH: The Board of Directors of the Parent Corporation has duly adopted a Plan of Merger setting forth the terms and conditions of merger. 1 SEVENTH: The effective date of the merger shall be July 31, 1989. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: July 28, 1989 Leon Pordy, M.D., Chairman of the Board of Chock Full o'Nuts Corporation Martin Cullen Secretary of Chock Full o'Nuts Corporation Leon Pordy, M.D., Chairman of the Board of Nathor Coffee Roasting Corp. Martin Cullen Secretary of Nathor Coffee Roasting Corp. Leon Pordy, M.D., Chairman of the Board of A.L. Ransohoff Co, Inc. Martin Cullen Secretary of A.L. Ransohoff Co., Inc. 2 CERTIFICATE OF MERGER OF NATHOR COFFEE ROASTING CORP. AND A.L. RANSOHOFF CO., INC. INTO CHOCK FULL O' NUTS CORPORATION Under Section 905 of the Business Corporation Law Dreyer & Traub 101 Park Avenue New York, New York 10178 CERTIFICATE OF MERGER OF IROQUOIS PROPERTIES, INC. INTO CHOCK FULL O'NUTS CORPORATION Under Section 905 of the Business Corporation Law It is hereby certified by the corporation named herein as the surviving corporation as follows: FIRST: The Board of Directors of the corporation named herein as the surviving corporation has adopted a plan of merger setting forth the terms and conditions of merging the corporation named herein as the subsidiary corporation into said surviving corporation. SECOND: The Laws of the jurisdiction of incorporation of the corporation named herein as the subsidiary corporation permit a merger of the kind certified herein. THIRD: The name of the subsidiary corporation to be merged, which was organized under the laws of the State of Delaware on February 26, 1964, is Iroquois Properties, Inc. The Application for Authority in the State of New York of said corporation to transact business as a foreign corporation therein was filed by the Department of State of the State of New York on March 9, 1964. FOURTH: The name of the surviving corporation, the certificate of incorporation which was filed by the Department of State on November 7, 1932 is Chock Full O'Nuts Corporation. The name under which said corporation was formed is Federal Nut Co., Inc. FIFTH: The designation and number of outstanding shares of each class of the subsidiary corporation, all of which are owned by the surviving corporation, as set forth in the plan of merger, are as follows: DESIGNATION NUMBER Common 1,000 SIXTH: The merger of the subsidiary corporation into the surviving corporation has been authorized under the laws of the jurisdiction of incorporation of the subsidiary corporation. IN WITNESS WHEREOF, we have subscribed this Certification on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained in this Certificate have been examined by us and are true and correct. DATE: May 3, 1990 CHOCK FULL O'NUTS CORPORATION Leon Pordy, M.D. Chairman of the Board and Chief Executive Officer 1 CERTIFICATE OF MERGER OF IROQUOIS PROPERTIES, INC. INTO CHOCK FULL O' NUTS CORPORATION Dreyer & Traub 101 Park Avenue New York, New York 10178 2 EXHIBIT (4C) EX-4.C 4 Exhibit 4 (c) INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of August 9, 1993, among Chock full O'Nuts Corporation, a corporation duly organized and existing under the laws of the State of New York, having its principal office at 370 Lexington Avenue, New York, New York, 10017 (the "Company"), Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, a banking corporation duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 450 West 33rd Street, New York, New York 10001 (the "Resigning Trustee"), and Liberty Bank and Trust Company of Oklahoma City, National Association, a national banking association duly organized and existing under the laws of the United States of America having its principal corporate trust office at 100 N. Broadway, Oklahoma City, OK 73102 (the "Successor Trustee"); RECITALS There are presently issued and outstanding $43,268,000.00 in aggregate principal amount of the Company's 8% Convertible Subordinated Debentures due September 15, 2006 (the "Securities") under an Indenture, dated as of September 15, 1986 (the "Indenture"), between the Company and the Resigning Trustee. The Resigning Trustee wishes to resign as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands under the Indenture; the Company wishes to appoint the Successor Trustee to succeed the Resigning Trustee as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands under the Indenture; and the Successor Trustee wishes to accept such appointment as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands under the Indenture. NOW THEREFORE, the Company, the Resigning Trustee and the Successor Trustee agree as follows: ARTICLE ONE THE RESIGNING TRUSTEE Section 101. Pursuant to Section 7.08 of the Indenture, the Resigning Trustee hereby confirms previous notification to the Company that the Resigning Trustee is hereby resigning as Trustee under the Indenture. - - -2- Section 102. The Resigning Trustee hereby represents and warrants to the Successor Trustee that: (a) To the best of the knowledge of the Responsible Officers of the Resigning Trustee assigned to its Corporate Trust Department, no Event of Default and no event which, after notice or lapse of time or both, would become an Event of Default, has occurred and is continuing under the Indenture. (b) No covenant or condition contained in the Indenture has been waived by the Resigning Trustee or by the Holders of the percentage in aggregate principal amount of the Securities required by the Indenture to effect any such waiver. (c) There is no action, suit or proceeding pending or, to the best of the knowledge of the Responsible Officers of the Resigning Trustee assigned to its Corporate Trust Department, threatened against the Resigning Trustee before any court or governmental authority arising out of any action or omission by the Resigning Trustee as Trustee under the Indenture. Section 103. The Resigning Trustee hereby assigns, transfers, delivers and confirms to the Successor Trustee all right, title and interest of the Resigning Trustee in and to the trust under the Indenture and all the rights, powers and trusts of the Trustee under the Indenture. The Resigning Trustee shall execute and deliver such further instruments and shall do such other things as the Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in the Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to the Successor Trustee. Section 104. The Resigning Trustee hereby resigns as Paying Agent, Registrar, Conversion Agent, agent for service of notices and demands and as the Office or agency maintained by the Company pursuant to the terms of the Indenture. - - -3- ARTICLE TWO THE COMPANY Section 201. The Secretary or Assistant Secretary or the Company attesting to the execution of this Instrument by the Company hereby certifies that annexed hereto marked Exhibit A is a copy of Board Resolutions duly adopted by the Board of Directors of the Company, and in full force and effect on the date hereof authorizing certain officers of the Company to: (a) accept the Resigning Trustee's resignation as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency; (b) appoint the Successor Trustee as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency; and (c) execute and deliver such agreements and other instruments as may be necessary or desirable to effectuate the succession of the Successor Trustee under the Indenture. Section 202. The Company hereby appoints the Successor Trustee as Trustee under the Indenture and confirms to the Successor Trustee all the rights, powers and trusts of the Trustee under the indenture. The Company shall execute and deliver such further instruments and shall do such other things as the Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in the Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to the Successor Trustee. Section 203. The Company hereby appoints the Successor Trustee as Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency maintained pursuant to the terms of the Indenture. - - -4- ARTICLE THREE THE SUCCESSOR TRUSTEE Section 301. The Successor Trustee hereby represents and warrants to the Resigning Trustee and to the Company that the Successor Trustee is qualified and eligible under the provisions of Section 7.10 of the Indenture to act as Trustee under the Indenture. Section 302. The Successor Trustee hereby accepts its appointment as Trustee under the Indenture and shall hereby be vested with all the rights, powers, trusts and duties of the Trustee under the Indenture. Section 303. The Successor Trustee hereby accepts its appointment as Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as Company's office or agency maintained pursuant to the terms of the Indenture. ARTICLE FOUR MISCELLANEOUS Section 401. Except as otherwise expressly provided or unless the context otherwise requires, all terms used herein which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Section 402. This instrument and the resignation, appointment and acceptance effected hereby shall be effective as of the opening of business on the date first above written upon the execution and delivery hereof by each of the parties hereto. Section 403. Notwithstanding the resignation of the Resigning Trustee effected hereby, the Company shall remain obligated under Section 7.07 of the Indenture to compensate, reimburse and indemnify the Resigning Trustee in connection with its trusteeship under the Indenture. Section 404. This Instrument shall be governed by and construed in accordance with the laws of the jurisdiction which govern the Indenture and its construction. Section 405. This Instrument may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereby have caused this Instrument of Resignation, Appointment and Acceptance to be duly executed and their respective seals to be affixed hereunto and duly attested all as of the day and year first above written. - - -5- [Corporate Seal] CHOCK FULL O'NUTS CORPORATION By__________________________ Name: Howard Leitner Title: President Attest: ___________________________ Secretary CHEMICAL BANK [Corporate Seal] By_________________________ Name: G.K. Burke Title: Vice President Attest: ______________________________ Assistant Trust Officer LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, NATIONAL ASSOCIATION [Corporate Seal] By___________________________ Name: Jake Riley Title: Senior Vice President Attest: _______________________ Assistant Secretary - - -6- STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On the 11th day of June, 1993, before me personally came Howard Leitner, to me known, who, being by me duly sworn, did depose and say that he resides at Chappaqua, NY; that he is a president of Chock Full O'Nuts Corporation, corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to the authority of the Board of Directors of said corporation; and that he signed his name thereto pursuant to like authority. ------------------------------- Notary Public STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On the 13th day of April, 1993, before me personally came G.K. Burke, to me known who, being by me duly sworn, did depose and say that he resides at 489 Hoyt Street, Darien, CT 06820; that he is a Vice President of Chemical Bank, a corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to the authority of the Board of Directors of said corporation; and that he signed his name thereto pursuant to like authority. --------------------------- Norary Public - - -7- STATE OF OKLAHOMA ) ) SS: COUNTY OF OKLAHOMA ) On the 16th day of July, 1993, before me personally came Jake L. Riley, to me known, who, being by me duly sworn, did depose and say that he is a Senior Vice President of Liberty Bank and Trust Company of Oklahoma City, National Association, a national banking association described in and which executed the above instrument; that he knows the seal of said association; that the seal affixed to said instrument is such seal; that it was so affixed pursuant to the authority of the Board of Directors of said association; and that he signed his name thereto pursuant to like authority. -------------------------------- Notary Public - - -8- EXHIBIT A BOARD RESOLUTIONS The following is a true copy of resolutions duly adopted on April 29, 1993, by the Board of Directors of Chock Full O'Nuts Corporation. "RESOLVED, that any officer of this Company is hereby authorized to accept the resignation of Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as Company's office or agency under the Company's Indenture, dated as of September 15, 1986, and to appoint Liberty Bank and Trust Company of Oklahoma City as Successor Trustee under said Indenture and as this Company's agent for the service of notices and demands in connection with the securities issued under said Indenture; and FURTHER RESOLVED, that any officer of this Company is hereby authorized to enter into such agreements and other instruments as may be necessary or desirable to effectuate the appointment of said Successor Trustee under said Indenture." EX-4.DE 5 Exhibit 4 (d,e) 3/31/87 (GL) 22B CHOCK FULL O' NUTS CORPORATION $60,000,000 * 7% Convertible Senior Subordinated Debentures due April 1, 2012 INDENTURE Dated as of April 1, 1987 IBJ SCHRODER BANK & TRUST COMPANY * Subject to a 30-day option to purchase up to an additional $9,000,000 principal amount of Convertible Senior Subordinated Debentures granted to the underwriters by the Company. CROSS-REFERENCE TABLE CHOCK FULL O' NUTS CORPORATION Trust Indenture Act Section Indenture Section 310 (a) (1) 7.10 (a) (2) 7.10 (a) (3) Not Applicable (a) (4) Not Applicable (b) 7.08; 7.10; 12.02 (c) Not Applicable 311 (a) 7.11 (b) 7.11 (c) Not Applicable 312 (a) 2.05 (b) 12.03 (c) 12.03 313 (a) 7.06 (b)(1) Not Applicable (b)(2) 7.06 (c) 7.06; 12.02 (d) 7.06 314 (a) 4.02; 12.02 (b) Not Applicable (c)(1) 12.04 (c)(2) 12.04 (c)(3) Not Applicable (d) Not Applicable (e) 12.05 (f) Not Applicable 315 (a) 7.01 (b) (b) 7.05; 12.02 (c) 7.01 (a) (d) 7.01 (c) (e) 6.11 316 (a)(last sentence) 12.06 (a)(l,A) 6.05 (a)(1,B) 6.04 (a)(2) Not Applicable (b) 6.07 317 (a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318 (a) 12.01 _____________________________ Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions 1 SECTION 1.02. Other Definitions 4 SECTION 1.03. Incorporation by Reference of Trust Indenture Act 4 SECTION 1.04. Rules of Construction 4 ARTICLE 2 THE SECURITIES SECTION 2.01. Dating; Incorporation of Form in Indenture 5 SECTION 2.02. Execution of Authentication 5 SECTION 2.03. Registrar and Agents 5 SECTION 2.04. Paying Agent to Hold Money in Trust 6 SECTION 2.05. Securityholder Lists 6 SECTION 2.06. Transfer and Exchange 6 SECTION 2.07. Replacement Securities 7 SECTION 2.08. Outstanding Securities 7 SECTION 2.09. Temporary Securities 7 SECTION 2.10. Cancellation 7 SECTION 2.11. Defaulted Interest 7 SECTION 2.12. Persons Deemed Owners 3 ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee 8 SECTION 3.02. Selection of Securities to be Redeemed 8 SECTION 3.03. Notice of Redemption 8 SECTION 3.04. Effect of Notice of Redemption 8 SECTION 3.05. Deposit of Redemption Price 9 SECTION 3.06. Securities Redeemed in Part 9 SECTION 3.07. Mandatory Redemption Provisions 9 - - -i- ARTICLE 4 Page COVENANTS SECTION 4.01. Payment of Securities 10 SECTION 4.02. SEC Reports 10 SECTION 4.03. Waiver of Stay, Extension or Usury Laws 10 SECTION 4.04. Limitation on Dividends and Other Distributions 10 SECTION 4.05. Liquidation 12 SECTION 4.06. Notice of Defaults 13 SECTION 4.07. Compliance Certificates 13 SECTION 4.08. Maintenance of Consolidated Net Worth 13 SECTION 4.09. Limitation of Certain Indebtedness 14 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, etc. 15 SECTION 5.02. Successor Corporation Substituted 15 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default 15 SECTION 6.02. Acceleration 16 SECTION 6.03. Other Remedies 17 SECTION 6.04. Waiver of Defaults and Events of Default 17 SECTION 6.05. Control by Majority 17 SECTION 6.06. Limitation on Suits 17 SECTION 6.07. Rights of Holders to Receive Payment 18 SECTION 6.08. Collection Suit by Trustee 18 SECTION 6.09. Trustee May File Proofs of Claim 18 SECTION 6.10. Priorities 19 SECTION 6.11. Undertaking for Costs 19 ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee 19 SECTION 7.02. Rights of Trustee 20 SECTION 7.03. Individual Rights of Trustee 21 SECTION 7.04. Trustee's Disclaimer 21 SECTION 7.05. Notice of Defaults 21 SECTION 7.06. Reports by Trustee to Holders 21 SECTION 7.07. Compensation and Indemnity 21 SECTION 7.08. Replacement of Trustee 22 SECTION 7.09. Successor Trustee by Merger, etc. 22 SECTION 7.10. Eligibility; Disqualification 22 SECTION 7.11. Preferential Collection of Claims Against Company 23 - - -ii- ARTICLE 8 Page SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.01. Satisfaction , Discharge and Defeasance of the Securities 23 SECTION 8.02. Satisfaction and Discharge of Indenture 23 SECTION 8.03. Survival of Certain Obligations 24 SECTION 8.04. Application of Trust Money 24 SECTION 8.05. Paying Agent to Repay Monies Held 24 SECTION 8.06. Return of Unclaimed Monies 25 SECTION 8.07. Reinstatement 25 ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders 25 SECTION 9.02. With Consent of Holders 26 SECTION 9.03. Compliance with Trust Indenture Act 26 SECTION 9.04. Revocation and Effect of Consents 26 SECTION 9.05. Notation on Exchange of Securities 27 SECTION 9.06. Trustee to Sign Amendments, etc. 27 ARTICLE 10 SUBORDINATION; SENIORITY SECTION 10.01. Securities Subordinated to Senior Indebtedness 27 SECTION 10.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances 27 SECTION 10.03. Securities Subordinated to prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company 28 SECTION 10.04. Securityholders to be Subrogated to Rights of Holders of Senior Indebtedness 30 SECTION 10.05. Obligation of the Company Unconditional 30 SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice 31 SECTION 10.07. Application by Trustee of Monies Deposited with It 31 SECTION 10.08. Continuing Offer of Subordination 31 SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness 32 SECTION 10.10. Securityholders Authorize Trustee to Effectuate Subordination of Securities 32 SECTION 10.11. Right of Trustee to Hold Senior Indebtedness; Trustee Owes No Fiduciary Duty to Holders of Senior Indebtedness 33 SECTION 10.12. Article 10 Not to Prevent Events of Default 33 SECTION 10.13. Officers' Certificate 33 SECTION 10.14. Paying Agents Other than the Trustee 33 SECTION 10.15. Securities Senior to Subordinated Indebtedness 33 - - -iii- ARTICLE 11 Page CONVERSION OF DEBENTURES SECTION 11.01. Right of Conversion; Conversion Price 33 SECTION 11.02. Issuance of Common Stock on Conversion 34 SECTION 11.03. No Adjustment for Interest or Dividends 34 SECTION 11.04. Adjustment of Conversion Price 35 SECTION 11.05. No Fractional Shares 39 SECTION 11.06. Effect of Reclassification, Consolidation, Merger, Sale, Lease or Conveyance 39 SECTION 11.07. Covenant to Reserve Shares 40 SECTION 11.08. Compliance with Legal and Governmental Requirements 40 SECTION 11.09. Payment of Taxes 41 SECTION 11.10. Notice of Certain Events 41 SECTION 11.11. Responsibility of Trustee and Conversion Agent 41 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls 42 SECTION 12.02. Notices 42 SECTION 12.03. Communications by Holders with other Holders 43 SECTION 12.04. Certificate and Opinion as to Conditions Precedent 43 SECTION 12.05. Statements Required in Certificate and Opinion 43 SECTION 12.06. When Treasury Securities Disregarded 43 SECTION 12.07. Rules by Trustee and Agents 44 SECTION 12.08. Legal Holidays 44 SECTION 12.09. Governing Law 44 SECTION 12.10. No Adverse Interpretation of Other Agreements 44 SECTION 12.11. No Recourse Against Others 44 SECTION 12.12. Successors 44 SECTION 12.13. Multiple Counterparts 44 SECTION 12.14. Table of Contents, Headings, etc. 44 SECTION 12.15. Severability 44 Signatures 45 Exhibit A - Form of Security - - -iv- INDENTURE dated as of April 1, 1987 between CHOCK FULL O' NUTS CORPORATION, a New York corporation ("Company") and IBJ SCHRODER BANK & TRUST COMPANY, a New York corporation ("Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 7% Convertible Senior Subordinated Debentures due April 1, 2012 ("Securities"): ARTICLE 1 DEFINITIONS AND INCORPORATION SECTION 1.01 Definitions "Affiliate" means any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. "Agent" means any Registrar, Paying Agent, Conversion Agent, co-registrar or agent for service of notices and demands. See Section 2.03. "Board of Directors" means the Board of Directors of the Company or any committee of the Board. "Business Day" means a day that is not a Legal Holiday. "Capital Stock" means any and all shares or other equivalents (however designated) of corporate stock except Redeemable Preferred Stock. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Consolidated Net Income" means, for any period, the aggregate of the Net Income of the Company and its Subsidiaries for such period determined in accordance with generally accepted accounting principles consistently applied, provided that (i) the Net income of any person which is not a Subsidiary and which is consolidated with the Company or is accounted for by the Company by the equity method of accounting shall be included only to the extent of the amount of cash dividends or cash distributions paid to the Company or a Subsidiary, (ii) the Net Income of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iii) the Net Income of any Subsidiary that is subject to restrictions, direct or indirect, on the payment of dividends or the making of distributions to the Company shall be excluded to the extent of such restrictions. "Consolidated Net Worth", as applied to any Person, means the consolidated Stockholders' Equity (exclusive of any Redeemable Preferred Stock) of such Person and its consolidated subsidiaries. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at One State Street, New York, New York 10004. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. 1 "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture as amended or supplemented from time to time. "Net Income" of any person means the net income (loss) of such person, determined in accordance with generally accepted accounting principles consistently applied: excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without Limitation, dispositions pursuant to Sale and Leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any Capital Stock of the Company or a Subsidiary owned by such person except to the extent that any such gain over the net book value of any such assets is represented by cash or fair value of other consideration as such value is determined in good faith by the Board of Directors of the Company. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer, Assistant Secretary or Assistant Controller of the Company. See Sections 12.04 and 12.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 12.04 and 12.05. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal" of a Security means the principal of the Security plus, when appropriate, the premium, if any, on the Security. "Redeemable Preferred Stock" means (i) preferred stock of the Company which is subject to mandatory redemption or which is redeemable at the option of the holder thereof or (ii) corporate stock which may be exchanged or converted, directly or indirectly, into any security other than (A) Common Stock or (B) non-Redeemable Preferred Stock until extinguishment of the exchange rights, either by the terms of such Stock or pursuant to an irrevocable election of the Company. "Redemption Date" when used with respect to any Security to be redeemed means the rate fixed for such redemption pursuant to this Indenture. "Redemption Price", when used with respect to any Securities to be redeemed, means the price fixed for such redemption pursuant to this Indenture as set forth in the form of Security annexed hereto as Exhibit A. "Sale and Lease-Back Transaction" means any arrangement with any person (other than the Company or a Subsidiary), or to which any such person is a party, providing for the leasing to the Company or a Subsidiary of any property owned by the Company or Subsidiary and sold or transferred by the Company or such Subsidiary to such person or to any other person (other than the Company or a Subsidiary). "SEC" means the Securities and Exchange Commission. "Securities" means the securities that are issued under this Indenture as amended or supplemented from time to time, pursuant to this Indenture. 2 "Senior Indebtedness" means the principal, premium, if any, and interest on Indebtedness of the Company (including, without limitation, that certain Guaranty Agreement between the Company and the First Missouri Bank and Trust Company dated as of December 1, 1984, that certain Loan Agreement between the Company as successor to Chock Full O' Nuts Coffee Corporation ("Coffee") and the Industrial Development Authority of the city of St. Louis, Missouri ("Authority") dated as of December 1, 1984, and that certain Promissory Note in the original principal amount of $2,000,000 made on December 28, 1984 payable to the Authority to which the Company is the obligor as the successor to Coffee) outstanding at any time, other than the Securities, Indebtedness of the Company with respect to the principal, premium, if any, and interest on the Company's $50,000,000 principal amount of 8% Convertible Subordinated Debentures due September 15, 2006, Indebtedness of the Company to a Subsidiary for money borrowed or advanced from any Subsidiary and any other Indebtedness which by its terms expressly provides that it is not superior in right of payment to the Securities. "Indebtedness" with respect to any Person means: (1) any debt (i) for borrowed money, or (ii) evidenced by a bond, note, debenture, or similar instrument (including purchase money obligations) given in connection with or assumed as all or a part of the consideration for the acquisition of property or assets, whether by purchase, merger, consolidation or otherwise, but shall not include any trade accounts payable, or (iii) which is a direct or indirect obligation which arises as a result of banker's acceptances or drawings under bank letters of credit issued to secure obligations of such person, whether contingent or otherwise; (2) any debt of others described in the preceding clause (1) which such Person has guaranteed or for which it is otherwise liable; (3) any obligation secured by a lien to which the property or assets of such Person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such Person's legal liability; (4) the obligation of such Person as lessee under any lease of property which is reflected on such Person's balance sheet as a capitalized lease; and (5) any deferral, amendment, renewal, extension, supplement or refunding of any liability of the kind described in any of the preceding clauses (1), (2), (3) and (4). "Stockholders' Equity" as applied to any Person means such Person's stockholders' equity as determined according to generally accepted accounting principles, but shall not include any amounts attributable to securities which do not constitute Capital Stock. "Subordinated Indebtedness" means the principal, premium, if any, and interest on any Indebtedness of the Company which by its terms is subordinated in right of payment to the Securities. "Subsidiary" means a corporation the majority of whose voting stock is owned by the Company or a Subsidiary. Voting stock is Capital Stock having voting power under ordinary circumstances to elect directors. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. 3 "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "United States" means the United States of America. SECTION 1.02 Other Definitions. Term Defined in Section "Bankruptcy Law" 6.01 "Conversion Agent" 2.03 "Current Market Price" 11.04 (g) "Custodian" 6.01 "Event of Default" 6.01 "Legal Holiday" 12.08 "Paying Agent" 2.03 "Registrar" 2.03 "U.S. Government Obligations" 8.01 SECTION 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the indenture securities. All other terms used in this Indenture that that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. SECTION 1.04 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date hereof; (3) "or" is not exclusive; and (4) words in the singular include the plural, and in the plural include the singular. 4 ARTICLE 2 THE SECURITIES SECTION 2.01 Dating; Incorporation of Form in Indenture. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A which is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, or usage. the Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication. SECTION 2.02 Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be nevertheless valid. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. Such signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue in the aggregate principal amount of up to $69,000,000 upon the execution of the Indenture an a written order or orders of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.07. The Trustee may appoint an authenticating agent to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 2.03 Registrar and Agents. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for payment ("Paying Agent"), an office or agency where Securities may be presented for conversion ("Conversion Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. 5 The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, paying Agent, Conversion Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands. SECTION 2.04 Paying Agent to Hold Money in Trust. On or prior to each due date of the principal of an interest on any Securities, the Company shall deposit with each paying Agent a sum sufficient to pay such principal, premium, if any, and interest so becoming due. the Company shall require each Paying Agent to agree in writing that it will hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of, premium if any, or interest on the Securities and to notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall on or before each due date of the principal of, premium, if any, or interest on any Securities segregate the money and hold it as a separate trust fund. The Company at any time may require a paying Agent to pay all money held by it to the Trustee and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money. SECTION 2.05 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonable require of the names and addresses of Securityholders. SECTION 2.06 Transfer and Exchange. When a Security is presented to the Registrar or a co-registrar with a request to register the transfer, the Registrar or co-registrar shall register the transfer as requested and when Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall make the exchange as requested provided that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. To permit transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company may charge a reasonable fee for any transfer or exchange and may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, but this provision shall not apply to any exchange pursuant to Section 2.09, 3.06, 9.05 or 11.02. 6 SECTION 2.07 Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security presents evidence to the satisfaction of the Company and the Trustee that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of the Trustee and the Company are met. An indemnity bond may be required that is sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expense in replacing a Security. SECTION 2.08 Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it and those described in this Section 2.08 as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent (other than the Company or a Subsidiary) holds on a Redemption Date or maturity date money deposited with it by or on behalf of the Company sufficient to pay the principal of and accrued interest on Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. Subject to Section 12.06, a Security does not cease to be outstanding because the Company or an Affiliate holds the Security. SECTION 2.09 Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. SECTION 2.10 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. the Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee any Securities surrendered to the for transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for transfer, exchange, payment or cancellation and destroy canceled Securities and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Securities to the Company, Subject to Section 2.07, the Company may not issue Securities to replace Securities that it has previously paid or delivered to the Trustee for cancellation. SECTION 2.11 Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest to the Persons who are Securityholders on a subsequent special record date. The Company shall 7 fix the special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before the special record date, the Company shall mail to each Securityholder a notice that states the special record date, the payment date, and the amount of defaulted interest to be paid. The Company may pay defaulted interest in any other lawful manner. SECTION 2.12 Persons Deemed Owners. Prior to presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security and neither the Company, the Trustee nor any agent of the company or the Trustee shall be affected by notice to the contrary. ARTICLE 3 REDEMPTION SECTION 3.01 Notices to Trustee. If the Company wants to redeem the Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee of the Redemption Date and the principal amount of Securities to be redeemed. If the Company wants to reduce the principal amount of Securities to be acquired pursuant to Paragraph 6 of the Securities, it shall notify the Trustee of the amount of the reduction and the basis for it. If the Company wants to credit against any such redemption Securities it has not previously delivered to the Trustee for cancellation, it shall deliver the Securities with such notice. The Company shall give each notice provided for in this Section 3.01 at least 60 days before the Redemption Date or such other period as the Company and the Trustee may agree. SECTION 3.02 Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed by a method the Trustee considers fair and appropriate. The Trustee shall make the selection from Securities outstanding and not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03 Notice of Redemption. At least 15 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: 8 (1) The Redemption Date; (2) the Redemption Price; (3) the then current conversion price; (4) the name and address of the Paying Agent and the Conversion Agent; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that interest on Securities called for redemption ceases to accrue on and after the Redemption Date; (7) Whether the redemption is pursuant to the optional or mandatory redemption provisions of the Securities; (8) that the right to convert the Securities as provided in Article 11 expires at the close of business on the Business Day prior to the Redemption Date; and (9) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price, plus accrued interest to the Redemption Date. SECTION 3.05 Deposit of Redemption Price. On or prior to the Redemption date, the Company shall deposit with the Paying Agent, or if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust or cause such Subsidiary to segregate and hold in trust) money sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date. SECTION 3.06 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.07 Mandatory Redemption Provisions. The Company shall redeem 5% of the principal amount of the Securities originally issued, on the dates, upon the terms and subject to the conditions set forth in Paragraph 6 of the Securities. Any such redemption shall be made pursuant to the provisions of this Article. 9 ARTICLE 4 COVENANTS SECTION 4.01 Payment of the Securities. The Company shall pay the principal of, premium, if any, and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or a Subsidiary) holds on that date money designated for and sufficient to pay the installment. The Company shall pay interest on overdue principal at the rate borne by the Securities; it shall pay interest, including post-petition interest in the event of a proceeding under the Bankruptcy Laws, on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02 SEC Reports. The Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. The Company shall also comply with the other provisions of TIA 314(a). So long as the Securities remain outstanding, the Company shall cause its annual reports to shareholders (containing audited financial statements) and any other financial reports furnished by it to shareholders to be mailed to the Holders at their addresses appearing in the register of Securities maintained by the Registrar. SECTION 4.03 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.04 Limitation on Dividends and Other Distributions. The Company will not declare or pay any dividend or make any distribution on its Redeemable Preferred Stock held by Subsidiaries or on its Capital Stock or to holders of its Capital Stock (other than dividends or distributions payable in Capital Stock of the Company, or purchase, redeem or otherwise acquire or retire for value any of its Capital Stock or Redeemable Preferred Stock held by Subsidiaries or any warrants, rights or options to purchase or acquire any shares of its Capital Stock or Redeemable Preferred Stock held by Subsidiaries or permit any Subsidiary to purchase, redeem or otherwise acquire or retire for value any such Capital Stock or Redeemable Preferred Stock so held or any warrants, rights or options to purchase or acquire any shares of its Capital Stock of Redeemable Preferred Stock so held: 10 (1) if at the time of such action an Event of Default has occurred and is continuing or would exist immediately after giving effect to such action; or (2) if, upon giving effect to such dividend, distribution, purchase, redemption, other acquisition or retirement, the aggregate amount expended for all such purposes (the amount expended for such distribution, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee) subsequent to January 31, 1987, exceeds the sum of: (A) 50% of aggregate Consolidated Net Income accrued on the cumulative basis subsequent to January 31, 1987 (or, in case such aggregate Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) The aggregate of the net proceeds received by the Company from the issue or sale of its Capital Stock subsequent to January 31, 1987 (other than to a Subsidiary) including, without limitation, any such issue or sale in connection with the conversion of any Indebtedness (including the Securities) or of any Redeemable Preferred Stock of the Company, said net proceeds being deemed for the purpose of this Section 4.04 to equal the aggregate of (a) the cash, if any, received by the Company from such issue or sale, plus (b) the fair value of the consideration other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee) received by the Company from such issue or sale, and (C) $2,909,808 provided, however, that the provisions of this Section 4.04 shall not prevent (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment complied with the provisions hereof; or (ii) the retirement of any shares of the Company's Capital Stock by exchange for, or upon conversion of, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of shares of its Capital Stock, and neither such retirement nor the proceeds of any such sale or exchange shall be included in any computation made under this Section 4.04. For purposes of this Section 4.04, a distribution to holders of the company's Capital Stock or Redeemable Preferred Stock held by Subsidiaries of (i) shares of Capital Stock of any Subsidiary or Redeemable Preferred Stock of any Subsidiary or similar securities of any Subsidiary of the Company, or (ii) other assets of the Company, without, in either case, the receipt of equivalent consideration therefor shall be regarded as the equivalent of a cash dividend equal to the excess of the fair market value of the shares or other assets being so distributed at the time of such distribution over the consideration, if any, received therefor. The fair market value of such shares or other assets and the value of any consideration therefor other than cash shall be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee. For purposes of this Section 4.04, the net proceeds from the issuance of shares of Capital Stock of the Company issued (a) upon conversion of debt securities shall be deemed to be the net book value of such debt securities at the date of conversion (plus the additional amount required to be paid upon such conversion, if any) less any cash payment on account of fractional shares or (b) upon exercise of warrants, 11 rights and options shall be deemed to be the exercise price thereof less any cash payment on account of fractional shares. For purposes of this paragraph, the "net book value" of a security shall be the amount received by the Company on the issuance of such security, as adjusted on the books of the Company to the date of conversion. The foregoing shall not be interpreted to limit the authority of the Board of Directors, as set forth above, to determine the value of other securities of the Company or other property received as net proceeds; provided, however, that the value of the other property as so determined shall not exceed the net book value of such property. Before the Company pays any dividend or makes any distribution on its Capital Stock or Redeemable Preferred Stock held by Subsidiaries (other than dividends or distributions payable in Capital Stock of the Company), o r purchases, redeems or otherwise acquires or retires for value any Capital Stock or Redeemable Preferred Stock so held or permits any Subsidiary to purchase, redeem or otherwise acquire or retire for value any such Capital Stock or Redeemable Preferred Stock, the Company shall file with the Trustee an Officers' Certificate (upon which the Trustee may conclusively rely) which shall conform to the provisions of Section 12.04 and 12.05 hereof and which shall set forth the applicable computation required by subdivision (2) of this Section 4.04. SECTION 4.05 Liquidation. The Board of Directors or the stockholders of the Company may not adopt a plan of liquidation which plan provides for, contemplates or the effectuation of which is preceded by (A) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company otherwise than substantially as an entirety (Section 5.01 of this Indenture being the Section which governs any such sale, lease, conveyance or other disposition substantially as an entirety), and (B) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and of the remaining assets of the Company to the holders of Capital Stock of the Company, unless the Company shall in connection with the adoption of such plan make provision for, or agree that prior to making any liquidating distributions it will make provision for, the satisfaction of the Company's obligations hereunder and under the Securities as to the payment of principal and interest. The Company shall be deemed to make provision for such payments only if (i) the Company delivers in trust to the Trustee U.S. Government Obligations in an aggregate principal amount equal to the unpaid principal amount of the Securities and having maturities and interest payment dates on or before the dates on when the principal of and interest on the Securities are due, or (ii) there is an express assumption of the due and punctual payment of the Company's obligations hereunder and under the Securities and performance and observance of all covenants and conditions to be performed by the Company hereunder, by the execution and delivery of a supplemental Indenture in form satisfactory to the Trustee by a person which acquires, or will acquire otherwise than pursuant to a lease) a portion of the assets of the Company, provided that at the time of such assumption no default or Event of Default shall have occurred and be continuing and such person will have a Consolidated Net Worth (immediately after the date of such express assumption) and pro-forma aggregate earnings adjusted to reflect the acquisition for such person's four full fiscal quarters (immediately preceding the date of such express assumption) equal to not less than the Consolidated Net Worth of the Company (immediately preceding the date of such express assumption) and the aggregate Net Income of the Company and its consolidated subsidiaries (for its four full fiscal quarters immediately preceding the date of such express assumption) and the aggregate Net Income of the Company and its consolidated subsidiaries (for its four full fiscal quarters immediately preceding the date of such express assumption), respectively, and which is organized under the laws of the United States, any State thereof or the District of Columbia; provided, further, that the Company shall not make any liquidating distribution until after the Company shall have certified to the Trustee with an Officers Certificate at least five days prior to the making of any liquidating distribution that it has complied with 12 the provisions of this Section 4.05. In the event that the Company shall liquidate in compliance with clauses (A) or (B) above, it shall be relieved of all obligations hereunder except as set forth below. However, in the case of a liquidation pursuant to clause (A), the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.06 and 8.07 shall survive until the Securities are no longer outstanding. Thereafter the Company's obligations in Section 7.07 shall survive. SECTION 4.06 Notice of Defaults. In the event that any Event of Default under Section 6.01(4) hereof occurs, the Company shall promptly give written notice to the Trustee of such Default. The Company will deliver to the Trustee, within 5 days after the occurrence thereof, written notice of any event which with the giving of notice and/or the lapse of time would become an Event of Default under Section 6.01(4) hereof. SECTION 4.07 Compliance Certificates. The Company shall deliver to the Trustee within 45 days after the end of each fiscal quarter of the Company and 120 days after the end of each fiscal year of the Company, which as of the date of this Indenture is July 31, an Officers' Certificate stating whether or not the signers know of any Default or Events of Default. If they do know of such a Default or Event of Default, the certificate shall describe the Default or Event of Default and the efforts to remedy the same. The certificate need not comply with Section 12.05. SECTION 4.08 Maintenance of Consolidated Net Worth. If the Company's Consolidated Net Worth at the end of each of any two consecutive fiscal quarters is less than $15,283,033, then the Company shall make an offer to acquire (an "Offer") on the last day of the next following fiscal quarter (the "Accelerated Payment Date") 7.5% of the principal amount of Securities originally issued (or such lesser amount as may be outstanding at the time) at a purchase price of 100% of principal amount plus accrued interest to the Accelerated Payment Date. The Company may credit against its obligation to offer to repurchase Securities hereunder the principal amount of Securities acquired by the Company and surrendered for cancellation through purchase, redemption (otherwise than pursuant to Paragraph 6 or the Securities) or exchange, or upon conversion, and which were not previously used as a credit against (i) the redemption obligation set forth in Paragraph 6 of the Securities or (ii) any obligation to offer to repurchase Securities pursuant to this Section. In no event shall the failure to meet the minimum Consolidated Net Worth stated above at the end of any fiscal quarter be counted toward the making of more than one Offer hereunder. The Company shall provide the Trustee with written notice of the Offer at least 30 days before any such Accelerated Payment Date (unless shorter notice shall be acceptable to the Trustee) but in no case less than 15 days before the notice of any Offer is mailed to Holders. The Company shall notify the Trustee promptly after the occurrence of any of the events specified in this Section 4.08. Notice of an Offer shall be mailed by the Trustee to all Holders not less than 15 days nor more than 60 days before the Accelerated Payment Date to the Holders of the Securities at their last registered addresses. The offer shall remain open from the time of mailing until five days before the Accelerated Payment Date. The notice shall be accompanied by a copy of the information regarding the Company required to be contained in a Quarterly Report on Form 10-Q for the second fiscal quarter referred to 13 above if such second fiscal quarter is one of the Company's first three fiscal quarters. If such second fiscal quarter is the Company's last fiscal quarter, a copy of the information required to be contained in an Annual Report to Shareholders pursuant to Rule 14a-3 under the Securities Exchange Act of 1934 for the fiscal year ending with such second fiscal quarter shall either accompany the notice or be delivered to Holders not less than 15 days before the Accelerated Payment Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Offer. The notice, which shall govern the terms of the offer, shall state: (1) that the offer is being made pursuant to this Section 4.08; (2) the purchase price and the Accelerated Payment Date; (3) that any Security not tendered or accepted for payment will continue to accrue interest; (4) that any Security accepted for payment pursuant to the Offer shall cease to accrue interest after the Accelerated Payment Date; (5) that Holders electing to have a Security purchased pursuant to an Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice at least five days before the Accelerated Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than three Business Days prior to the Accelerated Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Security purchased; and (7) that Holders whose Securities were purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. Before an Accelerated Payment Date, the Company shall (i) accept for payment on a pro rata basis (rounded to the nearest $1,000) Securities or portions thereof tendered pursuant to the Offer; provided, however, that all Securities or portions thereof accepted for payment shall be in amounts of $1,000 or multiples of $1,000, (ii) deposit with the Trustee or the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officer's Certificate stating the Securities or portions thereof accepted for payment by the Company. The Trustee or the Paying Agent shall, on or before the tenth Business Day following the date of the delivery of the Securities, mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce by a press release the results of the Offer on the Accelerated Payment Date. For purposes of this Section 4.08, the Trustee shall act as the Paying Agent. SECTION 4.09 Limitation on Certain Indebtedness. The Company will not incur, directly or indirectly, any Indebtedness which by its terms is both (i) subordinated in right of payment to any Senior Indebtedness and (ii) senior in right of payment to the Securities. 14 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge, etc. The Company shall not consolidate with or merge into, or transfer all or substantially all of its assets to, another Person unless (i) the resulting, surviving or transferee Person is a corporation which assumes by supplemental indenture all the obligations of the Company under the Securities and this Indenture; (ii) such corporation is organized and existing under the laws of the United States, a State thereof or the District of Columbia; (iii) such corporation and its consolidated subsidiaries shall have consolidated Stockholders' Equity immediately after such transaction at least equal to the consolidated Stockholders' Equity of the Company and its consolidated subsidiaries immediately prior to such transaction; (iv) immediately after giving effect to such transaction no Default or Event of Default shall have happened and be continuing, and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Indenture, and thereafter all obligations of the Company shall terminate. SECTION 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of (and premium, if any on) any Security when the same becomes due and payable at maturity, upon redemption or otherwise (including payment pursuant to Paragraph 5 or Paragraph 6 of the Securities or Section 4.08 hereof); (3) the Company fails to comply with any of its other agreements in the Securities or this Indenture and the default continues for the period and after the notice specified in the last paragraph of this Section 6.01; (4) there shall be a default under any bond, debenture, note or other evidence of Indebtedness or under any mortgage, indenture or other instrument under which there may be issued or by which there may be secured or evidence any Indebtedness of the Company or any 15 Subsidiary, whether any such Indebtedness now exists or shall hereafter be created, which (a) is a default in the payment of the principal, premium, if any, or interest on such Indebtedness unless such default is cured within 30 days after the date such payment is due or (b) if any other default, such default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable or on maturity, without such acceleration having been rescinded or annulled within 10 days after notice to the Company of such acceleration , or such Indebtedness having been discharged; provided, however, that no default under this paragraph (4) shall exist if the aggregate amount of such Indebtedness with respect to which a payment default under clause (a) or an acceleration under clause (b) had occurred shall be less than $2,000,000; (5) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding, (B) consents to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case or proceeding, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 90 days. The term "Bankruptcy Law" means Title 11 U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A default under clause (3) (other than defaults under Sections 4.04, 4.05 and 4.08, which defaults shall be Events of Defaults without the notice or passage of time specified in this paragraph) is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding notify the Company and the Trustee, of the default and the Company does not cure the default within 30 days after receipt of such notice. the notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default". SECTION 6.02 Acceleration. If an Event of Default occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding by notice to the Company 16 and the Trustee, may declare to be due and payable immediately the principal amount of the Securities plus accrued interest to the date of acceleration. Upon any such declaration, such amount shall be due and payable immediately, and upon payment of such amount all of the Company's obligations under the Securities and this Indenture, other than obligations under Section 7.07, shall terminate. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if (x) all existing Events of Default, other than the non-payment of the principal of the Securities, which have become due solely by such declaration of acceleration, have been cured or waived, (y) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, and (z) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Notwithstanding anything contained in this Indenture or in the Securities to the contrary, in the case of any Event of Default specified in Section 6.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company, then upon the acceleration resulting therefrom, the unpaid principal amount of the Securities, to the extent lawful, shall be deemed to be equal to the product of (i) the unpaid principal amount thereof and (ii) the then applicable percentage specified in Paragraph 5 of the Securities. SECTION 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal (and premium, if any) or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Defaults and Events of Default. Subject to Section 9.02, the Holders of a majority in principal amount of the Securities then outstanding, on behalf of the Holders of all of the Securities, by notice to the Trustee may waive a Default or Event of Default and its consequences. When a Default or Event of Default is waived, it is cured and ceases. SECTION 6.05 Control by Majority. The Holders of a majority in principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Securityholders or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. section 6.06 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: 17 (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the Securities then outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expenses; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, request and offer of indemnity; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Holders of a majority in principal amount of the Securities then outstanding. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07 Rights of Holders to Receive Payment. Subject to Article 10, notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to convert the Security or to bring suit for the enforcement of such right shall not be impaired or affected without the consent of the Holder. SECTION 6.08 Collection Suit by Trustee. If an Event of Default in payment of interest or principal (and premium, if any)specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of unpaid principal (and premium, if any) and accrued interest remaining unpaid, together with interest on overdue principal and premium, if any) and to the extent that payment of such interest, in each case at the rate borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursement and advances of the Trustee, its agents and counsel. SECTION 6.09 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same. Any Custodian in any such 18 judicial proceeding is hereby authorized by each Securityholder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceedings. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratable, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively, and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorney's fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08, or a suit by Holders of more than 10% in principal amount of the Securities then outstanding. ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise its rights and powers and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. 19 (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnishe to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error in judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability, expense or fee. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02 Rights of Trustee. Subject to Section 7.01: (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. 20 SECTION 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledge of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, is subject to Sections 7.10 and 7.11. SECTION 7.04 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication or in any document used in the sale of the Securities other than any statement in writing provided by the Trustee for use in such document. SECTION 7.05 Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a default in payment of principal of , premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06 Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA 313(a). The Trustee also shall comply with TIA 313(b) and 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company agrees to notify the Trustee whenever the Securities become listed on any stock exchange. SECTION 7.07 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or make by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it in connection with its duties under this Indenture. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it through its negligence or bad faith. 21 To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except such money or property held in trust to pay principal and interest on particular Securities and such lien shall not be subordinate to any Senior Indebtedness. SECTION 7.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee with the Company's written consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall, upon payment of its charges, transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Security holder. SECTION 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. the Trustee shall comply with TIA 310(b), including the 22 optional provision permitted by the second sentence of TIA 310(b)(9). SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA 311(a), excluding any creditor relationship listed in TIA 311(b). A Trustee who has resigned or been removed shall be subject to TIA 311(a) to the extent indicated therein. SECTION 7.12 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.01 Satisfaction, Discharge and Defeasance of the Securities. The Company shall be deemed to have paid and discharged the entire indebtedness on the Securities from and after the ninety-first day after the date of the deposit referred to in paragraph (a) below, the provisions of this Indenture shall no longer be in effect in respect of the Securities, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of such indebtedness; provided that the following conditions shall have been satisfied: (a) the Company has deposited or caused to be deposited with the Trustee irrevocably as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, with reference to this Section 8.01, (i) money or (ii) US Government Obligations or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on all the Securities for principal, premium, if any, and interest, if any, to April 1, 2012 as such principal, premium or interest, if any, becomes due and payable in accordance with the terms of this Indenture and the Securities; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company in connection with the Securities, including all fees and expenses of the Trustee; and (c) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the entire indebtedness on the Securities have been complied with. "U.S. Government Obligation" means direct, non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the timely payment of which obligation or guarantee the full faith and credit of the Unites States of America is pledged. SECTION 8.02 Satisfaction and Discharge of Indenture. In addition to its rights under Section 8.01, the Company may terminate all of its obligations under this Indenture when: 23 (a) All of the Securities theretofore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and which has been replaced or paid as provided in Section 2.07 hereof and (B) Securities for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 2.04 and Section 8.06 hereof) have been delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company in connection with the outstanding Securities, including all fees and expenses of Trustee; and (c) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this indenture have been complied with. SECTION 8.03 Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture pursuant to Sections 8.01 and 8.02, the respective obligations of the Company in Paragraph 12 or the Securities and in Sections 2.03, 2.04.2.05, 2.06, 2.07, 4.01,7.07,7.08, 8.06, 8.07 and in Article 11 shall survive until the Securities are no longer outstanding, and thereafter the obligations of the Company in such Paragraph 12 and in Sections 7.07 and 8.06 shall survive. Nothing contained in this Article Eight shall abrogate any of the obligations or duties of the Trustee under the Indenture. SECTION 8.04 Application of Trust Money. (a) Subject to the provisions of Section 8.06, all money and U.S. Government Obligations deposited with the Trustee for the Securities pursuant to Section 8.01 or Section 8.02, and all money received by the Trust in respect of U.S. Government Obligations deposited with the Trustee for the Securities pursuant to Section 8.01 or Section 8.02 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any, and interest, if any, on the Securities: but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to the subordination provisions of Article 10. (b) The Trustee shall deliver or pay to the Company from time to time upon Company request any U.S. Government Obligations, or money held by it as provided in Section 8.01 or Section 8.02 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such U.S. Government Obligations, or money were deposited or received. SECTION 8.05 Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it or paid to the 24 appropriate Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 8.06 Return of Unclaimed Monies. Any monies deposited with or paid to the Trustee or any Paying Agent for the Securities, or then held by the Company, in trust for the payment of the principal, premium, if any, and interest, if any, on the Securities and not applied but remaining unclaimed by the Holders of the Securities for two years after the date upon which the principal of and interest , if any, on the Securities, as the case may be, shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Company by such Trustee or any Paying Agent or demand or (if then held by the Company) shall be discharged from such trust; and the Holders of the Securities entitled to receive such payment shall thereafter look only to the Company for the payment thereof; provided, however, that, before being required to make any such repayment, such Trustees may (at the expense of the Company) cause to be published once in an authorized newspaper in the expense of the Company) cause to be published once in an authorized newspaper in the same city in which the place of payment with respect to the Securities shall be located and in an authorized newspaper in the City of New York, or mail to each such Holder, a notice (in such form as may be deemed appropriate by such Trustee) that said monies remain unclaimed and that, after a date named therein, any unclaimed balance of said monies then remaining will be returned to the Company. SECTION 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.01 Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture (any Indenture supplemental hereto to be in a form satisfactory to the Trustee) or the Securities without notice to or consent of any Securityholder: (1) to comply with Section 5.01; (2) to provide for uncertificated Securities in addition to or in place of certificated Securities, or (3) to cure any ambiguity, defect or inconsistency, or to make any other change that does not adversely affect the rights of any Securityholder. 25 SECTION 9.02 With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding. The Holders of a majority in principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. Subject to Section 9.04, without the consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (1) reduce the amount of Securities whose Holders must consent to an amendment or waiver; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the fixed maturity of any Security; (4) waive (except, unless theretofore cured) a default in the payment of the principal of (and premium, if any on), interest on or redemption amounts with respect to any Security; (5) make Security payable in money other than that stated in the Security; (6) make any change in Sections 6.04, 6.07 or 9.02 (third sentence); (7) make any change that adversely affects the right to convert any Security; or (8) make any change in Article 10 that adversely affects the rights of any Securityholder. After an amendment under this Section becomes effective the Company shall mail to Securityholders a notice briefly describing such amendment. SECTION 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04 Revocation and Effect of Consents. Subject to this Indenture, each amendment, waiver or instrument evidencing other action shall become effective in accordance with its terms. Until an amendment, waiver or other action becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Any such Holder or subsequent Holder, however, may revoke the consent as to his Security or portion of a Security, if the Trustee receives the notice of revocation before the date the amendment, waiver or other action becomes effective. After an amendment, waiver or other action becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (8) or Section 9.02. In that case the amendment, waiver or other action shall bind each Holder of a Security or portion of a Security that 26 evidences the same debt as the consenting Holder's Security. SECTION 9.05 Notation on or Exchange of Securities. If an amendment or waiver changes the terms of a Security, the Trustee may request the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determine, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06 Trustee to Sign Amendments, etc. The Trustee need not sign any amendment that adversely affects its rights. In signing or refusing to sign any amendment the Trustee shall be entitled to receive and, subject to Section 7.01, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. The Company may not sign an amendment until its Board of Directors approves it. ARTICLE 10 SUBORDINATION; SENIORITY SECTION 10.01 Securities Subordinated to Senior Indebtedness. The Company agrees, and each Holder of the Securities by his acceptance thereof likewise agrees, that the payment of the principal of, premium, if any, and interest on the Securities is subordinated and junior in right of payment, to the extent and in the manner provided in this Article 10, except as provided in Section 8.04, to the prior payment in full of all Senior Indebtedness whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed. The Senior Indebtedness of the Company shall continue to be Senior Indebtedness and entitled to the benefits of these subordination provisions irrespective of any amendment, modification or waiver of any term of any instrument relating to the Senior Indebtedness or the extension or renewal of the Senior Indebtedness. All the provisions of this Indenture and the Securities shall be subject to the provisions of this Article 10 so far as they may be applicable thereto, except that nothing in this Article 10 shall apply to claims for, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.02 Company Not to Make Payments with Respect to Securities in Certain Circumstances. (a) In the event the Company shall default in the payment of any principal of, premium, if any, or interest on any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest on the Securities, or on account of the mandatory redemption provisions in the Securities (except mandatory redemption payments made in respect of Securities acquired by the Company before the coming due of such Senior Indebtedness), or in respect of any retirement, purchase or other acquisition of any of the Securities. 27 (b) Upon the happening of an event of default with respect to any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof (other than under circumstances when the terms of the preceding paragraph are applicable), upon written notice thereof given to the Company and the Trustee by any holder or holders of such Senior Indebtedness or their representative or representatives ("Payment Notice"), then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium if any or interest on the Securities or on account of the mandatory redemption provisions of the Securities (except mandatory redemption payments made in Securities acquired by the Company before such payment notice), or in respect of any retirement, purchase or other acquisition of any of the Securities; provided, however, that this paragraph (b) shall prevent any such payment (which is not otherwise prohibited by the immediately preceding paragraph) only for a period which is the longer of (i) 90 days after Payment Notice shall have been given or (ii) any period during which the Senior Indebtedness in respect of which such event of default exists has become due and payable in its entirety and (A) such acceleration has not been rescinded or annulled or (B) such acceleration is being contested in good faith by the Company in an appropriate judicial proceeding. Notwithstanding the foregoing, no event of default which existed or was continuing on the date of any Payment Notice shall be made the basis for the giving of a second Payment Notice unless all events of default existing or continuing on the date of such first Payment Notice shall have been cured or waived after such date. (c) If any payment or distribution of any character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or any holder of the Securities, in contravention of any of the terms hereof and before all the Senior indebtedness shall have been paid in full, such payment or distribution shall be paid over or delivered and transferred to the holders of the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness; provided, however, that such payment or distribution need not be so paid over or delivered and transferred at any time when the provisions of subsections (a) and (b) or this Section 10.02 would no longer prevent payments by the Company to the Holders of the Securities. SECTION 10.03 Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company. (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including any collateral at any time securing the Securities), to creditors upon any dissolution or winding up or total or partial liquidation or reorganization or readjustment of the Company, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or other cases or proceedings, all principal of and interest due or to become due upon all Senior Indebtedness shall first be paid in full before the Holders of the Securities shall be entitled to receive any assets (including any collateral at any time securing the Securities, but not including shares of stock of the 28 Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment) so paid or distributed in respect of the Securities (for principal, premium, if any, or interest); and upon any such dissolution or winding up or liquidating or reorganization or readjustment, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan or reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), to which the Holders of the Securities would be entitled except for the provisions of this Section 10.03, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be paid or distributed by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution directly to the holders of Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution in respect of the Securities (for principal, premium, if any, or interest) is made to the Holders of the Securities. (b) Upon any payment or distribution in connection with any cases or proceedings referred to in subsection (a) of this Section 10.03, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such cases or proceedings are pending, and the Trustee and the Holders of the Securities shall be entitled to rely upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders of the Securities for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 10.03. (c) If any payment or distribution of any character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or any Holder of the Securities in contravention of any of the terms of this Article 10 and before all the Senior Indebtedness shall have been paid in full, such payment or distribution shall be paid over or delivered and transferred to the holders of the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving 29 effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness; provided, however, that such payment or distribution need not be so paid over or delivered and transferred at any time when the provisions of subsection (a) of this Section 10.03 would no longer prevent payments by the Company to the Holders of the Securities. (d) The Company shall give prompt written notice to the Trustee of any insolvency or bankruptcy case or proceeding in respect of the Company and of any cases or proceedings for voluntary liquidation, dissolution or other winding up of the Company (whether or not involving insolvency or bankruptcy), within the meaning of this Section 10.03 or any other proceeding or event contemplated by this Section 10.03, of the declaration of any Senior Indebtedness as due and payable before its expressed maturity, and of any event which pursuant to this Article 10 would prevent payment by the Company of the principal of, premium, if any, or interest on the Securities. SECTION 10.04 Securityholders to be Subrogated to Rights of Holders of Senior Indebtedness. Senior Indebtedness shall not be deemed to have been paid in full unless the holders thereof shall have received cash, or other property satisfactory to the holders of Senior Indebtedness, equal to the amount of such Senior Indebtedness then outstanding. Upon the payment in full of all Senior Indebtedness and not before, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which, by its express terms, ranks on a parity with the Securities and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions on the Senior Indebtedness, pursuant to Sections 10.02 an 10.03 hereof shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness, and no payments or distribution to the Trustee or the Holders of the Securities of assets by virtue of the subrogation herein provided for shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment to or on account of the Securities. The provisions of this Article 10 are solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Indebtedness on the other hand. SECTION 10.05 Obligation of the Company Unconditional. Nothing contained in this Article 10 or elsewhere in this Indenture or in the Securities is intended to or shall impair the obligation of the Company, which is unconditional and absolute, to pay the principal of, premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Securities from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 10, of the holders of Senior Indebtedness in respect of cash, property or securities of the Company otherwise payable or delivered to the Trustee or such Holder upon the exercise of any such remedy. 30 SECTION 10.06 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Trustee shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee, and the Trustee shall not be required to withhold payment to the Holders of Securities as provided in Section 10.02(c) or 10.03(c), unless the Trustee shall have received written notice thereof, two Business Days prior to the day such payment is due, at its Corporate Trust Office from the Company or from the one or more holders of Senior Indebtedness or from any representative thereof or trustee therefor identifying the specific sections of this Indenture involved and describing in detail the facts that would obligate the Trustee to withhold payments to Holders of Securities, as well as any other facts required by the next succeeding paragraph of this Section 10.06; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01 and 7.02, shall be entitled to assume conclusively that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 10, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment; provided, however, that if this Indenture has been discharged in accordance with Article Eight, any monies deposited with the Trustee shall be applied in accordance with the provisions of Article Eight and not otherwise. SECTION 10.07 Application by Trustee of Monies Deposited with It. Nothing contained in this Article 10 or elsewhere in this Indenture, or in any of the Securities, shall (i) affect the obligations of the Company to make, or prevent the Company from making, at any time except during the pendency of a proceeding referred to in subsection (a) of Section 10.03 and except during the continuance of any default specified in subsection (a) or (b) of Section 10.02 to the extent provided therein, payments at any time of principal of, premium, if any, or interest on the Securities, (ii) prevent the Paying Agent, in trust for the benefit of the Holders of Securities as to which notice of redemption shall have been mailed or published, to the payment of or on account of principal of, premium, if any, or interest on the Securities if, at the time of such mailing or publishing, such payment would not have been prohibited by the provisions of this Article 10, or (iii) prevent the application by the Trustee or any Paying Agency of any monies deposited with it hereunder to (or, if the Company is acting as its own Paying Agent, segregated and held in trust as provided in Section 2.04 for) the payment of or on account of the principal of, premium, if any, or interest on Securities if, at the time of such deposit (or at the time such monies were so segregated and held in trust), such payment would not have been prohibited by the provisions of this Article 10. SECTION 10.08 Continuing Offer of Subordination. The provisions of this Article 10 are made for the benefit of all Persons who become holders of or continue to hold Senior Indebtedness, and such holders are hereby made obligees under this Article 10 to 31 the same extent as if their names were written herein as such, and they and/or each of them may proceed to enforce such provisions. In furtherance of the foregoing, each holder of Senior Indebtedness is hereby irrevocably authorized and empowered but shall not be obligated to demand, sue for, collect, receive and execute a receipt for such holder's ratable share of all payments and distributions in respect of the Securities which are required to be paid or delivered to holders of Senior Indebtedness as provided in this Article 10, and to file and prove all such claims and take all such other action (including the right to vote such holder's ratable share of the Securities) in the name of the Holders of Securities or otherwise, as such holder of Senior Indebtedness may reasonably determine to be necessary for the enforcement of the rights provided in this Article 10, and at the Company's expense (which expense must be paid by the Company in advance to each Securityholder from whom the Company requests such instruments and such other action) the Company may require the delivery to a holder of Senior Indebtedness by each Holder of Securities of such instruments reasonable necessary to confirm such authorization, such as powers of attorney, proofs of claim, assignments of claim and other instruments in form and substance reasonably satisfactory to the Securityholders, and the taking of all such other reasonable action, as the Company may reasonably request in order to enable such holder of Senior Indebtedness to enforce such holder's ratable share of all Securities and all such payments and distributions in respect thereof. The Trustee shall have no obligations whatsoever with respect to compliance with any of the provisions of this Section 10.08 by any Holder. SECTION 10.09 Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness. The Holders of Senior Indebtedness may at any time or from time to time, and in their absolute discretion, change the manner, place or terms of payment of, change or extend the time of payment of, or renew or alter, any Senior Indebtedness, or amend or supplement any instrument pursuant to which any Senior Indebtedness is issued, or exercise or refrain from exercising any other of their rights under the Senior Indebtedness including, without limitation, the waiver of defaults thereunder, all without notice to or assent from the Holders of the Securities of the Trustee. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act by any such holder or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. SECTION 10.10 Securityholders Authorize Trustee to Effectuate Subordination of Securities. Each holder of the Securities by his acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 10 and irrevocably appoints the Trustee his attorney-in-fact for such purpose, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or otherwise) tending towards liquidation of the business and assets of the Company, the timely filing of a claim for the unpaid balance of its or his Securities in the form required in said proceedings and causing said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of Senior Indebtedness have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. 32 SECTION 10.11 Right of Trustee to Hold Senior Indebtedness; Trustee Owes No Fiduciary Duty to Holder of Senior Indebtedness. The Trustee, in its individual capacity, shall be entitled to all of the rights set forth in this Article 10 in respect of any Senior Indebtedness at any time held by it to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not be liable to any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to Holders of Securities, the Company or any other person monies or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.12 Article 10 Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of an Event of Default under Section 6.01. SECTION 10.13 Officers' Certificate. If there occurs an event referred to in section 10.02(a) or (b) or the first sentence of Section 10.03(a), the Company shall promptly give to the Trustee an Officers' Certificate (on which the Trustee may conclusively rely) identifying all holders of Senior Indebtedness and the principal amount of Senior Indebtedness then outstanding held by each such holder and stating the reasons why such Officers' Certificate is being delivered to the Trustee. SECTION 10.14 Paying Agents other than the Trustee. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 10 shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article 10 in addition to or in place of the Trustee, provided, however, that Sections 10.06 and 10.11 hereof shall not apply to the Company if it acts as Paying Agent. SECTION 10.15 Securities Senior Subordinated Indebtedness. The indebtedness represented by the Securities will be senior and prior in right of payment to the principal, premium, if any, and interest on all Subordinated Indebtedness, to the extent and in the manner provided in such Subordinated Indebtedness. ARTICLE 11 CONVERSION OF SECURITIES SECTION 11.02 Right of Conversion; Conversion Price. The Holder of any Security or Securities shall have the right, at his option, at any time before the close of business on April 1, 2012, (except that, with respect to any Security or portion of a Security which 33 shall be called for redemption, such right shall terminate, at the close of business on the Business Day prior to the date fixed for redemption of such Security or portion of a Security unless the Company shall default in payment due upon redemption thereof), to convert, subject to the terms and provisions of this Article 11, the principal of any such Security or Securities or any portion thereof which is $1,000 or an integral multiple thereof into shares of Common Stock of the Company, initially at the conversion price per share of $10.75; or, in case an adjustment of such price has taken place pursuant to the provisions of Section 11.04, then at the price at last adjusted (such price or adjusted price being referred to herein as the "conversion price"), upon surrender of the Security or Securities, the principal of which is so to be converted, accompanied by written notice of conversion duly executed, to the Company, at any time during usual business hours at the office or agency maintained by it for such purpose, and, if so required by the Conversion Agent or Registrar, accompanied by a written instrument or instruments of transfer in form satisfactory to the Conversion Agent or Registrar duly executed by the Holder or his attorney duly authorized in writing. For convenience, the conversion of any portion of the principal of any Security or Securities into the Common Stock of the Company is hereinafter sometimes referred to as the conversion of such Security or Securities. SECTION 11.02 Issuance of Common Stock on Conversion. As promptly as practical after the surrender, as herein provided, of any Security or Securities for conversion, the Company shall deliver or cause to be delivered at its said office or agency, to or upon the written order of the holder of the Security or Securities so surrendered, certificates representing the number of fully paid and non-assessable shares of Common Stock of the Company into which such Security or Securities may be converted in accordance with the provisions of this Article 11. Such conversion shall be deemed to have been made at the close of business on the date that such Security or Securities shall have been surrendered for conversion with a written notice of conversion duly executed, so that the rights of the holder of such Security or Securities as a Securityholder shall cease at such time and, subject to the following provisions of this paragraph, the person or persons entitled to receive the shares of Common Stock upon conversion of such Security or Securities shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time and such conversion shall be at the conversion price in effect at such time; provided, however, that no such surrender on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the conversion price in effect on the date that such Security or Securities shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of any Security which is converted in part only, the Company shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in principal amount equal to the unconverted portion of such Security. section 11.03 No Adjustment for Interest or Dividends. No payment or adjustment in respect of interest on the Securities or dividends on the Common Stock shall be made upon the conversion of any Security or Securities; 34 provided, however, that if a Security or any portion thereof shall be converted subsequent to any regular record date and on or prior to the next succeeding interest payment date, the interest falling due on such interest payment date shall be payable on such interest payment date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the person in whose name such Security is registered at the close of business on such regular record date (unless such Security shall have been called for redemption and the redemption date is prior to such interest payment date). SECTION 11.04 Adjustment of Conversion Price. The conversion price shall be subject to adjustment from time to time as follows: (a) In case the Company shall (i) declare a dividend or make a distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of its Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding shares of its Common Stock into smaller number of shares, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of any Security surrendered for conversion after such time shall be entitled to receive the number of shares of Common Stock of the Company which he would have owned or been entitled to receive had such Security been converted immediately prior to such time. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. Any shares of Common Stock of the Company issuable in payment of a dividend shall be deemed to have been issued immediately prior to the time of the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock of the Company under subsections (b) and (c) below. In the event that any of the events for which a record date is set do not occur, the conversion price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to effect such event, to the conversion price which would be then in effect if such record date had not been fixed. Such adjustment shall be made successively whenever any event specified above shall occur. (b) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of its Common Stock (or securities convertible into shares of its Common Stock) at a price per share (or having an initial conversion price per share) less than the Current Market Price (as defined in subsection (g) below) of a share of Common Stock of the Company on such record date, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding on such record date plus the number of shares of Common Stock of the Company which the aggregate offering price of the number of shares of such Common Stock so offered (or the aggregate initial conversion price of the convertible securities so offered) would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding on such record date plus the number of additional shares of Common Stock of the Company offered for subscription or purchase (or into which the convertible securities so offered are initially convertible). Shares of Common Stock of the Company owned by or held for the account of the 35 Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed and shall become effective immediately after such record date. In the event that such rights or warrants are not so issued, the conversion price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to issue such rights or warrants, to the conversion price which would then be in effect if such record date had not been fixed. (c) In case the Company fixes a record date for the making of a distribution to all holders of shares of its Common Stock (i) of shares of any class other than its Common Stock (ii) of evidences of indebtedness of the Company or any Subsidiary or (iii) of assets (excluding cash dividends or distributions, and dividends or distributions referred to in subsection (a) above) or (iv) of rights or warrants (excluding those referred to in subsection (b) above), in each such case the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding on such record date multiplied by the Current Market Price per share on such record date, less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a resolution of the Board of Directors certified by the Secretary or an Assistant Secretary of the Company and filed with the Trustee) of said shares or evidences or indebtedness or assets or rights or warrants so distributed, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding on such record date multiplied by such Current Market Price per share. Such adjustment shall be made successively whenever such a record date is fixed and shall become effective immediately after such record date. In the event that such distribution is not so made, the conversion price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to distribute such shares, evidences of Indebtedness, assets, rights or warrants, as the case may be, to the conversion price which would then be in effect if such record date had not been fixed. (d) In case the Company shall issue shares of Common Stock, (excluding shares issued (i) in any of the transactions described in subsection (a) above, (ii) upon conversion or exchange of securities convertible into or exchangeable for Common Stock of the Company, (iii) to the employees under the Company's 1984 Incentive Compensation Plan, as may be amended from time to time, if such shares would otherwise be included in this Section 11.04, (iv) to the Company's employees under bona fide employee benefit plans adopted by the Company's Board of Directors and approved by its stockholders, if such shares would otherwise be included in this Section 11.04(d)(but only to the extent that the aggregate number of shares excluded by this subdivision (iv), and issued after the date of this Indenture shall not exceed 50% of the Company's Common Stock outstanding at the time of any such issuance), or (v) upon exercise of rights or warrants issued to the holders of Common Stock of the Company, or issued to acquire, or in connection with the acquisition of, all or any portion of a business as a going concern, whether such acquisition shall be effected by purchase of assets, exchange of securities, merger, consolidation or otherwise, or (vi) upon exercise of rights or warrants issued in a bona fide public offering pursuant to a firm commitment underwriting, but only if no adjustment is required pursuant to this Section 11.04 (without regard to subsection (i) of this Section 11.04) with respect to the transaction giving rise to such rights) for a consideration per share less than the Current Market Price per share on the date of the Company fixes the offering price of such additional shares, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a 36 fraction, of which the numerator shall be the total number of shares of Common Stock of the Company outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock of the Company which the aggregate consideration received (determined as provided in subsection (f) below) for the issuance of such additional shares would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made and shall become effective immediately after such issuance. (e) In case the Company shall issue any securities convertible into or exchangeable for its Common Stock (excluding securities issued in transactions described in subsections (b) and (c) above, or the Securities) for a consideration per share of Common Stock of the Company initially deliverable upon conversion or exchange of such securities (determined as provided in subsection (f) below) less than the Current Market Price per share in effect immediately prior to the issuance of such securities, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding immediately prior to the issuance of such securities plus the number of shares of Common Stock which the aggregate consideration received (determined as provided in subsection (f) below) for such securities would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such issuance plus the maximum number of shares of Common Stock of the Company deliverable upon conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made and shall become effective immediately after such issuance. Upon the termination of the right to convert or exchange such securities, the conversion price shall forthwith be readjusted to such conversion price as would have obtained had the adjustments made upon the issuance of such convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered upon conversion or exchange of such securities and upon the basis of the consideration actually received by the Company (determined as provided in subsection (f) below) for such securities. (f) For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) above, the following shall apply: (i) in the case of the issuance of shares of Common Stock of the Company for cash, the consideration shall be the amount of such cash, provided that in no case shall any deductions be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (ii) in the case of the issuance of shares of Common Stock of the Company for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Certified Resolution which shall be filed with the Trustee and each Conversion Agent; and 37 (iii) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock of the Company, the aggregate consideration received therefor shall be deemed to be the consideration received by the company for the issuance for such securities plus the additional minimum consideration, if any to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in subparagraphs (i) and (ii) of this subsection (f). (g) For the purpose of any computation under subsections (b), (c), (d) and (e) above the "Current Market Price" per share at any date shall be deemed to be the average of the daily closing prices for 30 consecutive trading days commencing 45 trading days before such date. The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange registered under the Securities Exchange Act of 1934 on which the Common Stock of the Company is admitted to trading or listed, or if not listed or admitted to trading on any national securities exchange, the avenge of the highest reported bid and lowest reported asked prices as furnished by the National Quotation Bureau Incorporated or such other nationally recognized quotation service selected by the Company for the purpose, if said Bureau is not at the time furnishing quotations. (h) In any case in which this Article 11 shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Security converted after such record date and before the occurrence of such event the additional shares of Common Stock of the Company issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock of the Company issuable upon such conversion before giving effect to such adjustment and (ii) paying to such Holder any amount in cash in lieu of a fractional share of Common Stock of the Company pursuant to Section 11.05; provided, however, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional shares of Common Stock of the Company, and such cash, upon the occurrence of the event requiring such adjustment. (i) No adjustment in the conversion price need be made unless such adjustment would require an increase or decrease of at least 25 cents in such price; provided, however, that any such adjustment which is not required to be made shall be carried forward and taken into account in any subsequent adjustment. (j) Whenever the conversion price is adjusted as provided in this Section 11.04, the Company shall promptly file with the Trustee and each Conversion Agent (i) an Officers' Certificate in the case of an adjustment pursuant to subsection (a) of this Section 11.04, or (ii) both an Officers' Certificate and a certificate of a firm of independent public accountants, which shall conform to the provisions of Section 12.05, in the case of any other adjustment, in each case setting forth the conversion price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which Officers' Certificate or certificate of a firm of independent public accountants, as the case may be, shall be conclusive evidence of the correctness of any such adjustment, and promptly after such filing the Company shall mail or cause to be mailed a notice of such adjustment to each Securityholder at his last address as the same appears on the Security register. Neither the Trustee nor any Conversion 38 Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any holder of Securities desiring inspection thereof. (k) All calculations under this Article 11 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. SECTION 11.05 No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any Security of Securities. If the conversion of any Security or Securities results in a fraction, an amount equal to such fraction multiplied by the last reported sale price on the principal national securities exchange on which the Common Stock of the Company is admitted to trading or listed (or if not listed or admitted to trading on any national securities exchange, the last quoted bid price as furnished by the National Quotation Bureau Incorporated or such other nationally recognized quotation service selected by the Company for the purpose, if said Bureau is not at the time furnishing quotations) of the Common Stock of the Company on the day prior to the day of conversion (or if such day is not a trading day on such exchange, on the next preceding day on which such exchange was open for business) shall be paid to such holder in cash by the Company. If more than one certificate evidencing Securities shall be surrendered for conversion at any one time by the same Holder, then the number of shares of Common Stock of the Company shall be computed on the basis of the aggregate principal amount of the Securities so surrendered. SECTION 11.06 Effect of Reclassification, Consolidation, Merger, Sale, Lease or Conveyance. (a) In case of any consolidation with or merger of the Company into another corporation (other than a merger of consolidation in which the Company is the continuing corporation), or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, such successor, leasing or purchasing corporation, as the case may be, shall execute with the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right thereafter to convert such Security solely into the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such consolidation, merger, sale, lease or conveyance by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale, lease or conveyance. (b) In case of any reclassification or change of the shares of Common Stock of the Company issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in the shares of Common Stock of the Company into two or more classes or series of shares) or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock of the Company(other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination,, but including any change in the shares of Common Stock of the Company into two or more classes or series of shares), the Company shall execute with the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right thereafter to convert such Security solely into the kind and amount of shares of stock, and other securities, property, cash or any combination thereof receivable upon such 39 reclassification, change, consolidation or merger by a holder of the number of shares of Common Stock of the Company, into which such Security might have been converted immediately prior to such reclassification, change, consolidation or merger. (c) Any supplemental indenture entered into pursuant to this Section 11.06 shall (i) where appropriate, state the conversion price in terms of one full share of Common Stock of the Company or one full share of the common stock of any successor, leasing or purchasing corporation and (ii) provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 11. The Company shall cause notice of the execution of each such supplemental indenture to be mailed to each Securityholder at his address as the same appears in the Security register. (d) Neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of shares of stock or securities or property or cash receivable by Securityholders upon the conversion of their Securities after any such reclassification, change, consolidation, merger, sale or conveyance or t o any adjustment to be made with respect thereto, but, subject to the provisions of Section 7.01, may accept as conclusive evidence of the correctness of any such provisions and shall be protected in relying upon an Officers' Certificate or a certificate of a firm of independent public accountants which shall conform to the provision of Section 12.05 with respect thereto. (e) The above provisions of this Section 11.06 shall similarly apply to successive reclassifications and changes of shares of Common Stock of the Company and to successive consolidations, mergers, sales or conveyances. If this Section 11.06 applies, Section 11.04 does not apply. SECTION 11.07 Covenant to Reserve Shares. The Company covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized Common Stock, solely for the purpose of issuance upon conversion of Securities as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding Securities. The Company covenants that all shares of Common Stock which shall be so issuable shall be, when issued, duly and validly issued an fully paid and non-assessable. For purposes of this Section 11.07, the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding Securities shall be computed as if at the time of computation all outstanding Securities were held by a single holder. SECTION 11.08 Compliance with Legal and Governmental Requirements. Before taking any action which would cause an adjustment reducing the conversion price below the then stated or par value of the shares of Common Stock issuable upon conversion of the Securities, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted conversion price. Notwithstanding anything to the contrary that may be contained in this Indenture, in no event shall the conversion price be less than the then stated or par value of the shares of Common Stock issuable upon conversion of the Securities. The Company covenants that if any shares of Common Stock, required to be reserved for purposes of conversion of Securities hereunder, require registration with or approval of any governmental authority under any Federal or State law, or listing upon any national securities exchange, before such shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered, approved or listed, as the case may be. 40 SECTION 11.09 Payment of Taxes. The issuance of certificates for shares of Common Stock upon the conversion of Securities shall be made without charge to the converting Securityholders for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the Holders of the Securities converted; provided, however, that neither the Company nor any Conversion Agent shall be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder of the Security converted, and neither the Company nor any Conversion Agent shall be required to issue or deliver such certificates unless or until the person or person requesting the issuance thereof shall have paid to the Company or the Conversion Agent the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 11.10 Notice of Certain Events. In case at any time the Company shall propose: (a) to take any action that would require an adjustment in the conversion price pursuant to Section 11.04; or (b) to effect any reclassification or change of outstanding shares of its Common Stock, or consolidation or merger, or sale, lease or conveyance of property, requiring the execution of a supplemental indenture pursuant to Section 11.06; or (c) to effect any liquidation, dissolution or winding-up of the Company then, and in any one or more of such cases, the Company shall cause notice thereof to be filed with the Trustee and each Conversion Agent and to be mailed to each Holder of a Security at such Holder's last address as the same appears on the Security register at least 15 days prior to the date on which (i) the books of the Company shall close, or a record date be taken, for such dividend, distribution or issuance of rights or warrants or (ii) such reclassification, change, consolidation, merger, sale, lease, conveyance, liquidation, dissolution or winding-up shall be effective, as the case may be. SECTION 11.111 Responsibility of Trustee and Conversion Agent. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Securityholder to determine whether any facts exist which may require any adjustment of the conversion price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee, nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities of property or cash which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock of stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion, or, subject to Section 7.01, to comply with any of the covenants of the Company contained in this Article Eleven. 41 ARTICLE 12 MISCELLANEOUS SECTION 12.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provisions shall control. SECTION 12.02 Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand deliver, or first class mail, postage prepaid, (except that any notice by the Trustee to the Company of a default or an Event of Default under this Indenture shall be by registered or certified mail, postage prepaid, return receipt requested), addressed as follows: if to the Company: Chock Full O'Nuts Corporation 370 Lexington Avenue New York, New York 10017 Attention: Chairman of the Board if to the Trustee: IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 Attention: Corporate Trust Department The Company or the Trustee by notice to the other may designate additional or different addresses as shall be furnished in writing by either party. Any notice or communication to the company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered, and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee.) Any notice or communication mailed to a Securityholder shall be mailed to the address of such Securityholder as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manne r provided above, it is duly given, whether or not the addressee receives it. If case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice, as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. If the Company mails any notice or communication to Securityholders, it shall mail a copy to the Trustee and all Agents at the same time. 42 SECTION 12.03 Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA 312 (b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA 312 (c). SECTION 12.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 12.05) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 12.05) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.05 Statements Required in Certificate and Opinion. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition: (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such covenant or condition has been complied with. SECTION 12.06 When Treasury Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or such obligor shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company of such obligor. 43 SECTION 12.07 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions. SECTION 12.08 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banks or trust companies in the city in which the Trustee is located are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.09 Governing Law. The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflicts of law. SECTION 12.10 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.11 No Recourse Against Others. All liability described in Paragraph 19 of the Securities of any director, officer, employee or stockholder, as such, of the Company is waived and released. SECTION 12.12 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.13 Multiple Counterparts. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of the together represent the same agreement. SECTION 12.14 Table of Contents, Headings, etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 12.15 Severability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or 44 unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. CHOCK FULL O' NUTS CORPORATION Attest: ___________________ By: _________________________ IBJ SCHRODER BANK & TRUST COMPANY Attest: ____________________ By: _________________________ 45 3/25/87 #22B EXHIBIT A [Face of Debenture] No. $ CHOCK FULL O' NUTS CORPORATION 7% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE APRIL 1, 2012 CHOCK FULL O' NUTS CORPORATION, a New York corporation, promises to pay to or registered assigns the principal sum of Dollars, on April 1, 2012. Interest Payment Dates: April 1 and October 1 Record Dates: March 15 and September 15 Additional provisions of this Security are set forth on other side of this Security. Dated: CHOCK FULL O' NUTS CORPORATION By _____________________________ By _____________________________ Certificate of Authentication : IBJ SCHRODER BANK & TRUST COMPANY as Trustee, certifies that this is one of the Securities referred to in the within mentioned Indenture. By _________________________________ Authorized Officer [Back of Debenture] CHOCK FULL O' NUTS CORPORATION 7% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE APRIL 1, 2012 1. INTEREST. CHOCK FULL O' NUTS CORPORATION, a New York corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on April 1 and October 1 of each year beginning October 1, 1987. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 2, 1987; provided that, if there is no existing Default in the payment of interest, and if this Security is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders of the Securities at the close of business on the March 15 or September 15 next preceding the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal and interest by its check payable in such money. It may mail an interest check to a Holder's registered address. 3. REGISTRAR AND AGENTS. Initially, IBJ Schroder Bank & Trust Company (the "Trustee") will act as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands. The Company may change any Registrar, co-registrar, Paying Agent, Conversion Agent and agent for service of notices and demands without notice. The Company or any of its Subsidiaries may act as Registrar, co-registrar, Paying Agent or Conversion Agent. 4. INDENTURE; LIMITATIONS. The Company issued the Securities under an Indenture dated as of April 1, 1987 (the "Indenture"), between the Company and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are subject to all such terms, and the Holders of the Securities are referred to the Indenture and said Act for a statement of them. A-2 The Securities are general unsecured obligations of the Company limited to $69,000,000 principal amount. The Indenture does not limit in any manner the incurrence by the Company of other debt, secured or unsecured, except that the Company may not incur, directly or indirectly, any Indebtedness which by its terms is both (i) subordinated in right of payment to any Senior Indebtedness and (ii) senior in right of payment to the Securities. The Indenture imposes certain limitations on the ability of the Company to, among other things, make payments in respect of its Capital Stock, merge or consolidate with any other Person and sell, lease, transfer or otherwise dispose of its properties or assets. 5. OPTIONAL REDEMPTION. The Company may, at its option, redeem the Securities, in whole or from time to time in part (except that the Securities may not be so redeemed prior to April 1, 1990 unless the closing price per share of Common Stock of the Company on each of any 20 trading days within a period of 30 consecutive trading days ending not more than 5 days prior to the date upon which notice of redemption is first mailed is at least 150% of the conversion price in effect on such day) at the following redemption prices, expressed as percentages of the principal amount, if redeemed during the 12 months beginning April 1 of the years indicated below, plus accrued interest to the Redemption Date. Year Percentage Year Percentage 1987 107.0% 1992 103.5% 1988 106.3 1993 102.8 1989 105.6 1994 102.1 1990 104.9 1995 101.4 1991 104.2 1996 100.7 1997 and thereafter.... 100.0 6. MANDATORY REDEMPTION. The Company will redeem, on April 1, 1998 and on each April 1 thereafter through and including April 1, 2011, 5% of the principal amount of Securities originally issued, at a redemption price of 100% of the principal amount, plus accrued interest to the Redemption Date. The Company may reduce the principal amount of Securities to be redeemed pursuant to this paragraph 6 by subtracting 100% of the principal amount of any Securities that the Company has delivered to the Trustee for cancellation or redeemed otherwise than pursuant to this paragraph 6. The Company may so subtract the same Security only once. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 15 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1000 may be redeemed in part, but only in whole multiples of $1000. On and after the Redemption Date interest ceases to accrue on Securities or portions of them called for redemption. 8. CONVERSION. A Holder of a Security may convert such Security into Common Stock of the Company at any time before the close of business on April 1, 2012. If the Security is called for redemption, the Holder may convert it at any time before the close of business on the Business Day prior to the date fixed for such redemption. The initial conversion price is $10.75 per share, subject to adjustment in certain A-3 events. To determine the number of shares issuable upon conversion of a Security, divide the principal amount to be converted by the conversion price in effect on the conversion date. The Company will deliver a check for any fractional share. To convert a Security, a Holder must (1) complete and sign the conversion notice on the back of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent and (4) pay any transfer or similar tax if required. No adjustment is to be made on conversion for interest accrued hereon or for dividends on shares of Common Stock issued on conversion, provided, however, that if a Security is surrendered for conversion after the record date for a payment of interest and on or before the interest payment date, then, notwithstanding such conversion, the interest falling due on such interest payment date will be paid to the Person in whose name of Security is registered at the close of business on such record date. A Holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. If the Company is a party to a consolidation or merger or a transfer or lease of all or substantially all of its assets, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another Person. 9. SUBORDINATION. This Security is subordinated to all Senior Indebtedness of the Company. To the extent and in the manner provided in the Indenture, Senior Indebtedness must be paid before any payment may be made to any Holders of Securities. Any Securityholder by accepting this Security agrees to the subordination and authorizes the Trustee to give it effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of any instrument relating to the Senior Indebtedness or extension or renewal of the Senior Indebtedness. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered form without coupons in denominations of $1000 and integral multiples of $1000. A Holder may register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption or register the transfer of or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed. 11. PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as the owner of it for all purposes. 12. UNCLAIMED MONEY. If money for the payment of principal or interest on any Securities remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders must look to the Company for payment. A-4 13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Indenture will be discharged and canceled except for certain sections thereof upon payment of all the Securities, or upon the irrevocable deposit with the Trustee of funds or U.S. Government Obligations maturing on or before such payment date or Redemption Date, sufficient to pay principal, premium, if any, and interest on such payment or redemption. 14. AMENDMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the Securities then outstanding and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the Securities then outstanding. Without the consent of or notice to any Securityholder, the Company may amend the Indenture or the Securities to, among other things, provide for uncertificated Securities, to cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Securityholder. 15. SUCCESSORS. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 16. DEFAULTS AND REMEDIES. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of Securities may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence or Default. 17. OFFER TO PURCHASE. If the Company's Consolidated Net Worth at the end of each of any two consecutive fiscal quarters is less than $15,283,033, then the Company will be required to make an offer to acquire on the last day of the fiscal quarter next following such second fiscal quarter 7.5% of the aggregate principal amount of Securities originally issued (or such lesser amount as may be outstanding at that time), at a purchase price of 100% or their principal amount plus accrued interest to the date of payment. The failure to meet the minimum required Consolidated Net Worth at the end of any fiscal quarter may only be counted once toward the Company's requirement to make such an offer. 18. TRUSTEE DEALINGS WITH THE COMPANY. IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its affiliates, and may otherwise deal with the Company or its affiliates, as if it were not Trustee. A-5 19. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer or incorporator, as such, past, present or future, of the Company or any successor corporation shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason or, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 20. AUTHENTICATION. This Security shall not be valid until the Trustee signs the certificate of authentication on the other side of this Security. 21. ABBREVIATIONS. Customary abbreviation may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenant by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A/ (= Uniform Gifts to Minors Act.). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. It also will furnish the text of this Security in larger type. Requests may be made to: CHOCK FULL O' NUTS CORPORATION, 370 Lexington Avenue, New York , New York 10017, Attention: Secretary. A-6 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.08 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Company pursuant to Sections 4.08 of the Indenture, state the amount (which must be a minimum of $1,000 or any multiple of $1,000): $________________________. Date: __________________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ____________________________________________ CONVERSION NOTICE To convert this Security into Common Stock of the Company, check the box: / / To convert only part of this Security, state the amount (which must be a minimum or $1,000 or any multiple of $1,000): $ __________________________________________. If you want the stock certificate made out in another person's name, fill in the form below: ____________________________________________________________________ (Insert other person's social security or tax I.D. no.) ____________________________________________________________________ (Print or type other person's name, address and zip code) ____________________________________________________________________ ____________________________________________________________________ Date: __________________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of this Security) A-7 ASSIGNMENT FORM If you the Holder want to assign this Security, fill in the form below and have your signature guaranteed: I or we assign and transfer this Security to _______________________________________________________________________ _______________________________________________________________________ (Insert Assignee's social security or tax ID number) _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ (Print or type assignee's name, address an zip code) and irrevocably appoint _______________________________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________ Date: __________________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ____________________________________________ A-8 EX-10.A 6 Exhibit 10 Material Contracts (a) ________________________________________________________________ CHOCK FULL O'NUTS CORPORATION AND IBJ SCHRODER BANK & TRUST COMPANY RIGHTS AGENT ______________________________________ Rights Agreement Dated as of December 30, 1987 ______________________________________________________________ Table of Contents Section Page 1 Certain Definitions 3 2 Appointment of Rights Agent 7 3 Issue of Rights Certificates 8 4 Form of Rights Certificates 11 5 Countersignature and Registration 12 6 Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates 14 7 Exercise of Rights; Purchase Price; Expiration Date of Rights 15 8 Cancellation and Destruction of Rights Certificates 20 9 Reservation and Availability of Common Stock 20 10 Common Stock Record Date 23 11 Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights 24 12 Certificate of Adjusted Purchase Price or Number of Shares 39 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power 40 14 Additional Covenant 45 15 Fractional Rights and Fractional Shares 46 16 Rights of Action 48 (i) Section Page 17 Agreement of Rights Holders 49 18 Rights Certificate Holder Not Deemed a Shareholder 50 19 Concerning the Rights Agent 50 20 Merger or Consolidation or Change of Name of Rights Agent 51 21 Duties of Rights Agent 53 22 Change of Rights Agent 57 23 Issuance of New Rights Certificate 59 24 Redemption and Termination 60 25 Notice of Certain Events 62 26 Notices 64 27 Supplements and Amendments 65 28 Determination and Actions by the Board of Directors, etc 66 29 Successors 67 30 Benefits of this Agreement 67 31 Serverability 68 32 Governing Law 68 33 Counterparts 68 34 Descriptive Headings 68 Exhibit A -- Form of Rights Certificate A-1 Exhibit B -- Form of Summary of Rights B-1 (ii) RIGHTS AGREEMENT This Agreement, dated as of December 30, 1987, between Chock Full O'Nuts Corporation, a New York Corporation (the "Company"), and IBJ Schroder Bank & Trust Company, a New York banking corporation (the "Rights Agent"). W I T N E S S E T H: WHEREAS, on December 30, 1987, the Board of Directors of the Company authorized and declared a dividend distribution of one Right (as hereinafter defined) for each share of Common Stock, $0.25 par value per share, of the Company (the "Common Stock") outstanding on January 22, 1988 (the Record Date), and contemplate the issuance, prior to the Expiration Date (as hereinafter defined), of one Right (subject to adjustment as provided herein) (i) for each share of Common Stock of the Company issued between the Record Date and the later of the Stock Acquisition Date and the Distribution Date (as such terms are hereinafter defined) and (ii) for each share of Common Stock reserved for issuance upon conversion of the Company's 8% Convertible Subordinated Debentures due 2006 and the Company's 7% Convertible Senior Subordinated Debentures due 2012 (the "Convertible Debentures") and issued upon conversion of the Convertible Debentures at any time after the Record Date (whether before or after the later of the Stock Acquisition -2- Date and the Distribution Date), each Right representing the right to purchase one share of Common Stock of the Company upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows: Section 1. Certain Definitions For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates (as such term is hereinafter defined) and Associates (as such term is hereinafter defined) of such Person, without the prior approval of the Company, shall be the Beneficial Owner (as such term is hereafter defined) of securities representing 20% or more of the Voting Power (as such term is hereinafter defined), or who was such a Beneficial Owner at any time after the date hereof, whether or not such Person continues to be the Beneficial Owner of securities representing 20% or more of the Voting Power, but shall not include (i) the Company, (ii) any subsidiary of the Company (as such term is hereinafter defined), (iii) any employee benefit plan of the Company or any of its subsidiaries, (iv) any entity holding securities of the Company organized, appointed or established by the Company or any of its subsidiaries for or pursuant to the terms of any such plan, or (v) any Person who or which, together with all - - -3- Affiliates and Associates of such Person, was the Beneficial Owner of securities representing 20% or more of the Voting Power on the date hereof until such time as such Person who or which, together with all Affiliates and Associates of such Person, without the prior approval of the Company, acquires Beneficial Ownership of securities representing an additional 2% of the Voting Power at any time subsequent to the date hereof. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement. (c) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right or obligation to acquire (whether such right or obligation is exercisable or effective immediately or only after the passage of time) pursuant to any agreement, arrangement of understanding (whether or not in writing) or upon the exercise of conversion - - -4- rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associated until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this clause (B) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficial owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such - - -5- Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (B) of subparagraph (ii) of this paragraph (c) or disposing of any securities of the company. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business day. (f) "Common Stock" shall mean the Common Stock, $0.25 per value, of the Company, except that "Common Stock" when used with reference to stock issued by any Person other than the Company shall mean the capital stock with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person or, if such Person is a subsidiary of another Person, of the Person which ultimately controls such first-mentioned Person and which has - - -6- issued and outstanding such capital stock, equity securities or equity interests. (g) "Person" shall mean any individual, firm, corporation, partnership or other entity. (h) "Stock Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. (i) A "subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or voting interests is owned, directly or indirectly, by such Person, or which is otherwise controlled by such Person. (k) "Voting Power" shall mean the voting power of all securities of the Company then outstanding generally entitled to vote for the election of directors of the Company. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agents and any Co-Rights Agents shall be as the Company shall determine. - - -7- Section 3. Issue of Rights Certificates. (a) Until the earlier of (i) the Stock Acquisition Date or (ii) the tenth day after the date of the commencement of, or first public announcement of the intent of any Person (other than the Company, any subsidiary of the Company, or any employee benefit plan of the Company or any of its subsidiaries) to commence (which intention to commence remains in effect for five business days after such announcement), a tender or exchange offer which would result in such Person becoming an Acquiring Person, or such later date as may be fixed by the Board of Directors of the Company by notice to the Rights Agent and publicly announced by the Company (including any such date which is on or after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of the Section 3) by the certificates for Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights (and the right to receive certificates therefor) will be transferable only in connection with the transfer of the underlying shares of Common Stock. As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close - - -8- of business on the Distribution Date, at the address of such holder shown on the records of the Company, a certificate for Rights, in substantially the form of Exhibit A hereto (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. As soon as practicable following the Record Date, the Company will send a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit B (the Summary of Rights"), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date (or earlier redemption, expiration or termination of the Rights), the Rights will be evidenced by such certificates for the Common Stock together with the Summary of Rights and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Distribution Date (or earlier redemption, expiration or termination of the Rights), the surrender for transfer of any of the certificates for the Common Stock outstanding on the Record Date, even without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. - - -9- (b) Prior to the Expiration Date (as such term is hereinafter defined), certificates issued for Common Stock (including, without limitation, certificates issued upon transfer or exchange of Common Stock or certificates issued upon conversion of the Convertible Debentures of the Company) after the Record Date, but prior to the later of the Stock Acquisition Date and the Distribution Date, shall be deemed also to be certificates for Rights, and shall have impressed, printed, stamped, written or otherwise affixed onto them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Chock Full O'Nuts Corporation and IBJ Schroder Bank & Trust Company (the "Rights Agent"), dated as of December 30, 1987 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of Chock Full O'Nuts Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may expire or may be evidenced by separate certificates and will no longer be evidenced by this certificate. Chock Full O'Nuts Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge within five days after receipt of a written request therefor. Under certain circumstances, Rights issued to Acquiring Persons (as defined in the Rights Agreement) or certain related persons and any subsequent holder of such Rights may become null and void with respect to certain rights set forth in Section II (a) (ii) and Section 13 (a) of the Rights Agreement. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates shall be -10- evidenced by such certificates alone, and the surrender for transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. (c) Prior to the Expiration Date (as such term is hereinafter defined), certificates issued for Common Stock, upon conversion of the Convertible Debentures of the Company after the later of the Stock Acquisition Date and the Distribution Date, shall, as soon as practicable after the Distribution Date, be accompanied by one Rights Certificate evidencing one Right for each share of Common Stock so issued. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 23 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date, and on their face shall entitle -11- the holders thereof to purchase such number of shares of Common Stock as shall be set forth therein at the price per share set forth therein (the "Purchase Price"), but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate, and any Rights Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain the following legend: The Rights represented by this Rights Certificate were issued to a Person who was an Acquiring person or an Affiliate or an Associate of an Acquiring Person. This Rights Certificate and the Rights represented hereby may become void to the extent provided by, and under certain circumstances as specified in, Section 7 (e) of the Rights Agreement. The provisions of Section 7 (e) of this Rights Agreement shall be operative whether or not the foregoing legend is contained on any such Rights Certificate. Section 5. Countersignature and Registration. The Rights Certificates shall be executed on behalf of the Company -12- by its Chairman of the Board, the Vice Chairman of the Board, any President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In any case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at one of its offices in New York, New York, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names -13- and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificate; Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject to the provisions of Section 15 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of shares of Common Stock as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection -14- with any transfer, split up, combination or exchange of Rights Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein and subject to the prior compliance by the Company with the provisions of the last paragraph of Section 9 hereof) in whole or in part at any time after the Distribution Date upon presentation of the Rights Certificate, with the appropriate form of election to purchase on the reverse side thereof duly executed, to the Rights Agent as the principal office of the Rights Agent, together with payment of the Purchase Price for each share of Common Stock (or other securities, cash or other assets, as the case may be as to which the Rights are exercised, - - -15- at or prior to the earliest of (i) the close of business on December 30, 1997 (the "Final Expiration Date"), (ii)the consummation of a transaction contemplated by Section 13(d) hereof, or (iii) the time at which the Rights are redeemed as provided in Section 24 hereof (such earliest time being herein referred to as the "Expiration Date"). Notwithstanding any other provision of this Agreement, any Person who prior to the later of the Stock Acquisition Date or the Distribution Date becomes a record holder of shares of Common Stock (or any Person who after the Record Date (whether before or after the later of the Stock Acquisition and the Distribution Date) becomes a record holder of shares of Common Stock upon conversion of the Convertible Debentures of the Company) may exercise all of the rights of an registered holder of a Rights Certificate with respect to the Rights associated with such shares of Common Stock in accordance with and subject to the provisions of this Agreement, including the provisions of Section 7 (e) hereof, as of the date such Person becomes a record holder of shares of Common Stock. (b) The Purchase Price for each share of Common Stock pursuant to the exercise of a Right shall initially be $30.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. -16- (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the appropriate form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares (or other securities or property) to be purchased and an amount equal to any applicable transfer tax (as determined by the Rights Agent) in cash, or by certified check or bank draft payable to the order of the Company, the Rights Agent shall, subject to Section 21 (k), thereupon promptly (i) (A) requisition from any transfer agent of the shares of Common Stock (or make available, if the Rights Agent is the transfer agent) certificates for the number of shares of Common Stock to be purchased, and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company, in its sole discretion, shall have elected to deposit the shares of Common Stock issuable upon exercise of the Rights hereunder into a depository, requisition from the depository agent depository receipts representing such number of shares of Common Stock as are to be purchased (in which case certificates for the shares of Common Stock represented by such receipts shall be deposited by the transfer agent with the depository agent) and the Company will direct the depository agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 15, (iii) promptly after receipt of such certificates or depository receipts, -17- cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities of the Company, and/or distribute other property pursuant to Section 11 (a), the Company will make all arrangements necessary so that such other securities and/or property are available for distribution by the Rights agent, if and when appropriate. In addition, in the case of an exercise of the Rights by a holder pursuant to Section 11 (a) (ii), the Rights Agent shall return such Rights Certificate to the registered holder thereof after imprinting, stamping or otherwise indicating thereon that the rights represented by such Rights Certificate no longer include the rights provided by Section 11 (a)(ii) of the Rights Agreement and if less than all the Rights represented by such Rights Certificate were so exercised, the Right Agent shall indicate on the Rights Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11 (a)(ii). (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such -18- Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 15 hereof. (e) Notwithstanding anything in this Agreement to the contrary, if an Acquiring Person or an Associate or Affiliate of an Acquiring Person engages in or there occurs one or more of the transactions set forth in Section 11 (a)(ii) or Section 13 (a) on or after the time the Acquiring Person became such, then any Rights that are or were on or after the earlier of the Distribution Date or the Stock Acquisition Date beneficially owned by an Acquiring Person or any Associate or Affiliate shall become void with respect to the rights provided under Section 11 (a)(ii) and Section 13 (a) and any holder of such Rights shall thereafter have no right to exercise such Rights under the provisions of Section 11 (a)(ii) and Section 13 (a). (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless the certificate contained in the appropriate form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise shall have been properly completed and duly executed by the registered holder thereof and the Company shall have been provided with such additional evidence of the identity of -19- the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably requests. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Common Stock. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock, or any authorized and issued shares of Common Stock held in its treasury, the number of shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Rights and, subject to -20- Section 11 (a)(iii) hereof, after the occurrence of an event specified in Section 11, shall so reserve and keep available a sufficient number of shares of Common Stock (and/or other securities) which may be required to permit the exercise in full of the Rights pursuant to this Agreement. So long as the shares of Common Stock (or other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares (or other securities)reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Common Stock (and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares or other securities (subject to payment of the Purchase Price), be duly and validly authorized and issued and, with respect to shares of Common Stock or other securities, fully paid and nonassessable. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any certificates for shares of Common Stock (or other securities, as the case may be) upon the exercise of Rights. The Company -21- shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or in respect of the issuance or delivery of the shares of Common Stock (or other securities, as the case may be) in a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for shares of Common Stock (or other securities, as the case may be), in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. The Company shall use its best efforts to (i) file, as soon as practicable following the Stock Acquisition Date, a registration statement under the Securities Act of 1933, as amended (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act and the rules and regulations thereunder) until the date of the expiration of the rights provided by Section 11 (a)(ii). The Company will -22- also take such action as may be appropriate under the blue sky laws of the various states. Section 10. Common Stock Record Date. Each person in whose name any certificate for shares of Common Stock (or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Common Stock (or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly presented and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such presentation and payment is a date upon which the Common Stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificates shall be dated, the next succeeding Business Day on which the Common Stock transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate, as such, shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. - - -23- Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event that the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares or (D) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11 (a) and in Section 7 (e), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock and other securities which, if such Right had been exercised immediately prior to such date and at a time when the Common Stock - - -24- transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both Section 11 (a)(i) and Section 11 (a)(ii), the adjustment provided for in this Section 11 (a)(i) shall be in addition to, and shall be made prior to any adjustment required pursuant to Section 11 (a)(ii). (ii) In the event that any Person (other than the Company, any subsidiary of the Company, any employee benefit plan of the Company or any to its subsidiaries or any entity holding securities of the Company organized, appointed or established by the Company or any of its subsidiaries for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates, shall become an Acquiring Person (except pursuant to a tender or exchange offer for all outstanding shares of Common Stock at a price and on terms determined by at least a majority of the members of the Board of Directors who are not Acquiring Persons or Affiliates or Associates of an Acquiring Person to be both adequate and otherwise in the best interests of the Company and its various constituents, including without limitation, -25- the long-term and short-term interests of the Company and its shareholders (other than the Person or an Affiliate or Associate thereof on whose behalf the offer is being made) (a "Permitted Offer")), then proper provision shall be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall, for a period of 60 days after the later of the occurrence of any such event and the effective date of an appropriate registration statement pursuant toSection 9, have a right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of shares of Common Stock for which a Right is then exercisable and dividing that product by (y) 50% of the current market price per one share of Common Stock (determined pursuant to Section 11 (d) on the date of the occurrence of the event set forth in this subparagraph (ii) (such number of shares being referred to as the "number of Adjustment Shares"); provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall -26- apply and no adjustment shall be made pursuant to this Section 11 (a)(ii). (iii) In the event that there shall not be sufficient treasury shares or authorized but unissued shares of Common Stock to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exercise of the Rights; provided, however, that if the Company is unable to cause the authorization of a sufficient number of additional shares of Common Stock, then, in the event the Rights become so exercisable, the Board of Directors may, but shall not be required to, with respect to each Right, (A) pay cash in an amount equal to the Purchase Price, in lieu of issuing shares of Common Stock and requiring payment therefore; or (B) issue debt or equity securities or a combination thereof, having a value equal to the Current Value of the Common Stock (as defined hereinafter), where the value of such securities shall be determined by a majority of the members of the Board of Directors after considering the advice of a nationally recognized investment banking firm selected by a majority of the members of the Board of Directors of the Company, and require the payment of the Purchase -27- Price; or (C) deliver any combination of cash, property, Common Stock and/or securities having a value equal to the Current Value of the Common Stock, and require payment of all or any requisite portions of the Purchase Price. The Current Value shall be the product of the current market price per share of Common Stock (determined pursuant to Section 11 (d) on the date of the occurrence of the event described above in subparagraph (ii) multiplied by the number of shares of Common Stock for which the Right otherwise would be exercisable if there were sufficient shares of Common Stock available. To the extent that the Company determines that some action need be taken pursuant to clauses (A), (B) or (C) of the proviso of this Section 11 (a)(iii), a majority of the members of the Board of Directors may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event describe in Section 11(a)(ii) shall have occurred, in order to seek any authorization of additional shares of Common Stock and/or to decide the appropriate form of distribution to be made pursuant to the above proviso and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. -28- (b) If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share of Common Stock (or having a conversion price per share, if a security convertible into Common Stock) less than the current market price (as defined in Section 11 (d)) per share of Common Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of share of Common Stock outstanding on such record date, plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be determined -29- reasonably and with good faith to the holders of Rights by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. Shares of Common Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) If the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than regular cash dividends out of the earned surplus of the Company), assets (other than a dividend payable in Common Stock) or subscription rights or warrants (excluding those referred to in Section 11 (b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as defined in Section 11 (d)) per share of Common Stock on such record date, less the fair market value (as determined reasonably and with good faith to the holders of Rights by the -30- Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants distributable in respect of one share of Common Stock and the denominator of which shall be the current market price per share of Common Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would be in effect if such record date had not been fixed. (d) For the purpose of any computation hereunder the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of Common Stock or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such -31- subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common -32- Stock, the fair value of such shares on such date as determined reasonably and with good faith by the Board of Directors of the Company shall be used and shall be binding on the Rights Agent. The term, "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share determined reasonably and with good faith to the holders of Rights by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11 (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest thousandth of a share of Common Stock, as the case may be. Notwithstanding the first sentence of this Section 11 (e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the -33- date of the transaction which mandates such adjustment or (ii) the Expiration Date. (f) If as a result of any provision of Section 11(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 15 hereof with respect to the Common Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Common Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11 (i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11 (b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common -34- Stock (calculated to the nearest thousandth)obtained by (i) multiplying (x) the number of shares of Common Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of shares of Common Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of shares of Common Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later -35- than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 15 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holder shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of shares of Common Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares which were expressed in the initial Rights Certificates issued -36- hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date the shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. -37- (m) Anything to the contrary in this Section 11 notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors of the Company in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Stock, issuance wholly for cash of any shares of Common Stock at less than the current market price, issuance wholly for cash of shares of Common Stock or securities which by their terms are convertible into or exchangeable for shares of Common Stock, stock dividends or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Common Stock shall not be taxable to such shareholders. (n) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of the outstanding Common Stock, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately -38- adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event. (o) The exercise of Rights under Section 11 (a)(ii) shall only result in the loss of rights under Section 11 (a)(ii) to the extend so exercised and shall not otherwise affect the rights represented by the Rights under this Rights Agreement, including the rights represented by Section 13. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. -39- Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person, (y) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger (other than, in the case of either transaction described in (x) or (y), a merger or consolidation which would result in all of the Voting Power represented by the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the Voting Power represented by the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and the holders of such securities not having changed as a result of such merger or consolidation), or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of its subsidiaries shall sell, mortgage or otherwise transfer), in one or more transactions, assets or earning power of the Company and it subsidiaries (taken as a whole) to any other Person, then, and in each such case, proper provision shall be made so that (i) following the Distribution Date, each holder of a Right, subject to Section 7 (e), shall have the right to receive, upon the -40- exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of shares of freely tradeable Common Stock of the Principal Party (as hereinafter defined), free and clear of liens, rights of call or first refusal, encumbrances or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of shares of Common Stock for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11 (a)(ii) hereof) and dividing that product by (2) 50% of the current market price per share of the Common Stock of such Principal Party (determined pursuant to Section 11 (d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply to such Principal Party; and (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of -41- Common Stock thereafter deliverable upon the exercise of the Rights. (b) "Principal Party" shall mean (i) in the case of any transaction described in (x) or (y) of the first sentence of Section 13 (a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to the merger or consolidation (including, if applicable, the Company, if it is the surviving corporation); and (ii) in the case of any transaction described in (z) of the first sentence in Section 13 (a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect subsidiary of Affiliate of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; (2) in case of such Person is a subsidiary, directly or indirectly, or -42- Affiliate of more than one Person, the shares of Common Stock of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint ventures and the Principal Parties in each such chain shall bean the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and each Principal Party and each other Person who may become a Principal Party as a result of such consolidation, merger, sale or transfer shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraph (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any -43- consolidation, merger, sale or transfer of assets mentioned in paragraph (a) of this Section 13, the Principal Party at its own expense will: (i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; (ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; and (iii) deliver to holders fo the Rights historical financila statements for the Principal Party and each of its Affiliates which comply in all material respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other -44- transfers. The rights under this Section 13 shall be in addition to the rights to exercise Rights and adjustments under Section 11 (a)(ii)d and shall survive any exercise thereunder. (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13 (a) if: (i) such transaction is consummated with a Person or Persons who acquired shares of Common Stock pursuant to a Permitted Offer (or a wholly owned subsidiary of any such Person or Persons); (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of Common Stock whose shares were purchased pursuant to such Permitted Offer; and (iii) the form of considering being offered to the remaining holders of Common Stock pursuant to such transaction is the same as the form of consideration paid pursuant to such Permitted Offer. Upon consummation of any such transaction contemplated by this subsection (d), all Rights hereunder shall expire. Section 14. Additional Covenants. (a) After the Stock Acquisition Date, the Company covenants and agrees that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell or transfer to, in one or more transactions, assets or earning power aggregating more that 50% of the assets or earning power of the Company and -45- its subsidiaries taken as a whole, any other Person, if at the time of or after such consolidation, merger or sale there are any charter or by-law provisions or any rights, warrants or other instruments or securities outstanding, agreements in effect or any other action taken which would diminish or otherwise eliminate the benefits intended to be afforded by the Rights. The Company shall not consummate any such consolidation, merger or sale unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this subsection. (b) The Company covenants and agrees that, after the Stock Acquisition Date, it will not, except as permitted by Section 24 or Section 27 hereof, take any action the purpose or effect of which is to diminish or otherwise eliminate the benefits intended to be afforded by the Rights. Section 15. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11 (n), or to distribute Rights Certificates which evidence fractional Rights, In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. -46- For the purpose of this Section 15 (a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined reasonably and with good faith to the holders of Rights by the Board of Directors of the Company shall be used and shall be binding on the Rights Agent. (b) The Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a share of Common Stock. For purposes -47- of this Section 15 (b), the current market value of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11 (d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Except as otherwise expressly provided herein, the holder of a Right by the acceptance of the Rights expressly waive his right to receive any fractional Rights or any fractional shares upon exercise of a Right. Section 16. Rights of Action. All rights of action in respect of the Agreement are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy as law for any breach of this Agreement and -48- shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Holders of Rights shall be entitled to recover the reasonable costs and expenses, including attorney's fees, incurred by them in any action to enforce the provisions of this Agreement. Section 17. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the -49- associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 18. Rights Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of Common Stock, or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions thereof. Section 19. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable fees and expenses -50- and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. Such rights to indemnification shall survive any change of the Rights Agent as described in Section 22 hereof. The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 20. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it -51- may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 22 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned such Right Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates in this Agreement. In case of any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its price name and deliver -52- Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 21. Duties of Rights Agent. The Rights Agent has no duties other than as expressly set forth in this Rights Agreement. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be -53- deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, any Vice Chairman of the Board, any President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except as to the fact that it has countersigned the Rights Certificates) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement of the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any convenant or condition contained by this -54- Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it be responsible for any determination by the Board of Directors of the Company of the current market value of the Rights or Common Stock pursuant to the provisions of Section 15 hereof; nor shall it by any act hereunder by deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or other securities will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Rights Agent shall be under no liability for interest accrued on any monies received by it pursuant to the exercise of Rights or otherwise. (g) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (h) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance -55- of its duties hereunder and certificates delivered pursuant to any provision hereof from the Chairman of the Board, any Vice Chairman of the Board, any President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (i) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become peculiarly interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (j) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or to the holders of the Rights resulting from any -56- such act, omission, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (k) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (l) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Section 22. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' -57- notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of an new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York), in good standing, having a principal office in the State of New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights -58- Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 22, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 23. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price per share and the -59- number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of the Agreement. Section 24. Redemption and Termination. (a)(i) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (x) the time that any person becomes an Acquiring Person or (y) 5:00 P.M., New York City time, on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $.05 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). (ii) In addition, the Board of Directors of the Company may redeem all but not less than all of the then outstanding Rights at the Redemption Price following the occurrence of a Stock Acquisition Date but prior to any event described in Section 13(a) either (x) in connection with any event specified in Section 13 (a) in which all holders of Common Stock are treated alike and not involving an Acquiring Person, or an Affiliate or Associate of any Acquiring Person or any other Person in which such Acquiring Person, Affiliate or Associate has any interest, or any other Person acting directly or indirectly on behalf of or in association with any such Acquiring Person, Affiliate or Associate, or (y) following the occurrence of an event set forth in, and the -60- expiration of any period during which the holder of Rights may exercise the rights under, Section 11(a)(ii) if and for as long as the Acquiring Person is not thereafter the Beneficial Owner of securities representing 20% or more of the Voting Power, and at the time of redemption there are no other Persons who are Acquiring Persons. (b) In the case of a redemption permitted under Section 24(a)(i), immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. In the case of a redemption permitted only under Section 24(a)(ii), evidence of which shall have been filed with the Rights Agent, the right to exercise the Rights will terminate and represent only the right to receive the Redemption Price only after ten Business Days following the giving of notice of such redemption to the holders of such Rights if no event set forth in Section 11 (a)(ii) shall have occurred, and, if such event shall have occurred, upon the later of ten Business Days following the giving of such notice or the expiration of any period during which the rights under Section 11(a)(ii) may be exercised. Within ten days after the -61- action of the Board of Directors ordering any such redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to the Rights Agent and to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent of the Common Stock, and upon such action, all outstanding Rights Certificate shall be null and void without any further action by the Company. Section 25. Notice of Certain Events. In case the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of Common Stock or to make any -62- other distribution to the holders of Common Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company) or (b) to offer to the holders of Common Stock rights or warrants to subscribe for or to purchase any additional shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision of outstanding shares of Common Stock), or (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to, any other Person, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rites or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause -63- (a) or (b) above at least 20 days prior to the record date for determining holders of the shares of Common Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock whichever shall be the earlier. In case the event set forth in Section 11 (a)(ii) of the Agreement shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11 (a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Chock Full O'Nuts Corporation 370 Lexington Avenue New York, New York 10017 Attention: Chairman of the Board Subject to the provisions of Section 22, any notice or demand authorized by this Agreement to be given or made by the Company -64- or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Stock Transfer Department Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without approval of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) prior to the Distribution Date, to change or supplement the provisions hereunder which the Company may deem necessary or desirable or (iv) following the Distribution Date, to change or supplement the provisions hereunder in any manner which shall not adversely affect the interests of the holdings of Rights -65- Certificates. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment unless the Rights Agent shall have determined in good faith that such supplement or amendment would adversely affect its interests under this Agreement. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Any supplement or amendment of this Rights Agreement shall be in writing and signed on behalf of the Company and the Rights Agent. Section 28. Determination and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock or any other securities of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3 (d)(l)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company, or a may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the -66- provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties, and (y) not subject the Board to any liability to the holders of the Rights Certificates. Section 29. Successors. All the convenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates and prior to the Distribution Date, the Common Stock). -67- Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and to be performed entirely within such State. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -68- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: CHOCK FULL O'NUTS CORPORATION [Seal] _______________________ _____________________________ Name: Martin J. Cullen Name: Leon Pordy, M.D. Title: Vice President, Title: Chairman of the Board Treasurer and and Chief Executive Secretary Officer Attest: IBJ SCHRODER BANK & TRUST COMPANY [Seal] _________________________ By__________________________ Name: Perry A. Polhemus Name: Title: Assistant Secretary Title: - - -69- Exhibit A [Form of Rights Certificate] Certificate No. R- ______________Rights NOT EXERCISABLE AFTER December 30, 1997, OR EARLIER UNDER CERTAIN CIRCUMSTANCES AS SET FORTH IN THE RIGHTS AGREEMENT OR IF NOTICE OF REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY AT $.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID TO THE EXTENT PROVIDED IN AND UNDER THE CIRCUMSTANCES SPECIFIED IN SECTION 7 (e) OF THE RIGHTS AGREEMENT]* Rights Certificate CHOCK FULL O'NUTS CORPORATION This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of December 30, 1987 (the "Rights Agreement") between Chock Full O'Nuts Corporation, a New York corporation (the "Company"), and IBJ Schroder Bank & Trust _______________________________ * The portion of the legend in brackets shall be inserted only if applicable. A-1 Company (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New York time) on December 30, 1997 at the principal office of the Rights Agent in New York, one fully paid, nonassessable Common Share, $.25 par value (the "Common Share") of the Company, at a purchase price of $30.00 per share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the appropriate Form of Election to Purchase duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchase upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of January 22, 1988, based on the Common Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of Common Shares or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities A-2 hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreements are on file at the principal office of the Company and are also available upon written request to the Company. This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office of the Rights agent, may be exercised for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Common Shares as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised (other than pursuant to Section 11 (a)(ii) of the Rights Agreement, the holder shall be entitled to receive this Rights Certificate duly marked to indicate that such exercise has occurred as set forth in the Rights Agreement. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a reemption price of $.05 per Right. Subject to the provisions of the Rights Agreement, the Company A-3 at its option, may elect to mail payment of the redemption price to the registered holder of the Right at the time of redemption, in which event this certificate may become void without any further action by the Company. No fractional shares of Common Stock will be issued upon the exercise of any Right or Rights evidenced hereby but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Common Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in th e Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. A-4 This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of January__, 1988. ATTEST: [Seal] CHOCK FULL O'NUTS CORPORATION __________________________ By__________________________ Martin J. Cullen Leon Pordy, M.D. Vice President, Chairman of the Board Treasurer and Secretary and Chief Executive Officer Countersigned IBJ SCHRODER BANK & TRUST COMPANY __________________________________ Authorized Signature A-5 [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.) FOR VALUE RECEIVED____________________________________________________ hereby sell, assigns and transfers unto_______________________________ ______________________________________________________________________ (Please print name and address of transferee) ______________________________________________________________________ this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _____________________ Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated:___________________, 19___ ______________________ Signature Signature Guaranteed: A-6 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidence by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Date:_________________, 19 __ _____________________________ Signature NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. A-7 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Rights Certificate pursuant to Section 11(a)(ii) of the Rights Agreement.) To CHOCK FULL O' NUTS CORPORATION: The undersigned hereby irrevocably elects to exercise ________________Rights represented by this Rights Certificate to purchase the shares of Common Stock (or such other securities of the Company) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of and delivered to: ________________________________________________________________ (Please insert social security or other identifying number) ________________________________________________________________ (Please print name and address) ________________________________________________________________ The Rights Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to Section 11 (a)(ii) of the Rights Agreement shall be returned to the undersigned unless such person requests that the Rights Certificate be registered in the name of the delivered to : ________________________________________________________________ Please insert social security or other identifying number (complete only if Rights Certificate is to be registered in a name other than the undersigned) ________________________________________________________________ (Please print name and address) ________________________________________________________________ ________________________________________________________________ Date:____________, 19__ __________________________________ Signature Signature Guaranteed: A-8 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (3) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated:___________________, 19__ ________________________ Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. A-9 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Rights Certificate other than pursuant to Section 11(a)(ii) of the Rights Agreement.) To CHOCK FULL O' NUTS CORPORATION: The undersigned hereby irrevocable elects to exercise _________________Rights represented by this Rights Certificate to purchase the shares of Common Stock (or such other securities of the Company or any other Person) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of: ________________________________________________________________ (Please insert social security or other identifying number) ________________________________________________________________ (Please print name and address) ________________________________________________________________ The Rights Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall be returned to the undersigned unless such person requests that the Rights Certificate be registered in the name of and delivered to: ________________________________________________________________ Please insert social security or other identifying number (complete only if Rights Certificate is to be registered in a name other than the undersigned) ________________________________________________________________ (Please print name and address) ________________________________________________________________ ________________________________________________________________ Dated: _______________, 19__ __________________________________ Signature Signature Guaranteed: A-10 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are[ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Date: _______________, 19__ _____________________________ Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. A-11 Exhibit B SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK On December 30, 1987, the Board of Directors of CHOCK FULL O' NUTS CORPORATION (the "Company") declared a dividend distribution of one Right for each outstanding share of common stock, $.25 par value (the "Common Stock"), of the Company to shareholders of record at the close of business on January 22, 1988 (the "Record Date"). Except as set forth below, each Right, when exercisable, entitles the registered holder to purchase from the Company one share of Common Stock at a price of $30 per share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and IBJ Schroder Bank & Trust Company as Rights Agent. Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Right certificates will be distributed. Until the earlier to occur of (i) a public announcement that, without the prior consent of the company, (A) a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, after December 30, 1987, beneficial ownership of securities having 20% or more of the voting power of all outstanding voting securities of the Company, or B) a person or group of affiliated or associated persons that, on December 30, 1987, beneficially owned securities having 20% or more of the Company's voting power, has acquired, or obtained the right to acquire, after December 30, 1987, beneficial ownership of securities representing an additional 2% or more of the Company's voting power (any suc h person or group referred to in clauses (A) or (B) being an "Acquiring Person" and such date being the "Stock Acquisition Date") or (ii) the tenth day following the commencement of (or a public announcement of an intention to make) a tender offer or exchange offer which would result in any person or group and related persons becoming an Acquiring Person, without the prior consent of the Company or such later date as may be fixed by the Board of Directors of the Company (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of the Record Date, by such Common Stock certificate together with this Summary of Rights. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred only in conjunction with the corresponding transfer of the Common Stock certificates. From as soon as practicable after the Record Date and until the later of the Stock Acquisition Date or the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after the Record B-1 Date (including Common Stock issued at any time after the Record Date upon conversion of the Company's outstanding 8% Convertible Subordinated Debentures due 2006 and 7% Convertible Senior Debentures due 2012) upon transfer or new issuance of the Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the later of the Stock Acquisition Date or the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for Common Stock outstanding (with or without this Summary of Rights attached) will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and the separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. the rights will expire on the earliest of (i) December 30, 1997, (ii) consummation of a merger transaction with a person or group who acquired Common Stock pursuant to a Permitted Offer (as defined below) and who is offering the same price per share and form of consideration paid in the Permitted Offer, or (iii) redemption by the Company as described below. The Purchase Price payable, and the number of shares of Common Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Common Stock, (ii) upon the grant to holders of the Common Stock of certain rights or warrants to subscribe for Common Stock, certain convertible securities or securities having the same or more favorable rights, privileges and preferences as the Common Stock at less than the current market price of the Common Stock or (iii) upon the distribution to holders of the Common Stock of evidences of indebtedness or assets (excluding regular cash dividends out of earned surplus and dividends payable in Common Stock) or of subscription rights or warrants (other than those referred to above). In the event that a person becomes an Acquiring Person (unless pursuant to a tender or exchange offer for all outstanding shares of Common Stock at a price and on terms determined by at least a majority of the members of the Board of Directors of the Company, who are not an Acquiring Person or an affiliate or associate of an Acquiring Person, to be both adequate and otherwise in the best interests of the Company and its various constituents including, without limitation, both the long term and short term interests of the Company and its B-2 shareholders (a "Permitted Offer")), proper provision shall be made so that each holder of a Right will for a 60 day period thereafter have the right to receive upon exercise that number of shares of Common Stock having a market value of two times the then current exercise price of the right, subject to the availability of a sufficient number of authorized but unissued shares (such right being called the "Subscription Right"). In the event that after a Stock Acquisition Date the Company is acquired in a merger or other business combination transaction involving the Company or 50% of more of its assets or earning power are sold (in one transaction or a series of transactions), proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the acquiring company (or, in the event there is more than one acquiring company, the acquiring company receiving the greatest portion of the assets or earning power transferred) which at the time of such transaction would have a market value of two times the exercise price of the Right (such right being called the "Merger Right"). The holder of a Right will continue to have the Merger Right whether or not such holder exercises the Subscription Right. Upon the occurrence of any of the events giving rise to the exercisability of the Subscription Right or the Merger Right, any Rights that are or were at any time owned by an Acquiring Person engaging in any of such transactions or receiving the benefits thereof on or after the time the Acquiring Person becomes such shall become void insofar as they relate to the Subscription Right or the Merger Right. With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractions of shares will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Common Stock on the last trading date prior to the date of exercise. At any time prior to the earlier to occur of (i) a person becoming an Acquiring Person or (ii) the expiration of the Rights, the Company may redeem the Rights in whole, but not in part at a price of $.05 per Right (the "Redemption Price"), which redemption shall be effective upon the action of the Board of Directors. Additionally, the Company may thereafter redeem the then outstanding Rights in whole, but not in part, at the Redemption Price provided than such redemption is incidental to a merger or other business combination transaction or series of transactions involving the Company but not involving an B-3 Acquiring Person or any person who was an Acquiring Person or following an event giving rise to, and the expiration of the exercise period for, the Subscription Right if and for as long as no person beneficially owns securities representing 20% or more of the voting power of the Company's voting securities. The redemption of Rights described in the preceding sentence shall be effective only as of such time when the Subscription Right is not exercisable, and in any event, only after 10 business days prior notice. Upon the effective date of the redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does no purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. B-4 EX-10.B 7 Exhibit 10 Material Contracts (b) CHOCK FULL O'NUTS CORPORATION BENEFITS PROTECTION TRUST TABLE OF CONTENTS ARTICLE PAGE 1: Definitions 2 2: Creation of Trust 3 3: Expense Account 5 4: Management of Trust Assets 5 5: Administrative Powers 9 6: Trustee's Powers after Change in Control 10 7: Taxes, Expenses and Compensation of Trustee 15 8: General Duties of Trustee 16 9: Indemnification 18 10: No Duty to Advance Funds 19 11: Accounts 19 12: Administration of the Plan; Communications 22 13: Resignation or Removal of Trustee 24 14: Amendment of Agreement; Termination of Trust 28 15: Prohibition of Diversion 30 16: Prohibition of Assignment of Interest 31 17: Miscellaneous 31 Exhibit A 35 Exhibit B 36 Exhibit 1 37 Exhibit 2 39 BENEFITS PROTECTION TRUST AGREEMENT THIS TRUST AGREEMENT, made as of June 2, 1988, by and between Chock Full O'Nuts Corporation, a corporation organized and existing under the laws of the State of New York, and National Westminster Bank USA, a national banking association, organized and existing under the laws of the United States of America (hereinafter referred to as the "Trustee"), W I T N E S S E T H : WHEREAS, the Company (as hereinafter defined) or an Affiliate (as hereinafter defined) thereof has adopted the plans, programs, and policies and has entered into the contracts listed on Schedule 1 (hereinafter referred to either specifically by name or collectively as the "Plans") and may adopt or enter into other such plans which will be listed from time to time on Schedule 1 and may, from time to time, amend, modify or terminate any such Plan in accordance with its terms or to comply with any changes in the law and to increase the number of participants in any such Plan; and WHEREAS, the Company desires to establish a Benefits Protection Trust (hereinafter referred to as this "Trust") in order to ensure that Participants (as hereinafter defined) and their beneficiaries will receive the benefits which the Company and its Affiliates are obligated to provide for them or which they reasonably anticipate receiving pursuant to the Plans; and WHEREAS, the Trustee is not a party to the Plans; and WHEREAS, the aforesaid obligations of the Company are not funded or otherwise secured and the Company has agreed to take steps to assure that the future payment of amounts under such Plans will not be improperly withheld in the event that a "Change in Control" (as hereinafter defined) of the Company should occur; and WHEREAS, for purposes of assuring that such payments will not be improperly withheld, the Company desires to deposit with the Trustee, subject to the claims of the Company's existing or future general creditors, amounts of cash or marketable securities for the payment of the fees and expenses of the Trustee in pursuing claims of the Participants and their beneficiaries against the Company for such payments under the Plans; NOW, THEREFORE, the Company and the Trustee agree as follows: ARTICLE 1: Definitions. 1.1 "Affiliate" shall mean any corporation, partnership or other entity, the majority interest in which is held by the Company directly or through one or more intermediaries. 1.2 The "Board" shall mean the Board of Directors of Chock Full O'Nuts Corporation. 1.3 A "Change in Control" will be deemed to have occurred if following - - - 2 - (i) a tender or exchange offer for voting securities of the Company, (ii) a proxy contest for the election of directors of the Company, or (iii) a merger or consolidation or sale of all or substantially all of the business or assets of the Company. the persons constituting the Board immediately prior to the initiation of such event cease to constitute a majority of the Board upon the occurrence of such event or within one year after such event. 1.4 "Company" shall mean Chock Full O'Nuts Corporation, its successors, and assigns. 1.5 "Participants" shall mean active and former directors and employees of the Company and/or of its Affiliates. ARTICLE 2. Creation of Trust. 2.1 The Company hereby establishes with the Trustee and the Trustee hereby accepts a trust which shall be used exclusively to pay the fees, expenses and indemnities due or incurred by the Trustee in accordance with the terms of this Trust Agreement (hereinafter sometimes referred to as the "Expense Account"). - - - 3 - 2.2 The Company and the Trustee agree that the Trust created herein shall be revocable at any time before a Change in Control, but shall not be revocable by the Company or by any successor thereto after a Change in Control. The Trust established hereunder is intended to be a grantor trust within the meaning of Section 671 of the Internal Revenue Code of 1986, as hereafter amended, and all interest and other income earned on the investment of the Trust shall for such purposes be the property of, and taxable to, the Company. All taxes on or with respect to the Trust shall be payable by the Company from its separate funds and shall not be a charge against the Trust. 2.3 The Company may add plans to this Trust, by amending Schedule 1 and notifying the Trustee in writing 10 days in advance of amending Schedule 1, provided such additional plans are substantially similar in design to those Plans listed on Schedule 1 and subject to the terms of this Trust Agreement. If the Company amends any existing Plans, it shall send to the Trustee a copy of any such amendments and no consent of the Trustee to such amendments is required. Plans which are not substantially similar in design to those Plans listed on Schedule 1 (including, in particular, any qualified defined benefit pension plan) may be added to this Trust only with the consent of the Trustee whose consent will not be unreasonably withheld. - - - 4 - ARTICLE 3: Expense Account. 3.1 Concurrently with the execution of this Trust, the Company will deliver to the Trustee, to be held in trust hereunder and credited to the Expense Account, the sum of seven hundred thousand dollars ($700,000) in cash, to be administered and disposed of by the Trustee as provided herein. 3.2 At any time, the Company shall have the unlimited right to add to the Expense Account additional amounts of cash. Such amounts (together with the income attributable thereto) which are over and above the amount described in Section 3.1 of this Article 3 may be withdrawn by the Company at any time prior to a Change in Control, but not after. ARTICLE 4: Management of Trust Assets. 4.1 Prior to a Change in Control, the Trust assets shall be held, invested and reinvested by the Trustee, as designated by the written direction of the Company from time to time. The Trustee shall not be under any duty, or have any right, to question any such directions of the Company or to review any securities or other property held pursuant to such direction, or to make any suggestions to the Company in connection therewith, or have any liability for any loss resulting from such directions of the Company; and the Trustee shall as promptly as practicable comply with any directions given by the Company hereunder. In exercising the powers of the Company under this Section 4.1 the Company shall act by its Chairman of the - - - 5 - Board or President of such designees, each of whom is fully authorized to exercise such powers. The Trustee may, and shall, follow the written directions signed by said Chairman of the Board or President or such designees. 4.2 In the absence of written direction of the Company, the Trustee shall invest the assets as if a Change in Control had occurred as provided in Section 4.3 or this Article 4 and Article 6. 4.3 After a Change in Control, the Trustee shall have exclusive authority and discretion to manage and control the Trust assets and may employ investment managers including affiliates of the Trustee to manage the investment of the Trust assets. Pursuant to such authority and discretion, the Trustee may exercise, from time to time and at any time, the power: (a) To invest and reinvest the Trust, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, and in order to reduce - - - 6 - the rate of interest rate fluctuations, contracts, as either buyer or seller, for the future delivery of United States Treasury securities and comparable Federal-Government-backed securities; (b) To sell, convey, redeem, exchange, grant options for the purchase or exchange of, or otherwise dispose of, any real or personal property, at public or private sale, for cash or upon credit, with or without security, without obligation on the part of any person dealing with the Trustee to see to the application of the proceeds of or to inquire into the validity, expediency or propriety of any such disposition; (c) To exercise, personally or by general or limited proxy, the right to vote any shares of stock, bonds or other securities held in the Trust; to delegate discretionary voting power to trustees of a voting trust for any period of time; and to exercise, personally or by power of attorney, any other right appurtenant to any securities or other property of the Trust; (d) To join in or oppose any reorganization, recapitalization, consolidation, merger or liquidation, or any plan therefor, or any lease, mortgage or sale of the property of any organization the securities of which are held in the Trust; to pay from the Trust any assessments, charges or compensation specified in any plan of reorganization, recapitalization, - - - 7 - consolidation, merger or liquidation; to deposit any property with any committee or depository; and to retain any property allotted to the Trust in any reorganization, recapitalization, consolidation, merger or liquidation; (e) To exercise or sell any conversion or subscription or other rights appurtenant to any stock, security or other property held in the Trust; (f) To borrow from any lender (including the Trustee in its individual capacity) money, in any amount and upon any reasonable terms and conditions, for purposes of this Trust Agreement, and to pledge or mortgage any property held in the Trust to secure the repayment of any such loan; (g) To compromise, settle or arbitrate any claim, debt, or obligation of or against the Trust; to enforce or abstain from enforcing any right, claim, debt or obligation (subject to the provisions of Section 6.3 of Article 6); and to abandon any property determined by it to be worthless; (h) To make loans of securities held in the Trust to registered brokers and dealers upon such terms and conditions as are permitted by applicable law and regulations, and in each instance to permit the securities so lent to be registered in the name of the borrower or a nominee of the borrower, provided that in each instance and loan is adequately - - - 8 - secured and neither the borrower nor any affiliate of the borrower has discretionary authority or control with respect to the assets to the Trust involved in the transaction or renders investment advice with respect to those assets; and (i) To invest and reinvest any property in the Trust in any other form or type of investment not specifically mentioned in this Paragraph. ARTICLE 5: Administrative Powers. The Trustee shall have and in its sole and absolute discretion may exercise from time to time at any time the following administrative powers and authority with respect to the Trust: 5.1 To hold property of the Trust in its own name or in the name of a nominee or nominees, without disclosure of the trust, or in bearer form so that it will pass by delivery, but no such holding shall relieve the trustee of its responsibility for the safe custody and disposition of the Trust in accordance with the provisions of this Trust Agreement; the Trustee's books and records shall at all times show that such property is part of the Trust; and the Trustee shall be absolutely liable for any loss occasioned by the acts of its nominee or nominees with respect to securities registered in the name of the nominee or nominees; - - - 9 - 5.2 To organize and incorporate under the laws of any state it may deem advisable one or more corporations (and to acquire an interest in any such corporation that it may have organized and incorporated) for the purpose of acquiring and holding title to any property, interests or rights that the Trustee is authorized to acquire under Article 4 hereof; 5.3 To employ in the management of the Trust suitable agents, without liability for any loss occasioned by any such agents selected by the Trustee with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; 5.4 To make, execute and deliver, as Trustee, any deeds, conveyances, leases, mortgages, contracts, waivers or other instruments in writing that the Trustee may deem necessary or desirable in the exercise of its powers under this Trust Agreement; and 5.5 To do all other acts that the Trustee may deem necessary or proper to carry out any of the powers set forth in this Trust Agreement or otherwise in the best interests of the Trust. ARTICLE 6: Trustee's Powers after Change in Control. 6.1 After a Change in Control, the Trustee shall exercise for the sole benefit of the Plan's Participants and their beneficiaries any of the powers set forth in Section 4.3 of Article 4. - - - 10 - 6.2 Within thirty (30) days after a Change in Control, the Company shall notify all Participants, and beneficiaries of the Plans who are entitled to receive benefits under the Plans, in writing of the Trustee's availability to aid them in pursuing any claims that may have against the Company under the terms of those Plans under which they are covered. The Company shall provide such notice by using the same method as required by the Department of Labor pursuant to 29 C.F.R. 2520.104b-1 (b) (1) as now in effect without regard to subsequent amendments. If the Company fails to do so, the Trustee shall send such notice by certified mail return receipt requested to all Participants and/or the beneficiaries described above to their last address provided to the Trustee by the Company prior to a Change in Control. In addition, the Trustee may, at its option, provide such notification by placing an advertisement in one newspaper of general circulation in each of the ten locations in which the largest number of employees of the Company and its Affiliates are located as communicated by the Company to the Trustee prior to a Change in Control. 6.3 (a) If, after a Change in Control, a Participant or beneficiary notifies the Trustee that the Company (or insurance company, contract administrator or any other party acting on the Company's behalf, if applicable) has refused to pay a claim under - - - 11 - any of the Plans, then, unless the Trustee shall determine that the claim has no basis in law and fact, the Trustee: (1) will promptly attempt to negotiate with the Company to obtain payment, settlement, or other disposition of the claim, subject to the consent of the Participant or beneficiary; (2) will, if negotiations fail within ninety (90) days to result in a payment, settlement or other disposition agreeable to the Participant or beneficiary (hereinafter referred to in this Article 6 as the "Plaintiff"), upon the receipt of written authorization from the Plaintiff in substantially the form attached as Exhibit A hereto, institute and maintain legal proceedings (hereinafter referred to as the "Litigation") against the Company or other appropriate person or entity to recover on the claim on behalf of the plaintiff; and (3) may, subject to the consent of the Plaintiff, settle or discontinue the Litigation. (b) The Trustee shall direct the course of the Litigation and shall keep the Plaintiff informed of the progress of the Litigation as the Trustee deems appropriate, but no less frequently than quarterly. If, during the Litigation, - - - 12 - (1) the Plaintiff directs in writing that the litigation on behalf of the Plaintiff be settled or discontinued, the Trustee shall take all appropriate action to follow such direction, provided that the written direction specifies the terms and conditions of the settlement or discontinuance, and further provided that the Plaintiff, if requested by the Trustee, shall execute and deliver to the Trustee a document in a form acceptable to the Trustee releasing and holding harmless the Trustee from any liability resulting from the Trustee's following such direction; (2) The Plaintiff refuses to consent to the settlement or other disposition of the Litigation on terms recommended in writing by the Trustee or does not agree with the Trustee's conduct of the Litigation, the Trustee may proceed in its sole and absolute discretion, to take such action as it deems appropriate in the Litigation, including entering into settlement or discontinuance of the Litigation, provided that the Trustee shall first afford the Plaintiff at least fourteen (14) days advance notice of any decision to settle or otherwise discontinue the Litigation; further provided, however, that the Trustee shall not be authorized to proceed in the Litigation on behalf of the Plaintiff after - - - 13 - (i) the Plaintiff shall have revoked in writing the authorization of the Trustee to proceed on his behalf (in substantially the form attached as Exhibit B hereto) and shall have delivered such writing to the Trustee and (ii) the Plaintiff shall have appointed his own counsel, whose fees and expenses are to be paid by the Plaintiff and who shall appear in the Litigation on behalf of the Plaintiff in lieu of counsel retained by the Trustee. Thereafter, the Trustee shall have no obligation to proceed further on behalf of such Plaintiff or to pay from the Trustee Expense Account any costs or expenses incurred in the Litigation after the date of the delivery of such writing. (c) The Trustee is empowered to retain, at the expense of the Trust, counsel and other appropriate experts, including actuaries and accountants, to aid it in making any determination under this Article 6 and in determining whether to pursue or settle any Litigation and to pursue or settle any Litigation. The Trustee shall have the discretion to determine the form and nature that any Litigation against the Company, or other appropriate person or entity, shall take, and the procedural rules and laws applicable to such Litigation shall supersede any inconsistent provision in this Trust Agreement. - - - 14 - 6.4 After a Change in Control, the Trustee shall bill the Company directly, on a monthly basis, for all fees an expenses described in Section 7.2. The Trustee may commence legal action against the Company to recover any amount not paid within 30 days of the billing date, and shall be obligated to commence such an action if the Company's failure to pay causes a reduction in the assets of the Expense Account contributed pursuant to Article 3 below six hundred thousand dollars($600,000). ARTICLE 7: Taxes, Expenses and Compensation of Trustee 7.1 The Company shall pay any Federal, state, local or other taxes of whatever kind imposed or levied with respect to the assets and/or income of the Trust or any part thereof under existing or future laws, and the Company may contest the validity or amount of any tax, assessment, claim or demand respecting the Trust or any part thereof. The Trustee shall deduct any payroll taxes required to be withheld with respect to any payments made pursuant to the Trust. 7.2 The Trustee shall be reimbursed on a semi-annual basis prior to a Change in Control and on a monthly basis thereafter, or on such other basis as the Trustee deems reasonable, for the fees and expenses set forth in Schedule 2 attached hereto and its reasonable expenses, including but not limited to the retention of legal counsel (including but not limited to legal counsel and other professionals retained pursuant to Article 8 and to legal counsel retained - - - 15 - to represent the Trustee in any action brought by the Company or any Participant against the Trustee), accountants and actuaries and such other professionals as the trustee determines are necessary or appropriate to enable it to perform its services as Trustee. ARTICLE 8: General Duties of Trustee. 8.1 Subject to Article 14 hereof, the Trustee shall discharge its duties under this Trust Agreement solely in the interest of the Participants in the Plans and their beneficiaries and (1) for the exclusive purpose of enforcing the rights of Participants and their beneficiaries to benefits under the Plans (subject to Section 2.2 of Article 2 of this Trust Agreement); and (2) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. 8.2 The Trustee is responsible for ascertaining whether a Change in Control has occurred. Among the ways the Trustee may use to determine whether a Change in Control has occurred is to read the Wall Street Journal and the New York Times on a daily basis and the Company will provide to the Trustee, in a timely manner, any Proxy Statements, Solicitation/Recommendation Statement on 14D-9 Schedules, and information statements - - - 16 - pursuant to Rule 14 (f) of the Securities Exchange Act of 1934, as amended (the "Act"), to the extent that the Company has filed such documents pursuant to the federal securities laws and copies of any initial filings and amendments thereto that the Company receives pursuant to Sections 13 (d) and 14 (d) of the Act. 8.3 The Trustee may consult with counsel, who may be counsel for the Company prior to a Change in Control or for the Trustee in its individual capacity, and shall not be deemed imprudent by reason of its taking or refraining from taking any action in accordance with the opinion of counsel. 8.4 The Company may designate in writing, prior to a Change in Control, counsel to be retained by the Trustee after a Change in Control to enforce the rights of Participants and beneficiaries to benefits under the Plans. If the designated counsel declines to provide representation, or the Trustee is not satisfied with the quality of representation provided, the Trustee may dismiss the designated law firm and engage another qualified law firm for this purpose; however, the law firm so engaged may not be the same law firm which represents the Trustee with respect to its responsibilities as Trustee in its individual capacity under this Trust Agreement. The Company may not dismiss or engage such counsel or cause the Trustee to - - - 17 - engage or dismiss such counsel after a Change in Control. ARTICLE 9: Indemnification. 9.1 The Company agrees, to the extent permitted by law, to indemnify and hold the Trustee harmless from and against any liability that the Trustee may incur in the administration of the Trust (including attorneys' fees and expenses), unless arising from the Trustee's own gross negligence, willful misconduct, or willful breach of the provisions of its obligations under this Trust Agreement. The Trustee shall not be required to give any bond or any other security for the faithful performance of its duties under this Trust Agreement, except as required by law. 9.2 Any amount payable to the Trustee under this Article 9 and not previously paid by the Company shall be paid by the Company promptly upon written demand therefor by the Trustee or, if the Company fails to make payment within 15 days after such written demand, from the Expense Account. In the event that payment is made hereunder to the Trustee from the Expense Account, the Trustee shall promptly notify the Company in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it will deliver to the Trustee to be held in the Trust an amount in cash equal to any payments made from the Trust to the Trustee pursuant to this Article 9. The failure of the Company to transfer any - - - 18 - such amount shall not in any way impair the Trustee's right to indemnification, reimbursement and payment pursuant to this Article 9. The provisions of this Article 9 shall survive the termination of this Trust Agreement. ARTICLE 10: No Duty to Advance Funds. Nothing contained in this Trust Agreement shall require the Trustee to risk or expend its own funds in the performance of the duties of the Trustee hereunder. In the acceptance and performance of its duties hereunder, the Trustee acts solely as trustee and not in its individual capacity, and all persons, other than the Company, having any claim against the Trustee related to this Trust Agreement or the actions or agreements of the Trustee contemplated hereby shall look solely to the Trust for the payment or satisfaction thereof unless the Trustee's conduct has been willful or grossly negligent. Without limiting the foregoing, the Trustee shall not be liable in its individual capacity for the payment of the fees and expenses of counsel and other professionals retained by the Trustee in accordance with Articles 6, 7 and 8 hereof. ARTICLE 11: Accounts. 11.1 (a) The Trustee shall keep accurate and detailed accounts of all its receipts, investments and disbursements under this Trust Agreement on a July 31 year ("fiscal year") basis. Such person or persons as the Company shall designate shall be allowed to inspect the books of account relating to the Trust upon prior written request at any reasonable time - - - 19 - during business hours of the Trustee. (b) Within 120 days after the close of each fiscal year, the Trustee shall transmit to the Company, and certify the accuracy of, a written statement of the assets and liabilities of the Trust, showing the current value of each asset at the close of the fiscal year, and a written account of all the Trustee's transactions relating to the Trust during the period from the last previous accounting to the close of that year. For the purposes of this Subsection 11(b) the date of the Trustee's resignation or removal as provided in Article 13 hereof or the date of termination of the Trust as provided in Article 14 hereof shall be deemed to be the close of a year. (c) Unless the Company shall have filed with the Trustee written exceptions or objections to an such statement and account within 120 days after receipt thereof, the Company shall be deemed to have approved such statement and account; and in such case or upon the written approval by the Company of any such statement and account, the Trustee shall be forever released and discharged with respect to all matters and things contained in such statement and account as though it had been settled by decree of a court of competent jurisdiction in an action or proceeding to which the Company and all persons having any beneficial interest in the Trust were parties. - - - 20 - 11.2 The Trustee shall determine the fair market value of the Trust as of each July 31, or more frequently (but not more often than monthly) if it so desires. If there is a diminution in value of the Expense Account below six hundred thousand dollars ($600,000) prior to the occurrence of a Change in Control, the Company shall provide the Trustee with sufficient funds to make up for any such diminution in value within 15 days after written demand by the Trustee for such payment. At any time other than after a Change in Control, if the Company fails to comply with the Trustee's written demand within 15 days to provide the Trustee with sufficient funds to make up for any diminution in value below six hundred thousand dollars ($600,000) in the Expense Account, and Trustee may resign as Trustee upon six (6) months written notice in accordance with Section 13.1 of Article 13 hereof. The Trustee will have no duty to find or secure the appointment of a successor upon its resignation pursuant to this Section 11.2 of this Article 11, nor shall its resignation or the termination of any further duties be contingent upon the appointment and qualification of a successor. Notwithstanding the foregoing, no resignation pursuant to the foregoing provisions of this Section 11.2 may take effect on or after the date of a Change in Control. 11.3 Nothing contained in this Trust Agreement or in the plans shall deprive the Trustee of the right to have a judicial settlement of its accounts. In any proceeding - - - 21 - for a judicial settlement of the Trustee's accounts or for instructions in connection with the Trust, the only other necessary party thereto in addition to the Trustee shall be the Company. If the Trustee so elects, it may bring in as a party or parties defendant any other person or persons. No person interested in the Trust, other than the Company, shall have a right to compel an accounting, judicial or otherwise, by the Trustee, and each person shall be bound by all accountings by the Trustee to the Company, as herein provided as if the account had been settled by decree of a court of competent jurisdiction in an action or proceeding to which such person was a party. ARTICLE 12: Communications. 12.1 The Trustee shall not be responsible in any respect for administering the Plans nor shall the Trustee be responsible for the adequacy of the Trust to meet and discharge any payments and liabilities under the Plans. The Trustee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by an officer of the Company designated pursuant to this Trust Agreement. The Company, from time to time, shall furnish the Trustee with the names and specimen signatures of the designated officers of the Company and shall promptly notify the Trustee of the termination of office of any designated - - - 22 - officer of the Company and the appointment of a successor thereto. Until notified to the contrary, the Trustee shall be fully protected in relying upon the most recent list of the designated officers of the Company furnished to it by the Company. 12.2 Any action required by any provision of this Trust Agreement to be taken by the Board shall be evidenced by a resolution of such Board certified to the Trustee by the Secretary or an Assistant Secretary of the Company under its corporate seal, and the Trustee shall be fully protected in relying upon any resolution so certified to it. Unless other evidence with respect thereto has been specifically prescribed in this Trust Agreement, any other action of the Company under any provision of this Trust Agreement, including any approval of or exceptions to the Trustee's accounts, shall be evidenced by a certificate signed by an officer of the Company, and the Trustee shall be fully protected in relying upon such certificate. The Trustee may accept a certificate signed by an officer of the Company as proof of any fact or matter that it deems necessary or desirable to have established in the administration of the Trust (unless other evidence of such fact or matter is expressly prescribed herein), and the Trustee shall be fully protected in relying upon the statements in the certificate. - - - 23 - 12.3 The Trustee shall be entitled conclusively to rely upon any written notice, instruction, direction, certificate or other communication believed by it to be genuine and to be signed by the proper person or persons. 12.4 Until written notice is received to the contrary, communications to the Trustee shall be sent to it at its office at 175 Water Street, New York, New York 10038, Attention: Gerald P. Breezley, Corporate Trust Department, Telecopy (212)602-2166, copy to Cole & Deitz, 175 Water Street, New York, New York 10038, Attention: Jeffrey H. Elkin, Trust Counsel; communications to the Company shall be sent to it at its office at 370 Lexington Avenue, New York, New York 10017; Attention: Chairman of the Board or President, copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004; Attention: Allen Kezsbom. Notice will be deemed received by the Trustee or Company upon the date that such notice is either (1) delivered by hand, or (2) sent by telecopy, or (3) sent by telex, or (4) by certified mail and the certified receipt is signed, or (5) any other method of delivery or mail which is evidenced by a receipt of delivery signed by any employee or agent of the Trustee or Company. ARTICLE 13: Resignation or Removal of Trustee. 13.1 The Trustee may resign at any time, other than after a Change in Control, upon six (6) months written notice to the Company or such shorter period as is - - - 24 - acceptable to the Company (hereinafter referred to as the "Resignation Period") and immediately after the Resignation Period shall have no further duties hereunder. The Trustee will have no duty to find or secure the appointment of a successor upon its resignation pursuant to this Section 13.1 of this Article nor shall its resignation or its termination of any further duties be contingent upon the appointment and qualification of a successor. Promptly after receipt of such notice, the Company shall appoint a successo r trustee, such trustee to become Trustee upon its acceptance of this Trust. 13.2 After a Change in Control, the Trustee may resign only under one of the following circumstances: (a) A final decision of a court of competent jurisdiction removing the Trustee by reason of such court's determination of the existence of a conflict of interest which prevents the Trustee from properly performing its duties hereunder. The Trustee agrees to use its best efforts to avoid any such conflict. For the purpose of this Trust Agreement, the decision of a court shall not be deemed to be final unless the decision is not appealable, or no appeal has been taken from the decision and the time for an appeal has expired. Notwithstanding the foregoing provisions of this Subsection 13.2(a), such resignation shall not be effective unless the Trustee has obtained the agreement of a bank to act as successor trustee which bank (1) is - - - 25 - among the 100 largest banks in the United States, as measured by deposits, and (2) has a rating of "B/C" or greater based upon the most current rating from Keefe, Bruyett & Woods ("KB&W) or its successor, or if KB&W or its successor should cease to publish ratings, then a short-term debt rating from Moody's of "P-1," or greater, or from Standard and Poor's of "A-1." In any event, the Trustee shall continue to be custodian of the Trust until the new trustee is in place, and the Trustee shall be entitled to expenses and fees through the later of the effective date of its resignation as Trustee or the end of its custodianship of the Trust assets. (b) The Trustee has exhausted all of its legal remedies and has been unsuccessful in such litigation to require the Company to remit to the Trustee such amounts as are billed pursuant to Section 6.4 of Article 6 hereof and the assets of the Trust have been exhausted. In such event, the Trustee shall have the right to resign immediately as Trustee, and immediately upon such resignation shall have no further duties hereunder. The Trustee will have no duty to find or secure the appointment of a successor upon its resignation pursuant to this Subsection 13.2(b), nor shall its resignation or the termination of any further duties be contingent upon the appointment and qualification of a successor. - - - 26 - 13.3 Prior to a Change in Control, the Company may remove the Trustee upon 30 days written notice to the Trustee, or upon shorter notice if acceptable to the Trustee. Such removal shall become effective, however only upon the occurrence of all of the following events: (a) The appointment by the Company of a successor trustee; and (b) The acceptance of the trust by the successor trustee; and (c) The delivery of the Trust assets to the successor trustee. 13.4 Each successor trustee shall have the powers and duties conferred upon the Trustee in this Trust Agreement, and the term "Trustee" as used in this Trust Agreement shall be deemed to include any successor trustee. Upon designation or appointment of a successor trustee, the Trustee shall transfer and deliver the Trust to the successor trustee, reserving such reasonable sums as the Trustee shall deem necessary to defray its expenses in settling its accounts, to pay any of its compensation due and unpaid and to discharge any obligation of the Trust for which the Trustee may be liable. If the sums so reserved are not sufficient for these purposes, the Trustee shall be entitled to recover the amount of any deficiency from either the Company or the successor trustee, or both. When the Trust shall have been transferred and delivered to the successor trustee and the accounts of the Trustee have been settled as provided in - - - 27 - Article 14 hereof, the Trustee shall be released and discharged from all further accountability or liability for the Trust and shall not be responsible in any way for the further disposition of the Trust or any part thereof. 13.5 Notwithstanding anything to the contrary, in the event it resigns or is removed, the Trustee shall have a right to have its accounts settled as provided in Article 11 hereof. ARTICLE 14: Amendment of Trust Agreement; Termination of Trust. 14.1 Subject to Section 14.2 of this Article 14, the Company expressly reserves the right at any time prior to the occurrence of a Change in Control to amend in writing or terminate this Trust Agreement and the Trust created thereby to any extent that it may deem advisable. No amendment shall be made without the Trustee's consent thereto in writing if, and to the extent that, the effect of such amendment is to increase the Trustee's responsibilities hereunder. Such proposed amendment shall be delivered to the Trustee as a written instrument of amendment, duly executed and acknowledged by the Company. The Company also shall deliver to the Trustee a copy of any modifications or amendments to the Plans. The Trustee's consent shall not be required for the termination of the Trust or its removal as Trustee. - - - 28 - 14.2 Notwithstanding any other provision of this Trust Agreement other than the following sentence, the provisions of this Trust Agreement and the Trust created thereby may not be amended or terminated by the Company or the Trustee after a Change in Control. The Trustee, after the occurrence of a Change in Control, upon written advice of counsel, may amend the provisions of this Trust Agreement to the extent required by applicable law. 14.3 In the event the Company terminates the Trust prior to the occurrence of a Change in Control, the Trustee shall reserve such sums it deems necessary to pay its fees and expenses, and shall distribute all remaining assets of the Trust in accordance with the written directions of the Company and the Trustee shall provide the Company with a final written account in accordance with Article 11 hereof. 14.4 This Trust shall be terminated upon notice to the Trustee by the Company of the final payment of all amounts payable by the Company or its successor thereto to all of the Participants and beneficiaries pursuant to the Plans, and the payments of all amounts due to the Trustee and all costs and expenses chargeable to the Trust. Upon termination of this Trust, the Trustee, the Trustee shall have a right to have its account settled as provided in Article 11 hereof. Promptly upon termination of this Trust, and after payment of all fees, expenses and indemnities due to or incurred by the Trustee hereunder, any remaining portion of the Trust shall be paid to the Company. - - - 29 - ARTICLE 15: Prohibition of Diversion. 15.1 Except as provided in Sections 3.2, 14.1, and 15.2 of this Article 15, at no time prior to the satisfaction of all liabilities with respect to Participants and their beneficiaries under the Plans by the Company or its successor shall any part of the corpus and/or income of the Trust be used for, or diverted to, purposes other than for the exclusive benefit of protecting participants and their beneficiaries and the assets of the Trust shall be held for the exclusive purposes of enforcing the rights of Participants in the Plans and their beneficiaries and defraying reasonable expenses of administering the Plans or performing any of the Trustee's duties under this Trust Agreement. 15.2 Notwithstanding any provision of this Trust Agreement to the contrary, the assets of the Trust shall at all times be subject to claims of the general creditors of the Company and its Affiliates. Upon notice that the Company or any Affiliate may be insolvent, the Trustee shall not pay benefits from Trust assets, shall hold the assets for the general creditors of the Company and its Affiliates, shall in its discretion make an independent determination or promptly seek a judicial determination regarding the insolvency of the Company and its Affiliates, - - - 30 - and shall deliver the assets of the Trust to satisfy the claims of creditors, as directed by the court. The Trustee shall resume payments under the terms of the Trust only after determining that the Company and its Affiliates are not insolvent or after receiving a judicial decision to that effect. The Company shall have the duty to inform the Trustee of the insolvency of the Company or its Affiliates. The Company or an Affiliate shall be considered insolvent if it is unable to pay its debts as they mature or if it is subject to a pending proceeding as a debtor under the Bankruptcy Code. ARTICLE 16: Prohibition of Assignment of Interest. No interest, right or claim in or to any part of the Trust or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution or levy of any kind, and the Trustee shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commit or anticipate the same, except to the extent required by law. ARTICLE 17: Miscellaneous. 17.1 This Trust Agreement shall be interpreted, construed and enforced, and the Trust hereby created shall be administered, in accordance with the laws of the United States and of the State of New York. Nothing in this Trust Agreement shall be construed to subject the Trust created hereunder to the Employee Retirement Income Security Act of 1974, as amended. - - - 31 - 17.2 In the event that any action is brought by the Trustee against the Company (1) in its individual capacity, or (2) on behalf of or in the name of any Plaintiff (s) individually, collectively or as a class action pursuant to Article 6, the Company hereby agrees and consents to exclusive jurisdiction and venue in any court of competent jurisdiction in the State of New York. 17.3 The Company shall, at any time and from time to time, upon the reasonable request of the Trustee, execute and deliver such further instruments and do such further acts as may be necessary or proper to effectuate the purpose of this Trust Agreement. 17.4 The titles to Articles of this Trust Agreement are placed herein for convenience of reference only, and this Trust Agreement is not to be construed by reference thereto. 17.5 This Trust Agreement shall bind and inure to the benefit of the successors and assigns of the Company and the Trustee, respectively. 17.6 This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute by one instrument, which may be sufficiently evidenced by any counterpart. - - - 32 - 17.7 If any provision of this Trust Agreement is determined to be invalid or unenforceable the remaining provisions shall not for that reason alone also be determined to be invalid or unenforceable. 17.8 Each Participant and his beneficiary is an intended beneficiary under this Trust, and shall be entitled to enforce all terms and provisions hereof with the same force and effect as if such person had been a party hereto. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed in their respective names by their duly authorized officers under their corporate seals as of the day and year first above written. CHOCK FULL O' NUTS CORPORATION By_________________________________ ATTEST: Chairman of the Board _________________________ President NATIONAL WESTMINSTER BANK USA By__________________________________ ATTEST: Assistant Vice President _________________________ Trust Officer - - - 33 - STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) On this 2nd day of June, 1988, before me personally came Dr. Leon Pordy, to me known, who, being by me duly sworn, did depose and say that he resides at 1125 Park Avenue, New York, NY, and that he is Chairman of the Board of Chock full o' Nuts Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. ________________________________ NOTARY PUBLIC STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) On this 3rd day of June, 1988, before me personally came Gerald P. Breezley, to me, known, who, being by me duly sworn, did depose and say that he resides at 501 Court Street., Hoboken, NJ, and that he is Assistant Vice President of National Westminster Bank USA the national banking association described in and which executed the foregoing instrument; that he knows the seal of said national banking association; that the seal affixed to said instruments such corporate seal; that it was so affixed by order of the Board of Directors of said national banking association; and that he signed his name thereto by like order. ________________________________ NOTARY PUBLIC - - - 34 - EXHIBIT A Authorization Pursuant to Article 6.3 of Chock Full O'Nuts Corporation Benefits Protection Trust TO: NATIONAL WESTMINSTER BANK USA This is to authorize the __________________________as Trustee Chock Full O'Nuts Corporation Benefits Protection Trust (the "Trust") to institute and maintain legal proceedings against the Company (as defined in the Trust) or other appropriate person or entity to assert the following claim(s) on my behalf: [nature of claim]. The Trustee shall have the powers and be subject to the procedures set forth in Article 6 of the Trust (a copy of which I have already received and reviewed). Any proceedings by the Trustee under this authorization may be initiated in my name as a plaintiff (or as a member of a class) or in the name of the Trustee, or both, as the Trustee determines is necessary or appropriate at the time proceedings are commenced. ____________________________ Participant - - - 35 - EXHIBIT B Revocation of Authorization Under Article 6.3 of CHOCK FULL O' NUTS CORPORATION Benefits Protection Trust TO: NATIONAL WESTMINSTER BANK USA This is to notify you that I revoke any prior authorization I have given to you as Trustee of the Chock Full O'Nuts Corporation Benefits Protection Trust (the "Trust") to maintain legal proceedings against the Company (as defined in the Trust), or otherwise to assert the following claim(s) on my behalf: [nature of claim(s)]. I understand that this Revocation of Authorization is conditioned upon, and shall not be effective until, the appointment by me of my own counsel and the appearance of that counsel in any legal proceeding on my behalf in lieu of counsel retained by the Trustee. I understand further that, upon the occurrence of these conditions, the Trustee shall have no obligation to proceed further on my behalf, or to pay any costs or expenses incurred after the delivery of this Revocation of Authorization. __________________________ Participant - - - 36 - Schedule 1 THE PLANS The following Company plans and agreements (collectively referred to as the "Plans") are subject to this Trust: 1. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Anthony J. Fazzari. 2. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Richard Kassar. 3. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and George Rudy. 4. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Howard M. Leitner. 5. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Dr. Leon Pordy. 6. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Joseph A. Breslin. 7. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Martin J. Cullen. 8. Amendment and Restatement of Employment Agreement dated as of May 25, 1988, between the Company and Neil S. Bonne. - - - 37 - 9. Employment Agreement dated as of May 25, 1988, between the Company and Raymond Hickey. 10. Employment Agreement dated as of May 25, 1988, between the Company and Peter Baer. 11. Employment Agreement dated as of May 25, 1988, between the Company and Ismar Reich. 12. Employment Agreement dated as of May 25, 1988, between the Company and Max Apfelbaum. 13. Chock Full O'Nuts Corporation Severance Policy, effective May 25, 1988. 14. Deferred Compensation Plan for Certain Key Executives, effective August 1, 1987. 15. Chock Full O'Nuts Incentive Compensation Plan, effective January 12, 1984 and Stock Bonus Plan and Trust. - - - 38 - Schedule 2 NATIONAL WESTMINSTER BANK USA Fee Schedule 1. Acceptance Fee: $ 7,500 2. Annual Administration Fee: (Pro-rated through July 31, 1988; thereafter payable in advance, based on the Company's fiscal year, beginning on August 1, 1988.) (a) Prior to a Change in Control $20,000 payable semi-annually in advance. (b) Subsequent to a Change in Control on a monthly basis in advance. $50,000 3. Out of Pocket Expenses (As incurred) 4. Reasonable legal fees for (As incurred) Trustee's Counsel (Cole & Deitz) for initial review of Schedule 1 Plans and for other services to Trustee. - - - 39 - EX-10.C 8 Exhibit 10 Material Contracts(c) PRIVILEGED AND CONFIDENTIAL 5588C 05/24/88 CHOCK FULL O' NUTS CORPORATION SEVERANCE POLICY 1.0 Intent It is the intent of Chock Full O' Nuts Corporation to provide severance benefits ("Severance Benefit Payments") for each of its Employees (as defined below whose employment with the Company (as defined below) is involuntarily terminated other than on account of Cause, Disability, Sale of a Business (all as defined below) or the Employee's death. 2.0 Scope This Policy shall apply without exception to all Employees who are described in Section 5.8 below. 3.0 Contractual Right On the date of a Qualifying Termination (as defined below), each Employee described in Section 5.8 below shall have a fully vested, nonforfeitable contractual right, enforceable against the Company, to the benefits provided for under Section 7.0 of this Policy upon the conditions specified in Section 6.1 below. Such contractual right to receive such benefits if the conditions specified in Section 6.1 are fulfilled shall arise on the date on which the Qualifying Termination occurs. 4.0 Effective Date This Policy is effective May ___, 1988 (the "Effective Date"). 5.0 Definitions For purposes of this Policy, the following definitions shall apply: 5.1 Base Pay: "Base Pay" shall mean the Employee's base annual salary as of the date of his termination of employment or, if greater, as of the date on which a Change in Control occurs, divided by Fifty-Two (52). 5.2 Cause: The Company shall have Cause to terminate an Employee only if the Employee (a) intentionally failed to perform reasonably assigned duties, (b acted dishonestly or engaged in willful misconduct in the performance of his duties, (c) engaged in a transaction in connection with the performance of his duties to the Company for personal profit to himself or (d) willfully violated any law rule or regulation in connection with the performance of his duties (other than traffic violations or similar offenses). 5.3 Change in Control: For purposes of this Policy, a Change in Control shall occur if following any event which constitutes (A) a tender or exchange offer for voting securities of the Company, (B) a proxy contest for the election of directors of the Company, or (C) a merger or consolidation or sale of all or substantially all of the business or assets of the Company, the persons constituting the Board of Directors of the Company immediately prior to the initiation of such event cease to constitute majority of the Board of Directors of the Company upon the occurrence of such event or within two years after such event. 5.4 Class A Employee: "Class A Employee" shall mean an Employee who, as of the Effective Date, has a base annual salary which is equal to or greater than $25,000. 5.5 Class B Employee: "Class B Employee" shall mean any employee who is not a Class A Employee. - - -2- 5.6 Company: "Company" shall mean Chock Full O'Nut Corporation and any successor thereto, including, without limitation, any person (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended), partnership(s) or corporation(s) acquiring directly or indirectly all or substantially all of the business or assets of Chock Full O'Nuts Corporation. 5.7 Disability: "Disability" shall mean physical or mental infirmity which impairs the Employee's ability to substantially perform his duties (as they existed immediately prior to the illness or injury) on a full-time basis for four (4) consecutive calendar months. 5.8 Employee: The term "Employee" shall mean an active employee of the Company (or any of its subsidiaries, including Greenwich Mills Company and its Subsidiaries), other than an active employee who, (i) is included in a unit of employees covered by a collective bargaining agreement; or (ii) at the time of his termination of employment, is covered under an individual employment or severance agreement (as distinguished from a plan or program which is applicable to groups of salaried employees generally) which provides for compensation and/or benefits upon termination of employment. 5.9 Sale of a Business: For purposes of this Policy a "Sale of a Business" shall be deemed to have occurred if the company has sold a subsidiary, division or other business unit in which the Employee was employed before such sale, and the Employee has been offered employment with the purchaser of such subsidiary, division or business unit on substantially the same terms and conditions under which he worked for the Company. - - -3- 6.0 When Provisions Apply 6.1 The benefits provided for under Section 7.0 of this Policy shall be provided to each Employee described in Section 5.8 above who incurs a Qualifying Termination. For the purposes of this Policy, a "Qualifying Termination" shall occur only if an Employee's employment with the Company is involuntary terminated other than for Cause, Disability, Sale of a Business or death. 6.2 The fact that an Employee is eligible to immediately receive retirement benefits under the Chock Full O'Nuts Corporation Pension Plan the Greenwich Mills Company retirement plan or any other Company employee benefit plan, practice or policy shall not render him ineligible for the benefits under this Policy. 7.0 Severance Benefit Payment 7.1 Subject to Section 7.3, each Class A Employee entitled to benefits under this Policy shall receive the Severance Benefit Payment described below. Complete Severance Benefit Payment Years of Service Upon Qualifying Termination (i) Prior to, or *(ii) Within Two Years More than Two * After Change in Control Years After, * Control a Change in * Control * * (a) 1 - 2 times Base Pay * 4 times Base Pay 5 per Complete Year * per Complete Year of Service * of Service * (b) 6 - 10 times Base Pay * 20 times Base Pay, 10 plus 3 times Base * plus 6 times Base Pay per Complete * Pay per Complete Year of Service in * Year of Service in excess of 5 * excess of 5 * (c) More 25 times Base Pay, * 50 times Base Pay, than 10 plus 4 times Base * plus 8 times Base Pay per Complete * Pay per Complete Year of Service in * Year of Service in excess of 10 * excess of 10 -4- 7.2 Subject to Section 7.3, each Class B Employee entitled to benefits under this Policy shall receive the Severance Benefit Payment described below. Complete Severance Benefit Payment Years of Service Upon Qualifying Termination (i) Prior to, or *(ii) Within Two Years More Than Two * After Change in Years After, * Control * (a) 1 - 1.33 times Base Pay * 2.67 times Base Pay 5 per Complete Year * per Complete Year of Service * of Service * (b) 6 - 10 6.67 times Base * 13.33 times Base Pay, plus 2 times * Pay, plus 4 times Base Pay per Complete * Base Pay per Complete Year of Service in * Year of Service in excess of 5 * excess of 10 * (c) More 16.67 times Base * 33.33 times Base than 10 Pay, plus 2.67 * Pay, plus 5.33 times Base Pay per * times Base Pay per Complete Year of * Complete Year of Service in excess * Service in excess of 10 * of 10 7.3 In no event shall the Severance Benefit Payment paid to an Employee in connection with a Qualifying Termination that occurs prior to a Change in Control or more than two years after a Change in Control exceed fifty-two (52) times his Base Pay. In addition, in no event shall the Severance Benefit Payment paid to an Employee in connection with a Qualifying Termination that occurs within two years after a Change in Control exceed One Hundred Four (104) times his Base Pay. - - -5- 7.4 An Employee shall be credited with a number of weeks of service equal to the number of weeks of Base Pay he receives or is entitled to receive as a Severance Benefit Payment for the purpose of determining eligibility, vesting and accrual service under all employee benefit plans of the Company, including, but not limited to, group health and life insurance, long-term disability, the Chock Full o'Nuts Corporation Pension Plan, and the Greenwich Mills Company retirement plan. 7.5 The Severance Benefit Payments described in Sections 7.1 and 7.2 above shall be payable in addition to, and not in lieu of, all other accrued, vested, earned, or deferred compensation rights, options, or other benefits which may be payable or owed to an Employee following termination of employment under any plan, including but not limited to accrued vacation or sick pay, compensation or benefits payable under any employee benefit plans, practices or policies of the Company (or any of its subsidiaries, including Greenwich Mills Company and its Subsidiaries). 7.6 All Severance Benefit Payments provided for in Sections 7.1 and 7.2 above shall be paid within twenty-five (25) days after the Employee's Qualifying Termination and, subject to applicable withholding requirements, shall be paid in a lump sum. 7.7 Severance Benefit Payments shall not be offset or reduced by any unemployment insurance benefit or income from subsequent employment that the Employee may receive. An Employee who is entitled to benefits under this Policy shall not be required to accept or to seek other employment as a condition of receiving such benefits. 7.8 If an employee who is entitled to benefits under this Policy dies before receiving the Severance Benefit Payment, such Payment shall be made to the Employee's surviving spouse, or, if applicable, to the Employee's estate. - - -6- 8.0 Successor to Company This Policy shall bind any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, in the same manner and to the same extent that the Company would be obligated under this Policy if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Policy, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company's to assume and agree to perform the Company's obligations under this Policy, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. 9.0 Amendment and Termination on or After a Change in Control Prior to the occurrence of a Change in Control, this Policy may be amended in any respect whatsoever or terminated by the Board. If a Change in Control occurs, the Policy may not be amended or terminated in any respect whatsoever for a period of two years following such Change in Control if the effect of such amendment or termination would result in any reduction or elimination of any benefits the Employee would have been entitled to absent such amendment or termination nor shall any such amendment or termination change or eliminate any of the circumstances pursuant to which the Employee would have become entitled to the benefits provided herein absent such amendment or termination. 10.0 Employment Status This Policy does not constitute a contract of employment or impose on the Company any obligation to retain any individual as an Employee, to change the status of any Employee's employment, or to change the Company's policies regarding termination of employment. - - -7- 11.0 Administration The Board of Directors of the Company, or a Committee appointed by the Board shall be responsible for implementing, administering and interpreting the provisions of this Policy. 12.0 Severability If any provision of this Policy is held invalid or unenforceable, the remainder of this Policy shall nevertheless remain in full force and effect, and if any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 13.0 Governing Law The interpretation, construction and performance of this Policy shall in all respects be governed by the laws of New York. - - -8- EX-99.CHOCK 9 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of October 16, 1992, by and between CHOCK FULL O'NUTS CORPORATION, a New York corporation ("Buyer"), and NESTLe BEVERAGE COMPANY, a Delaware corporation ("Seller"), the holder of all of the issued and outstanding shares of common stock of Cain's Coffee Co., a Delaware corporation (the "Company"). RECITALS A. Seller owns all 15,000 of the issued and outstanding shares of common stock, $100.00 par value (the "Shares") of the Company. B. Seller desires to sell the Shares to Buyer, and Buyer desires to purchase the Shares from Seller, for the consideration and on the terms and conditions set forth in this Agreement. TERMS AND CONDITIONS NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, agreements, representations and warranties contained in this Agreement, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Sale and Purchase of Shares. Upon the terms and subject to all of the conditions contained herein, Seller hereby agrees to sell, assign, transfer and deliver the Shares to Buyer on the Closing Date (as defined in Section 2.4 hereof), and Buyer hereby agrees to purchase and accept the Shares from Seller on the Closing Date. 2. Purchase Price and Payment Thereof. 2.1 Purchase Price. The aggregate purchase price for the Shares being purchased pursuant to Section 1 and for Seller's agreement as set forth in Section 5.7 (which shall be allocated between the Shares and the covenant in the manner required by Section 5.10) shall be Forty Seven Million Dollars ($47,000,000) adjusted by that amount (the "Adjustment Amount"), which may be a positive or a negative number, as determined pursuant to Section 2.2 hereof (together, the "Purchase Price"). 2.2 Calculation of Adjustment Amount. Commencing promptly after the Closing Date, Buyer shall prepare and deliver, within the ninety (90) days following the Closing Date, to Seller an unaudited statement of net assets of the Company as of the Closing Date (the "Closing Statement of Net Assets"), in the form (including, without limitation, the line items, columns and headings) of the unaudited Statement of Net Assets at June 30, 1992 attached hereto as Schedule 2.2 (the "Opening Statement"). In addition, Buyer shall prepare and deliver a calculation of the amount, if any, payable under Section 2.3.2 (the "Payment Calculation") which calculation shall be based on the working capital accounts (i.e. current assets and current liabilities) shown on both the Closing Statement of Net Assets and the Opening Statement. Buyer shall prepare the Closing Statement of Net Assets using United States generally accepted accounting principles, except as modified to take into account the first three items listed on Schedule 3.7.1B, applied on a basis which is consistent with the Opening Statement. The parties acknowledge that the Closing Statement of Net Assets will be adjusted to include an accrual relating to 1992 employee bonuses which is the fourth item on Schedule 3.7.1B. The parties also acknowledge that the Closing Statement shall not include any liability of the Company for which Seller has agreed to be solely responsible for the payment thereof pursuant to the terms of this Agreement or the Tax Indemnity Agreement. Seller and its representatives shall be entitled to review the work papers, schedules, memoranda and other documents used in the preparation by Buyer of the Closing Statement of Net Assets and the Payment Calculation. In the event that Seller shall in good faith disagree with the Closing Statement of Net Assets or the Payment Calculation, Seller and Buyer shall, during the sixty (60) days after delivery to Seller of the Closing Statement of Net Assets and the Payment Calculation, negotiate in good faith to resolve any disagreements with respect thereto. If at the end of such 60-day period no such resolution is reached, such disagreements shall be resolved by a nationally recognized firm of independent public accountants agreed upon by Buyer and Seller. The determination made by such firm shall be conclusive, binding on, and non-appealable by, the parties hereto. The fees and disbursements of such firm of independent public accountants shall be divided and borne equally by Seller and Buyer. The fact that Seller's accountants may have made adjustments or determinations in order to prepare the financial statements referred to in Section 5.5 shall not be disclosed to independent accountants employed to resolve any disagreement under this Section 2.2. 2.3 Payment of Purchase Price. The Purchase Price is payable as follows: 2.3.1 Payment at Closing. On the Closing Date, Buyer shall pay Forty Seven Million Dollars ($47,000,000) to Seller by wire transfer in immediately available funds to such account as shall be specified by Seller. 2.3.2 Payment of Adjustment Amount. (a) If the amount of total current assets less total current liabilities ("Net Working Capital") shown on the Closing Statement of Net Assets shall be less than $11,385,000, Seller shall pay to Buyer an amount equal to the difference between such Net Working Capital and $11,385,000, together with interest on such amount from the Closing Date to the date of payment of such amount at a rate of six percent (6%) per annum, such payment to be made within two (2) business days after the final determination of the Adjustment Amount (which determination shall be in accordance with the procedures set forth in Section 2.2. hereof) by wire transfer of immediately available funds to an account designated by Buyer. (b) If the amount of Net Working Capital shown on the Closing Statement of Net Assets shall be greater than $11,385,000, Buyer shall pay to Seller an amount equal to the difference between such Net Working Capital and $11,385,000, together with interest on such amount from the Closing Date to the date of payment of such amount at a rate of six percent (6%) per annum, such payment to be made within two (2) business days after the final determination of the Adjustment Amount (which determination shall be in accordance with the procedures set forth in Section 2.2 hereof) by wire transfer of immediately available funds to an account designated by Seller. 2.4 Delivery of Purchased Shares. At the Closing (as defined in Section 2.5 hereof), Seller shall deliver or cause to be delivered to Buyer a stock certificate(s) representing all 15,000 of the outstanding shares of Common Stock of the Company, duly executed in blank or accompanied by a stock power(s) duly executed in blank, in proper form for transfer. Title to the Shares will be as provided in Section 3.4.2 hereof. 2.5 Closing Date. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Seller at 345 Spear Street, San Francisco, California on November 30, 1992, or on such other date and/or place as may hereafter be agreed upon in writing by the parties hereto (the "Closing Date"). 3. Representations and Warranties of Seller. Seller hereby represents and warrants to and agrees with Buyer as follows: 3.1 Authority. The Company has the full corporate power and authority to own, lease and operate its assets, properties and business as it is now being conducted. This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as enforceability may be limited by laws relating to insolvency or bankruptcy or by equitable principles. Seller has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement, and to perform its obligations hereunder. Except for (i) the filing required by the provisions of the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 (the "HSR Act"), and (ii) the filing required by the Federal Trade Commission's Consent Order, a copy of which is attached hereto as Schedule 3.1 (the "Consent Order"), no consent, authorization or approval of, exemption by, or filing with, any domestic governmental or administrative authority, or any court is required to be obtained or made by Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. 3.2 Organization and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified or otherwise authorized as a foreign corporation to transact business and is in good standing in each jurisdiction in which the nature of its business or the character of its properties require such qualification wherein the failure so to qualify or be authorized could have a material adverse effect on the business or properties of the Company. The jurisdictions in which the Company is so qualified are set forth on Schedule 3.2 attached hereto. 3.3 Interested Parties. Except as set forth on Schedule 3.3 attached hereto, no material asset used in the Company's business is owned by Seller or by any affiliate of Seller other than the Company. Except as set forth on Schedule 3.3 and except for supply arrangements entered into in the ordinary course of the Company's business, there are no material contracts, agreements or other arrangements which will continue following the Closing between the Company and Seller or the Company and any affiliate of Seller. 3.4 Capital Stock. 3.4.1 Outstanding Stock. The total authorized capital stock of the Company consists of 50,000 shares of common stock, $100 par value per share, of which 15,000 shares are issued and outstanding; all of which issued and outstanding Shares are owned by Seller. No other class of capital stock of the Company is authorized or outstanding. All of the Shares are duly authorized and are validly issued, fully paid and nonassessable. 3.4.2 Title to Purchased Shares. Seller owns beneficially and of record, free and clear of any lien, security interest, option or other encumbrance, the Shares and, upon delivery of and payment for such Shares as herein provided, Seller will convey to Buyer good and valid title thereto, free and clear of any lien, security interest, option or other encumbrance of any kind. 3.5 Options or Other Rights. There are no outstanding rights, subscriptions, warrants, calls, unsatisfied preemptive rights, options, conversion rights, commitments or other agreements of any kind to purchase or otherwise to receive from the Company any of the outstanding, authorized but unissued, unauthorized or treasury shares of the capital stock of the Company, including the Shares, or any other security of the Company, and there is no outstanding security of any kind convertible into such capital stock, including the Shares. 3.6 Certificate of Incorporation; By-Laws. Attached hereto as Schedule 3.6 are true, complete and correct copies of (a) the Certificate of Incorporation, as amended to date, of the Company and (b) the By-Laws, as currently in effect, of the Company. 3.7 The Company's Financial Condition. 3.7.1 Financial Information. Seller has delivered to Buyer: (a) unaudited statements of operations and cash flows for the Company for each of the four years ended on or about December 31, 1988 through December 31, 1991, and for the six month period ended June 30, 1992 and (b) unaudited statements of net assets for each of the four years ended on or about December 31, 1988 through December 31, 1991, and at June 30, 1992, copies of which are attached hereto as Schedule 3.7.1A. Such financial statements fairly present the financial condition and results of operations of the Company as of the respective dates thereof and for the periods therein referred to. Such financial statements were prepared in accordance with International Accounting Principles consistently applied and on a basis consistent with prior periods. Such financial statements comply with United States generally accepted accounting principles ("GAAP") in all material respects except as set forth on Schedule 3.7.1B, attached hereto. In addition, Seller has delivered to Buyer the Opening Statement, a copy of which is attached hereto as Schedule 2.2. Such Opening Statement has been prepared in a manner which is consistent with the financial statements for the six months ended June 30, 1992, except that the Opening Statement has been adjusted as set forth on Schedule 3.7.1C to reflect obligations of the Company which have terminated, obligations which will be the sole responsibility of Seller after the sale of the Company, adjustments for over accruals or accounting reclassifications. 3.7.2 Absence of Certain Changes. Except as set forth on Schedule 3.7.2 attached hereto, since the date of the Opening Statement, there has not been (i) any transaction not in the ordinary course of the Company's business; (ii) any change in the Company's accounting methods or practices (including, but not limited to, any change in depreciation or amortization policies or rates); (iii) any sale or transfer of any of the assets of the Company or any cancellation of any debts, claims or any amendments to any contracts, except in the ordinary course of business and consistent with past practice; (iv) the incurrence by the Company of any liability whatsoever which would in accordance with GAAP be classified as anything other than a current liability; (v) any increase in the salary or compensation of any of the employees of the Company other than in the ordinary course of business consistent with past practice; or (vi) any other event or condition of any character which has materially and adversely affected the assets or the business of the Company, with the possible exception of general business and economic conditions which are also applicable to companies situated in similar businesses. 3.7.3 No Undisclosed Liabilities. The Opening Statement summarizes the Company's liabilities using the accounting principals described in Section 3.7.1, applied on a consistent basis with prior periods. To the best of Seller's knowledge, (i) the summary of liabilities shown on the Opening Statement is true and correct in all material respects and (ii) the Company has no contingent liabilities except those which may arise out of those matters disclosed elsewhere in this Agreement and the schedules attached hereto. 3.7.4 Disclaimer Regarding Projections. In connection with Buyer's investigation of the Company, Buyer received from Seller certain projections, estimates and other forecasts. Buyer acknowledges that there are uncertainties inherent in attempting to make such projections, estimates and forecasts, that Buyer is familiar with such uncertainties, that Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections, estimates and other forecasts so furnished to it, and that Buyer shall have no claim against Seller with respect thereto. Accordingly, neither Seller nor any of its agents or representatives makes any representation or warranty with respect to such projections, estimates and forecasts. 3.8 Title to Assets. Except as set forth in Schedule 3.8 attached hereto, the Company has good title to all of the assets owned by it (other than the Real Property as to which Section 3.18 relates), including without limitation, all assets shown on the Opening Statement but excluding assets disposed of in the ordinary course of business since the date of the Opening Statement, free and clear of all liens, security interests and other encumbrances of any kind other than (i) liens, if any, for personal property taxes and assessments not yet due and payable, (ii) leasehold interests or other possessory interests incurred by the Company in the ordinary course of its business, and (iii) other liens, security interests incurred in the ordinary course of the Company's business which individually and in the aggregate do not have a materially adverse affect on the business or financial condition of the Company. 3.9 Books and Records. The minute books and other records of the Company are complete and correct and have been maintained in accordance with sound business practices. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the Company's stockholder, the Board of Directors and committees of the Board of Directors of the Company and no meetings of the Company's stockholder, the Board of Directors of the Company or any committee thereof has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company. 3.10 Compliance with Law. Except as set forth on Schedule 3.10A attached hereto and except with respect to any and all environmental laws, rules and regulations as to which no representations are being made except as set forth below or as may be set forth in Section 9 hereof and except with respect to intellectual property matters as to which the sole representations are set forth in Section 3.22, the Company and its use and occupancy of its properties are in compliance with all applicable laws, rules and regulations to which the Company or its properties are subject, including, without limitation, laws, rules and regulations relating to occupancy, health, safety or employment. The Company has not failed to obtain or adhere to any license, permit or authorization (including any license permit or authorization required by environmental laws) required by it to operate its business or to occupy or use any of its properties or assets, which failure individually or in the aggregate has had or will have a material cost or material adverse effect on the Company. A list of all such material licenses or permits is attached hereto as Schedule 3.10B. 3.11 Products. Schedule 3.11 attached hereto, contains a list of all categories of products presently manufactured or sold by the Company. None of the products manufactured or sold by the Company in the past five (5) years has been subject to recall or recalled by the Company. 3.12 Condition and Sufficiency of Assets. Except as set forth on Schedule 3.12 attached hereto, any and all machinery and equipment which is material to the business of the Company is in good operating condition and repair, normal wear and tear excepted, and is adequate for the uses to which such machinery and equipment are being put. The Company's equipment is sufficient for the continued conduct of the Company's business after the Closing in substantially the same manner as conducted prior to the Closing. 3.13 No Brokerage or Finder's Fees. Neither the Company nor Seller has incurred any liability to any broker, finder or agent other than Lazard Freres & Company for any brokerage fees, finder's fees or commissions with respect to the transactions contemplated by this Agreement. Any such fee payable to Lazard Freres & Company will be the sole and exclusive obligation of Seller. 3.14 No Violation. Except as set forth in Schedule 3.14, neither the execution and delivery of this Agreement nor the consummation or performance of any of the transactions contemplated hereby will, directly or indirectly: (a) contravene, conflict with or result (with or without notice or lapse of time) in a violation of (i) any of the provisions of the current certificate of incorporation or the Bylaws of the Company or (ii) any resolution adopted by the Board of Directors or the stockholder of the Company; (b) contravene, conflict with or result (with or without notice or lapse of time) in a violation of any federal or state law, statute or ordinance, or any order, judgment, injunction, ruling, decision, writ or sentence rendered by any court, agency or other governmental body applicable to or binding upon the Company or Seller, or any of the assets owned or used by the Company which would have a material adverse effect on the Company or its properties taken as a whole; (c) contravene, conflict with or result (with or without notice or lapse of time) in a violation or breach of any of the provisions of, or give any person or entity the right (with or without notice or lapse of time) to declare a default or to accelerate the maturity or performance of, to amend the terms of, or terminate any contract, license or permit which, if terminated, would have a material adverse effect on the Company or its properties taken as a whole, and to which the Company is a party or under which the Company has any rights, or by which the Company or any of the assets owned or used by the Company may be bound; or (d) result in the creation or imposition or any security interest, lien or other encumbrance upon the property or assets of the Company. 3.15 Consents to Assignment. No consent, approval or other action of any third party is required to be obtained by the Company or Seller in connection with the transactions contemplated in this Agreement except as set forth in Schedule 3.15 attached hereto; provided, however, that this Section 3.15 shall not apply with respect to any consent or approval which may be required if the failure to obtain such consent or approval would not have a material adverse effect on the business or the properties of the Company. 3.16 No Litigation. Except as set forth in Schedule 3.16 attached hereto, there are no legal, administrative, arbitration or other proceedings, or claims, actions or investigations ("Legal Proceedings") pending and, to the best of Seller's knowledge (based solely upon the knowledge of Tom Donnell, John Masters, Seller's General Counsel and the knowledge of the staff members of Seller's legal department who have direct responsibility for monitoring the legal affairs of the Company), no other Legal Proceedings are currently threatened against the Company which, if adversely determined would have a material adverse effect on the business or financial condition of the Company. Other than as set forth in Schedule 3.16 attached hereto, neither the Company nor Seller is subject to any judgment, order or decree entered in any lawsuit or proceeding which has had or may have, if adversely determined, a material adverse effect on the business or financial condition of the Company. Except as set forth on Schedule 3.16, neither the Company nor any insurance carrier of the Company has, since January 1, 1991, paid or reserved an amount in excess of $25,000 with respect to any third-party liability claim (including, without limitation, product liability claim), for personal injury or property damage made or threatened against the Company. 3.17 Benefit Plans. 3.17.1 Except as set forth in Schedule 3.17 attached hereto, the Company is not a party to (i) any "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (an "Employee Benefit Plan"), (ii) any profit sharing, pension, deferred compensation, bonus, stock option, stock purchase, severance, health, welfare or incentive plan or agreement, (iii) any written plan or policy providing for "fringe benefits" to its employees, including but not limited to vacation, paid holidays, personal leave, employee discount, educational benefit or similar programs, or (iv) any written employment agreement (individually a "Plan" and collectively the "Plans"). 3.17.2 Except as set forth in Schedule 3.17, the Company has made no contributions to any multiemployer plan described in Section 3(37) of ERISA (a "Multiemployer Plan") or any Employee Benefit Plan. 3.17.3 To the best of Seller's knowledge, each Plan which is an "employee benefit plan", as defined in Section 3(3) of ERISA, complies in all material respects with the requirements provided by any and all statutes, orders or governmental rules or regulations currently in effect and applicable to the Plan, including but not limited to ERISA and the Code. 3.17.4 All reports, forms and other documents required to filed with any government entity with respect to any Plan (including without limitation, summary plan descriptions, Forms 5500 and summary annual reports) have been timely filed and are accurate in all material respects. 3.17.5 The Company has no liability nor is it threatened with any liability (i) for the termination of any single employer plan under Section 4062 or 4064 of ERISA or any multiple employer plan under Section 4063 of ERISA, (ii) for any lien imposed under Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest payments required under Section 302(e) or any taxes imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, (iv) for a fine under Section 501 of ERISA, or (v) for an transaction within the meaning of Section 4069 of ERISA. 3.17.6 The Company has no current liabilities with respect to withdrawals from any Multiemployer Plans which could subject Seller to any controlled group liability under Section 4001(b) of ERISA. 3.17.7 All of the Plans, to extent applicable, are in compliance with the continuation of group health coverage provisions contained in Section 4980B of the Code and Sections 601 through 608 of ERISA. 3.17.8 Except for the Central States, Southeast and Southwest Area Pension Plan, from and after the Closing Date, neither Buyer nor the Company shall have any obligation under nor incur any liability whatsoever with respect to any of the plans listed on Schedule 3.17 or under any unidentified Plan which may have been maintained by or on behalf of Seller or the Company or to which Seller or the Company made contributions prior to the Closing Date. 3.18. Real Property. Schedule 3.18A contains a complete and accurate legal description of all real property owned by the Company (the "Real Property") and Schedule 3.18B contains a complete list of all real property as to which the Company is a party as lessee. All the leases pertaining to properties described in Schedule 3.18B are in full force and effect, and there does not exist any material default or event that with notice or lapse of time, or both, would constitute a material default by the Company or, to the best of Seller's knowledge, by any lessor, under any of these leases. The Company has good title to the Real Property, free and clear of all mortgages, deeds of trust, encumbrances, liens and charges of every kind and character, except for (i) liens for taxes and assessments not yet due and payable, and (ii) covenants, conditions, restrictions, rights, easements and other matters which do not materially interfere with the current use of the Real Property by the Company. Except as set forth on Schedule 3.18C, attached hereto, all buildings on the Real Property are in good condition and repair, normal wear and tear excepted, and conform in all material respects with all applicable ordinances, regulations and building, zoning and other laws. All buildings located on the Real Property are located within the record property lines. 3.19 Accounts Receivable. All accounts receivable reflected on the Opening Statement and all accounts and other receivables acquired by the Company subsequent to June 30,1992 to and including the Closing Date arose and/or will arise from bona- fide transactions in the ordinary course of business. The reserve for bad debts included in computing amounts set forth on the Opening Statement was computed in a manner consistent with past practice. 3.20 Insurance. Schedule 3.20 attached hereto contains an accurate and complete description of all current material policies of fire, liability, workers' compensation and other forms of insurance including, without limitation, surety bonds maintained with respect to the Company. Such policies are carried by insurers of recognized responsibility and are in full force and effect. All such insurance shall be in effect through the Closing Date and shall be terminated as of midnight on the Closing Date. Except as set forth on Schedule 3.20, no insurance coverage of the Company is maintained through self-insurance. 3.21 Ownership of Machinery and Equipment. All of the machinery, equipment, furniture, vehicles, related capitalized items and other tangible personal property which are material to the business of the Company are, and on the Closing Date will be, owned by the Company, except as otherwise indicated on Schedule 3.21 attached hereto. For purposes of this Section 3.21, tangible personal property shall not be considered material to the business of the Company if it is leased pursuant to a lease which may be cancelled on ninety (90) days notice or less without penalty or if it is subject to payment of not more than $50,000 prior to termination. 3.22 Intellectual Properties. 3.22.1 Ownership of Intellectual Properties. Schedule 3.22A attached hereto contains a complete and correct list of all patents, patent rights, patent applications, licenses, shop rights, trademarks, trademark applications, tradenames, copyrights and similar rights (collectively "Rights") currently owned by the Company or licensed to the Company for use in the conduct of the business of the Company, indicating the registered and beneficial owner and the renewal date thereof. Except as otherwise set forth in this Section 3.22, the Company owns or has a valid license to use all Rights necessary to the conduct of its business as such business is currently being conducted. To Seller's knowledge, the conduct of the business of the Company, as such business is currently being conducted, does not materially conflict with valid intellectual property rights of others, except as otherwise set forth in this Section 3.22. The Company has entered into a License Agreement with Societe des Produits Nestle S.A. ("SPN") pursuant to which it has the right to use such trademarks, tradenames and other intellectual property rights as are designated on Schedule 3.22B attached hereto (the "Marks"), subject to the provisions of Section 3.22.2, below which License Agreement will be cancelled on or prior to the Closing Date. 3.22.2 Interest of Others in Marks. Seller has disclosed to Buyer, and Buyer acknowledges receipt of, that material information known or possessed by Seller, which, to the best of Seller's knowledge (based solely upon the knowledge of Seller's General Counsel), relates to the trademarks, tradenames, or other intellectual property rights which are material to the Company's business, including without limitation, the fact that: (i) the "CAIN'S" trademark, Registration No. 682,261 with the U.S. Patent and Trademark Office is restricted to use in the U.S. States of Oklahoma, Texas, Arkansas, Missouri, Kansas, California, New Mexico, Arizona, Mississippi and Colorado but is also being used by the Company in the States of Louisiana, Georgia, Alabama, Iowa, Wisconsin, Illinois, Kentucky, Tennessee, and Indiana; (ii) John E. Cain Co., a Massachusetts corporation which has no affiliation with the Company, owns a registration for "CAIN'S" trademark Registration No. 992,196 relating to certain food items; (iii) there are certain state registrations for the "CAIN'S" trademark which are owned by John E. Cain Co. in the states of Rhode Island, Connecticut, Delaware, Florida, Maryland, Maine, New Hampshire, New Jersey, Ohio, Pennsylvania, Virginia, Vermont, New York and Massachusetts, (iv) Borden Inc. sells a potato chip product under the "Cain's" name, although Seller knows of no registration by Borden; and (v) Seller is aware of other current uses of the "CAIN" or "CAIN'S" name which do not appear to be closely related to products which are similar to those sold by the Company. Buyer further acknowledges that there may be other material information relating to the trademarks or other intellectual property rights which Seller is not aware of, and has not investigated, which may affect such trademarks, tradenames or other intellectual property rights. 3.22.3 Transfer of Marks. Based on the foregoing, Seller represents and warrants that the Agreement for the Purchase and Sale of Trademarks, a copy of which is attached hereto as Exhibit C, and this Agreement, taken together, are sufficient to transfer to Buyer all of the Company's and SPN's right, title and interest in and to the Marks, without representation of any kind as to the scope or extent of the rights associated with such Marks. 3.23 Inventory. All Inventory reflected on the Opening Statement and all inventory acquired by the Company subsequent to June 30, 1992 to and including the Closing Date was and will be acquired in the ordinary course of business. The inventory reflected on the Opening Statement has been accounted for using the first in, first out inventory method; however, there has been no analysis to determine if any adjustments should be made to take into account inventories which may have a cost higher than current market values. The inventory to be reflected on the Closing Statement of Net Assets will be accounted for, at the lower of cost (first-in, first-out) or market of such inventory, in accordance with GAAP. 3.24 Capital Projects and Expenditures. All capital projects and capital expenditures undertaken by the Company, or to which the Company is committed, which have not been completed by the date hereof and which involve an expected expenditure on or after the date hereof of more than $50,000 to complete are set forth on Schedule 3.24 attached hereto. 3.25 Subsidiaries. Except as set forth in Schedule 3.25, the Company does not, directly or indirectly, own any stock or other equity interest in any other person or entity. 3.26 Compensation, Vacation Time, Bonuses. Attached hereto as Schedule 3.26A is (i) a list of the names, titles and annual compensation (including bonus) of each employee of the Company who, as of the Closing Date, are entitled to receive base compensation in excess of $50,000 per annum; and (ii) the accrued vacation time of each such employee. The policies of the Company do not permit employees to carryover accrued vacation time from year to year provided, however, under limited circumstances the Company has allowed employees to carry over up to one-half of their annual accrued vacation until the end of May the following year. Traditionally, bonuses paid to employees of the Company have been calculated and paid in the manner set forth on Schedule 3.26B attached hereto. 3.27 Bank Accounts. Attached hereto as Schedule 3.27 is a list of each financial institution in which the Company maintains an account or safety deposit box, the number of such account or safety deposit box, and the names of all persons holding check signing or withdrawal powers or other authority with respect thereto. 3.28 Suppliers, Distributors and Customers. Schedule 3.28, attached hereto, lists the five largest suppliers of the Company by dollar amount for the twelve months ending on June 30, 1992, and the five largest direct purchasers of the Company's products by dollar amount for the six months ending on June 30, 1992. In the last twelve months no such supplier or customer of the Company has notified the Company in writing that it has cancelled or otherwise terminated, or threatened in writing to cancel or otherwise terminate, its relationship with the Company. 3.29 Material Contracts and Other Agreements. Schedule 3.29A, attached hereto, sets forth all of the (i) contracts and other agreements with any current officer or director, and material agreements with affiliates of the Company; (ii) contracts and other agreements with any labor union or association representing any employee; (iii) any contracts and other agreements between the Company and any person which relate to the sale, distribution or marketing of any of the products of the Company where the Company's sales to such person in the twelve (12) month period ending June 30, 1992 exceeded $100,000 except for purchase orders received from customers of the Company in the ordinary course of business; (iv) material contracts and other material agreements pursuant to which any party is required to purchase or sell a stated portion of its requirements or output from or to another party; (v) material contracts and other material agreements for the sale of any of its assets or for the grant to any person of any preferential rights to purchase any of its assets; (vi) joint venture agreements; (vii) contracts and other agreements restraining the Company in any respect from engaging or competing in any line of business or with any person or in any geographical area; (viii) contracts and other agreements relating to the acquisition by the Company of any operating business or the capital stock of any other person; (ix) contracts and other agreements relating to the borrowing of money, other than those relating to the financing of automobiles or other vehicles not in excess of $100,000; (x) contracts or agreements wherein the Company has guaranteed the obligation, or agreed to be responsible for the negligence, of any other person or entity; or (xi) any other contracts or other agreements pursuant to which payments in excess of $100,000 have been made or which are for terms longer than ninety (90) days. The items listed on Schedule 3.29A (hereinafter the "Material Contracts") have been listed by subsections which correspond to the subsections used above. True and complete copies of all of the Material Contracts have been made available to Buyer. Except as set forth on Schedule 3.29B, all of such Material Contracts are valid and binding upon the Company. Except as set forth on Schedule 3.29C, the Company is not in default in any material respect under any of the Material Contracts, nor, to the best of Seller's knowledge, is any other party to any of the Material Contracts in default thereunder in any material respect. For purposes of this Section 3.29, a contract shall not be considered material if it is terminable on ninety (90) days notice or less without penalty or is subject to payment of not more than $100,000 prior to termination. Except as set forth on Schedule 3.29D attached hereto, no such Material Contract contains any requirement with which there is a reasonable likelihood that (i) the Company or any other party thereto will be unable to comply or (ii) compliance therewith by the Company would have a material adverse effect on the business of the Company. 3.30 Renegotiation Act. Since January 1, 1990, the Company has not made any repayments pursuant to the provisions of the Federal Renegotiation Act on account of any contract with the United States Government or any agency, department or subdivision thereof. 3.31 Material Misstatements or Omissions. No representation or warranty by Seller contained in this Agreement or the Schedules attached hereto, and no document or certificate furnished or to be furnished to Buyer in connection herewith or with the transactions contemplated hereby, contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements of fact contained herein or therein at the time such statement was made not misleading. 4. Representations and Warranties of Buyer. Buyer hereby further represents and warrants to Seller as follows: 4.1 Authority. This Agreement has been adopted, and its execution and delivery to Seller and the performance thereof have been duly authorized by the Board of Directors of Buyer, and no further action is necessary on the part of Buyer to make this Agreement valid and binding upon it. Except for the filing required by the provisions of the HSR Act, no consent, authorization or approval of, exemption by, or filing with, any domestic governmental or administrative authority, or any court, is required to be obtained or made by Buyer in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. 4.2 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of New York. 4.3 Brokerage or Finder's Fees. Buyer has not incurred any liability to any broker, finder or agent other than Alex. Brown & Sons Incorporated for any brokerage fees, finder's fees or commissions with respect to the transactions contemplated by this Agreement. Any such fee payable to Alex. Brown & Sons Incorporated will be the sole and exclusive obligation of Buyer. 5. Seller's Covenants and Agreements. Seller hereby affords Buyer the following affirmative and negative covenants, thereby agreeing to the following: 5.1 No Corporate Borrowings. From the date hereof through the Closing Date, Seller will use its best efforts to ensure that the Company shall not, except in the ordinary course of business, without the prior written consent of Buyer, borrow monies for any reason or draw down on any line of credit or long-term debt obligation, or become the guarantor, surety or endorser of the obligation of any other person, partnership, corporation or other business entity. 5.2 Conduct of Business. 5.2.1 Diligent Conduct. From the date hereof through the Closing Date, Seller will use its best efforts to ensure that the Company shall (i) conduct its business diligently and in the ordinary course, (ii) preserve intact its business and marketing organization, (iii) retain in its employ all of its key employees and (iv) preserve its relationships with its suppliers, customers, sales representatives, and others having business relations with it. 5.2.2 Capital Commitments. From the date hereof through the Closing Date, Seller will use its best efforts to ensure that the Company shall not, without the prior written consent of Buyer, make commitments for capital expenditures in excess of an aggregate of $100,000; provided, however, that the Company may make expenditures in the event of an emergency without the prior written consent of Buyer. 5.2.3 Properties and Assets. From the date hereof through the Closing Date, Seller will use its best efforts to ensure that the Company shall not, without the prior written consent of Buyer, sell or transfer the Real Property or any other assets, cancel any debts or claims, or mortgage, pledge or subject to lien, charge or encumbrance of any kind (other than liens for taxes and assessments not delinquent) any of its assets, except in the ordinary course of business. 5.2.4 Contracts. From the date hereof through the Closing Date, Seller will use its best efforts to ensure that the Company shall not, without the prior written consent of Buyer, enter into, amend or terminate any Material Contract other than in the ordinary course of business. 5.2.5 Insurance. From the date hereof through the Closing Date, Seller will not cancel any of the insurance policies described in Schedule 3.17 attached hereto. 5.2.6 Compensation of Employees. From the date hereof through the Closing Date, the Company may, in the ordinary course of business and consistent with past practice, increase the compensation payable or to become payable to any of its officers, employees or agents, or make any bonus payment or similar arrangement with any such person. 5.2.7 Long Term Liabilities. On or prior to the Closing Date, Seller shall have caused the Company to pay any and all liabilities of the Company that would be classified as long- term liabilities of the Company in accordance with GAAP except as modified by Schedule 3.7.1B, such that on the Closing Date the Company shall have no liabilities except for liabilities that would be classified as current liabilities in accordance with GAAP except as modified by Schedule 3.7.1B; it being understood that Seller shall have no obligation to pre-pay lease payments thereafter due on leased vehicles. 5.3 Access and Information. Subject to the Buyer's continuing compliance with the provisions of Section 6, prior to the Closing, Seller shall afford to Buyer and Buyer's counsel, accountants and other representatives, reasonable access to all properties, books, contracts, records and personnel of the Company and any records concerning the Company maintained and accumulated by its counsel, accountants and other representatives. In addition, Seller shall use its reasonable efforts to provide Buyer with all reasonably obtainable information relating to any matter involving the Company's insurance coverages, exposures and claims with respect to any claim since January 1, 1989. 5.4 Disposition of Employee Benefit Plans. 5.4.1 Retirement Plans. Seller shall continue to maintain the employee benefit plans set forth in Schedule 3.17, attached hereto, for the benefit of the employees of the Company until the Closing Date. Thereafter Seller shall treat the employees of the Company as terminated employees in accordance with the current terms and provisions of such plans; provided, however, that on the Closing Date Seller agrees to fully vest those employees who are not vested in the Nestle USA, Inc. Retirement Plan or the Nestle USA, Inc. Retirement Savings Plan (401K) as of the Closing Date and who on such date have a minimum of thirty (30) months of service as determined under the terms of such plans, in those benefits accrued by them under such plans to and including the Closing Date. Seller shall have no further obligation with respect to employees of the Company with less than thirty (30) months of service. 5.4.2 Disability. Seller shall continue to provide both short-term and long-term disability and related health benefits to employees of the Company until the Closing Date, and, from and after the Closing Date, to each employee or former employee of the Company who, as of the Closing Date, is receiving or is entitled to receive such benefits pursuant to any of Seller's disability plans. 5.4.3 Retiree Health Benefits. Until the Closing Date Seller shall continue to provide health benefits to retired employees of the Company who had retired prior to the Closing Date and, from and after the Closing Date Seller shall continue to provide health benefits to such retired employees, and after they retire from the employ of the Company and the Buyer, to those employees of the Company who were qualified for post retirement health benefits on the Closing Date (except for the fact that they were not retired), all of whom are listed on Schedule 5.4.3 attached hereto, on the terms on which they were qualified on the Closing Date to the extent Seller provides such benefits to other qualified retirees of Seller. If it is finally determined by a court of competent jurisdiction that any person employed by the Company at any time prior to the Closing Date is entitled to post- retirement health benefits as a result of actions taken by Seller or the Company prior to the Closing Date relating to conditions of employment, Seller shall be liable therefore. 5.4.4 Severance Obligations. If any person employed by the Company on the Closing Date is terminated after the Closing Date, and it is finally determined by a court of competent jurisdiction that such person is entitled to severance benefits of more than two weeks of compensation as a result of actions taken by Seller or the Company on or prior to the Closing Date relating to conditions of employment, Seller shall be liable for that portion of the severance payable to such person which exceeds two weeks of compensation. 5.4.5 Health Benefits. Seller shall continue to be responsible for medical expenses incurred by an employee of the Company following the Closing Date provided such employee was hospitalized in accordance with the terms of Seller's welfare benefit plans prior to midnight on the Closing Date. Seller's obligation under this Section 5.4.5 shall terminate when such employee is discharged from the hospital and Seller shall have no liability for such employee's subsequent medical expenses, including any follow-up doctor's visits or additional hospitalizations. 5.5 Audited Financial Statements. On or before the second day prior to the Closing Date, Seller shall use its best efforts to deliver to Buyer financial statements of the Company for the years ended December 31, 1991, and December 31, 1990 and the nine months ended September 30, 1992, which financial statements (the "Audited Statements") shall have been reported on by a nationally recognized firm of certified public accountants and shall be in form satisfactory to meet the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to Buyer, including, without limitation, the provisions of Regulation S-X promulgated by the SEC, using, to the extent permitted under such rules, accounting principles previously used by the Company applied in a manner which is consistent with the Company's prior use. Any failure by Seller to deliver such financial statements shall not constitute a breach of this Agreement provided Seller has used its best efforts to fulfill its obligations under this Section 5.5 and such failure shall not give rise to any damages of any kind, but shall give Buyer the right to terminate this Agreement as a consequence of the failure of the condition set forth in Section 8.1.12. Seller's obligation to use its best efforts shall not require the expenditure of more than $350,000. Buyer will not unreasonably withhold its consent to any request for a reasonable extension of time to complete the preparation of the Audited Statements. Buyer and its accountants shall be afforded reasonable access to and shall be entitled to review such work papers, schedules, memoranda and other documents as may have been prepared by the Company or the accountants in connection with the preparation of the Audited Statements. 5.6 Intentionally Omitted. 5.7 Covenant Not to Compete. For a period of five (5) years from and after the Closing Date, neither Seller nor any affiliate of Seller will compete with the Company in the foodservice direct store delivery coffee business in those localities which are serviced by the Company on the Closing Date (the "Restricted Service Areas"), provided, however, that during the two (2) year period commencing on the third anniversary of the Closing Date and terminating on the fifth anniversary of the Closing Date, Seller, or any affiliate of Seller, may acquire a company which engages in the foodservice direct store delivery coffee business in the Restricted Service Areas, and may continue such business, provided that the sales and revenues derived from the foodservice direct store delivery coffee business represent no more than twenty-five percent (25%) of the overall sales and revenues of the company being acquired in any of the previous three years before the date of acquisition. Buyer and Seller expressly acknowledge and agree that, from and after the Closing Date, Seller may continue its Sark's Coffee retail direct store delivery business in such areas as it is currently conducted or may hereafter be expanded. Buyer and Seller expressly acknowledge and agree that, from and after the Closing Date, Nestle Brands Foodservice Company, an affiliate of Seller, may continue its current distribution of foodservice products, as such business may hereafter be expanded or modified. Except as otherwise authorized by the terms of this Section 5.7, Seller will not in competition with the Company (i) solicit or deal with any customer of the Company; or (ii) hire away, interfere with or attempt to hire away any employee of the Company. In the event that the provisions of this Section 5.7 should ever be deemed to exceed the time or geographic limitations or any other limitations permitted by applicable laws, then such provisions shall be deemed reformed to the maximum permitted by applicable laws. Seller specifically acknowledges and agrees that (i) the foregoing covenant is an essential element of this Agreement and that, but for the agreement of Seller to comply with such covenant, Buyer would not have entered into this Agreement; (ii) the remedy of law for any breach of the foregoing covenant will be inadequate; and (iii) Buyer, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief in the event the Seller or any affiliate of the Seller violates the provisions of this Section 5.7. 5.8 HSR Filing. On or prior to October 28, 1992, Seller shall file with the Federal Trade Commission ("FTC") and the U.S. Department of Justice ("DofJ") the notification to be filed under the HSR Act with respect to the transactions contemplated by this Agreement. Seller shall use its best efforts (a) to respond to any request for additional information made by such agencies, and (b) to resist vigorously any assertion that the actions contemplated by the Agreement constitute a violation of the anti-trust laws of the United States or any State; provided, however, that Seller shall not be obligated to litigate any such assertion and shall be deemed to have complied with the requirements of this Section 5.8 even though it elects not to pursue litigation if it has pursued all other reasonable methods of resistance. 5.9 Section 338(h)(10) Election. Seller will join with Buyer in making an election under Sections 338(g) and 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code") and any corresponding elections under state and local tax law (collectively a "Section 338(h)(10) Election") with respect to the purchase and sale of the stock of the Company hereunder. A regular exclusion election under Reg. Section 1.338-5T(c)(2) will be made. Seller will pay any federal tax (including, without limitation, income tax) attributable to the making of the Section 338(h)(10) Election. Seller will also pay any state or local tax (including without limitation, income tax) attributable to an election under state or local law similar to the election available under Section 338(g) of the Code (or which results from the making of an election under Section 338(g) of the Code) with respect to the purchase and sale of the stock of the Company hereunder where the state or local jurisdiction (i) does not provide or recognize a Section 338(h)(10) Election or (ii) does not apply its provisions corresponding to Section 338(h)(10) of the Code to the purchase and sale of the stock of the Company. 5.10 Allocation of Purchase Price. The parties agree that the Purchase Price and the liabilities of the Company will be allocated to the assets of the Company for all purposes (including tax and financial accounting purposes) in the manner set forth on Schedule 5.10 attached hereto. Seller agrees to file all tax returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation. 5.11 Inter-Company Product Sales. For a period of five (5) years from and after the Closing Date Seller agrees to supply to the Company, for its use, those products listed on Schedule 5.11 attached hereto, which products represent all of the products currently sold by Seller (or its affiliates) to the Company. Seller agrees to sell such products to the Company at prices calculated in the same manner as the prices for such inter-company product sales were calculated prior to the Closing. The price for those products to be co-packed by Seller shall continue to be based primarily on Seller's cost of ingredients plus an amount which represents a portion of Seller's fixed overhead costs. Seller acknowledges that the Company may, but shall not be required to, purchase some or all of such products at its sole option. Seller shall provide Buyer with a draft of a contract manufacturing agreement with respect to those products to be co-packed by Seller which incorporates the terms specified in this Section 5.11 and shall use its best efforts to reach an agreement with Buyer as to the terms thereof on or before the Closing Date and to execute such agreement on the Closing Date, it being understood and agreed that Seller's obligations hereunder are not conditioned upon the prior execution of such agreement. 5.12 Assumption of Future's Contracts. On the Closing Date and prior to preparation of the Closing Statement of Net Assets, Seller will assume, and shall be entitled to the benefit of, any and all open contracts for the future delivery of green coffee or raw tea to the Company, excepting only those contracts which cover such raw materials which may then be in transit to the Company and where title to such raw materials has passed to the Company. Prior to Closing, Seller will cooperate with Buyer in Buyer's efforts to assure that the supply of raw materials to the Company will not be interrupted immediately after the Closing Date, and upon request, Seller will supply to Buyer from time to time the list of open contracts entered into by or on behalf of the Company, including the date of the contract, the price, the amounts covered by the contract and the scheduled delivery date or dates, and the amount of inventories on hand at, and in transit to, the Company. 5.13 Assumption of Liability for Claims of Common Carriers. The parties acknowledge that the Company has received and may hereafter receive a number of claims from bankruptcy trustees who represent various common carriers to the effect that such carriers undercharged the Company for shipping product by failing to charge the appropriate ICC tariff fee. Seller agrees to defend the Company against any such claims to the extent the claim relates to services provided prior to the Closing Date and to assume liability for amounts which it is finally determined that the Company owes to any bankrupt common carrier provided such amounts relate to services provided to the Company prior to the Closing Date. If Buyer or the Company shall admit liability for any such claim or take any action which has a material adverse impact on Seller's ability to defend itself against such claims, this covenant shall terminate with respect to the claims so involved. 6. Buyer's Covenants and Agreements. Buyer hereby affords Seller the following affirmative and negative covenants, thereby agreeing to the following: 6.1 Nondisclosure of Confidential Information of the Company. Buyer acknowledges that it remains bound by the terms of the confidentiality agreement heretofore signed by it and attached hereto as Exhibit A. 6.2 Employee Terminations. 6.2.1 Severance Benefits. Buyer agrees that if any person employed by the Company on the Closing Date is terminated, other than for cause, Buyer shall be responsible for paying to each such employee as a severance benefit two weeks of compensation if such person had been employed by the Company for more than one year and one week of compensation if such person had been employed by the company for three or more months but not more than one year. 6.2.2 Warn Notice. Buyer acknowledges that it shall be Buyer's responsibility to provide any notice of layoff or plant closing that might be required pursuant to the Worker Adjustment and Retraining Notification Act of 1988 with respect to any plant closings or terminations from and after the Closing Date. 6.3 Consent Order. Buyer agrees to be bound by the terms of the Federal Trade Commission's Consent Order attached hereto as Schedule 3.1. 6.4 Assumption of Leases. Buyer agrees to assume all of Seller's obligations arising from and after the Closing Date (i) under the fleet vehicles leases with respect to those vehicles disclosed on Schedule 6.4 attached hereto, and (ii) under the AS400 computer lease; provided that Buyer is receiving the benefits thereof. If either of the lessors of such vehicles or the AS400 lessor fails to consent to an assignment of such leases, Seller agrees either (i) to continue to provide Buyer with the benefits of such lease in which event Buyer shall continue to pay all of Seller's obligations thereunder or (ii) to terminate such leases and to pay any penalties imposed as a result of such early termination. 6.5 Disposition of Employee Benefit Plans. Buyer agrees that except as otherwise contemplated by Section 5.4 hereof, from and after midnight on the Closing Date, the Company and each of its salaried employees and hourly employees shall cease participating in the welfare benefit plans maintained by Seller and commence participation in the welfare benefit plans presently maintained by Buyer to the extent, if any, that each such employee qualifies for such participation pursuant to the terms of such plans. Buyer further agrees that Seller's medical and dental insurance plans shall only be responsible for medical and dental expenses incurred before the Closing Date or covered by Section 5.4 hereof. 6.6 HSR Filing. On or prior to October 28, 1992, Buyer shall file with the FTC and the DofJ the notification required to be filed under the HSR Act with respect to the transactions contemplated by this Agreement accompanied by the appropriate filing fee. Buyer shall use its best efforts (a) to respond to any request for additional information made by such agencies, and (b) to resist vigorously any assertion that the actions contemplated by this Agreement constitute a violation of the anti-trust laws of the United States or any State; provided, however, that Buyer shall not be obligated to litigate any such assertion and shall be deemed to have complied with the requirements of this Section 6.6 even though it elects not to pursue litigation if it has pursued all other reasonable methods of resistance. 6.7 Allocation of Purchase Price. The parties agree that the Purchase Price and the liabilities of the Company will be allocated to the assets of the Company for all purposes (including tax and financial accounting purposes) in the manner set forth on Schedule 5.10 attached hereto. Buyer agrees to file and to cause the Company to file, all tax returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation. 6.8 Access to Records. Buyer agrees to allow representatives of Seller, during a reasonable time following the Closing, access to the original books and records being transferred to Buyer for the purpose of defending any claim or cause of action which may be alleged or filed against Seller relative to the Company. Buyer further agrees that it will cooperate with Seller in such matters to the extent requested by Seller, at the cost of Seller, including compensation for time spent by personnel of Buyer and the reimbursement of Buyer's out-of-pocket costs. Buyer also agrees to notify Seller prior to the destruction of records relating to periods prior to the Closing. 6.9 Inter-Company Product Sales. Buyer shall use its best efforts to reach an agreement with Seller as to the terms of the contract manufacturing agreement referred to in Section 5.11 hereof on or before the Closing Date and to execute such agreement on the Closing Date. 7. Termination of Agreement. From and after December 30, 1992 either party who is not otherwise in default under this Agreement may terminate this Agreement by giving a written notice of termination to the other party. In addition, at any time the parties may mutually agree to an early termination. No party by its own actions may intentionally delay the Closing beyond December 30 in order to have a right of termination. Any intentional delay by a party shall result in an extension of the December 30 date insofar as that party (but not the other party) is concerned. A termination shall be effective on the date that a termination notice is properly given, a party exercises a right to terminate at Closing because of the failure of a material condition (if the Closing is on or after December 30, 1992) or the effective termination date under a mutual agreement (the "Termination Date"). From and after the Termination Date this Agreement shall become void and shall have no further force or effect whatsoever, except that the provisions of this Section 7 and of Section 6.1 shall survive the termination and shall continue in full force and effect. If this Agreement is terminated by other than mutual agreement, and the non-terminating party is not in material breach of its obligations contained in this Agreement, then the terminating party shall pay to the non-terminating party, an amount equal to all reasonable expenses actually incurred by the non- terminating party in connection with this transaction. 8. Conditions Precedent to Closing. 8.1 Conditions Precedent to Obligations of Buyer. The Closing shall not take place unless all of the following conditions are either waived by Buyer or fulfilled. 8.1.1 Correctness of Representations and Warranties. The representations and warranties of Seller contained in this Agreement or any other document delivered to Buyer at the Closing in connection with this Agreement shall be true on and as of the Closing Date, as if made on and as of the Closing Date. 8.1.2 Performance of Covenants and Agreements. Seller shall have performed and complied with all covenants, obligations and agreements to be performed or complied with by it on or before the Closing Date pursuant to this Agreement. 8.1.3 Opinion of Seller's Counsel. Buyer shall have received an opinion from Seller's General Counsel dated the Closing Date substantially in the form of Exhibit B attached hereto. In rendering such opinion such counsel may rely on governmental advice, factual certificates, opinions of local counsel and such other matters as such counsel may deem reasonably appropriate and as are acceptable to Buyer's counsel. Such opinion may also contain such assumptions and qualifications as such counsel deems appropriate and as are acceptable to Buyer's counsel. 8.1.4 Good Title to Shares. Seller shall have transferred all the Shares to Buyer, free and clear of all liens, encumbrances or restrictions. No claim shall have been filed, made or threatened by any person or entity asserting that he or she is entitled to any part of the Purchase Price paid for the Shares. 8.1.5 No Prohibition of Transaction. No proceeding or regulation or legislation shall have been instituted, threatened or proposed before, nor any order issued by, any governmental body to enjoin, restrain or prohibit or obtain substantial damages (a) in respect of, or which is related to, or arises out of, this Agreement or the consummation of these transactions, or (b) which, in the reasonable judgment of Buyer, could have a materially adverse effect on the assets, liabilities, business prospects, results of operations or financial condition of the Company. 8.1.6 Compliance with Law. Seller and Company shall have obtained any and all permits, approvals and consents of any governmental body which counsel for Buyer may reasonably deem necessary or appropriate so that consummation of these transactions will be in compliance with applicable requirements, including without limitation those specifically set forth on Schedule 8.1.6 attached hereto. 8.1.7 FIRPTA Affidavit. Buyer shall have received from Seller an affidavit declaring that it is not a foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Internal Revenue Code and Income Tax Regulations. 8.1.8 Consents. On or prior to the Closing Date, Seller shall furnish Buyer with evidence of such consents as are listed on Schedule 3.15 attached hereto; provided, however, that although Seller shall use its best efforts to obtain the consent of the lessors of the vehicles referred to on Schedule 6.4 attached hereto and of the lessor of the AS400 computer equipment, the parties hereto agree that Seller shall have no liability if it is unable to secure such consent and that Buyer will assume the obligations established by Section 6.4 hereof. 8.1.9 Sale of Marks. Buyer and Societe des Produits Nestle S.A. ("SPN"), the owner of the Marks, shall have entered into a purchase and sale agreement substantially in the form of Exhibit C attached hereto, pursuant to which SPN shall sell and Buyer shall purchase the Marks and such purchase and sale shall have been completed simultaneously with the Closing. 8.1.10 Tax Indemnity Agreement. Buyer, Seller, the Company and Nestle Holdings, Inc. shall have entered into a Tax Indemnity Agreement substantially in the form of Exhibit D attached hereto. 8.1.11 HSR Filing Period. The applicable waiting period under the HSR Act shall have expired. 8.1.12 Financial Information. Seller has delivered to Buyer the audited financial statements referred to in Section 5.5. 8.2 Conditions Precedent to Obligations of Seller. The Closing shall not take place unless all of the following conditions are either waived by Seller or fulfilled: 8.2.1 Correctness of Representations and Warranties. The representations and warranties of Buyer contained in this Agreement or any other document delivered by Buyer to Seller at the Closing in connection with this Agreement shall be true on and as of the Closing Date, as if made on and as of the Closing Date. 8.2.2 Performance of Covenants and Agreements. Buyer shall have performed and complied with all covenants, obligations and agreements to be performed or complied with by it on or before the Closing Date pursuant to this Agreement. 8.2.3 Opinion of Buyer's Counsel. Seller shall have received from Dreyer and Traub, counsel for Buyer, an opinion dated the Closing Date, substantially in the form of Exhibit E attached hereto. In rendering such opinion such counsel may rely on governmental advice, factual certificates, opinions of local counsel and such other matters as such counsel may deem reasonably appropriate and as are acceptable to Seller's counsel. Such opinion may also contain such assumptions and qualifications as such counsel deems appropriate and as are acceptable to Seller's counsel. 8.2.4 Compliance with Law. Buyer shall have obtained any and all permits, approvals and consents of any governmental body which counsel for Seller may reasonably deem necessary or appropriate so that consummation of these transactions will be in compliance with applicable requirements, including without limitation those specifically set forth in Schedule 8.2.4. 8.2.5 No Litigation. No suit, action, arbitration or legal administrative or other proceeding or governmental investigation shall be pending or threatened against the Company or Seller in relation to or affecting consummation of the transactions contemplated herein. 8.2.6 Tax Indemnity Agreement. Buyer, Seller the Company and Nestle Holdings, Inc. shall have entered into a Tax Indemnity Agreement substantially in the form of Exhibit D attached hereto. 8.2.7 HSR Filing Period. The applicable waiting period under the HSR Act shall have expired. 8.2.8 Sale of Marks. Buyer and SPN shall have entered into a purchase and sale agreement substantially in the form of Exhibit C attached hereto, pursuant to which SPN shall sell and Buyer shall purchase the Marks and such purchase and sale shall have been completed simultaneously with the Closing. 9. Mutual Covenants. 9.1 Public Statements. Except as may be required by law, from the date of this Agreement until the Closing Date, the parties hereto will not make, issue or release any oral or written public announcement or statement concerning, or acknowledgment of the existence of, or reveal the terms, conditions and status of the transaction contemplated by this Agreement, without first making a good-faith attempt to obtain the prior approval of, or concurrence in, the contents of such announcement, acknowledgement or statement by the other parties, which approval or concurrence will not be unreasonably withheld or delayed. 9.2 Assumption of Certain Potential Environmental Liabilities of the Company by Seller and Buyer. The parties agree that this Section 9.2 is intended merely to provide an allocation of potential exposure as between the parties hereto, and nothing in this Section 9.2 shall constitute an admission of any liability, responsibility, wrongful or negligent conduct or bad faith by the Company or by any of the parties hereto. 9.2.1 Seller's Assumption. Upon the terms and subject to all of the conditions contained in this Agreement, and for the consideration Seller has received from Buyer under this Agreement on the date hereof, Seller agrees that Seller shall assume and shall indemnify Buyer and the Company from and against any and all Indemnified Losses (as defined in Section 10.1) up to the Maximum Environmental Liability Amount (as defined in Section 10.4) relating to: (i) the matters set forth as Items 4 and 5 on Schedule 3.16 (ii) On-site Environmental Liability (as hereinafter defined) existing on the Closing Date and/or arising from activities of the Company occurring prior to the Closing Date, and (iii) Off-site Environmental LiabilitY (as hereinafter defined) existing on the Closing Date and/or arising from activities of the Company occurring prior to the Closing Date. Seller's obligation under this Subsection 9.2.1 shall be to pay Indemnified Losses with respect to remediation or investigation of the matters described in clauses (i), (ii) and (iii) of the preceding sentence. Remediation and investigation costs shall be deemed to include applicable fines and penalties and damages to third parties arising from On-site Environmental Liability and Off-site Environmental Liability. In undertaking to fulfill any obligation to remediate or investigate any On-site Environmental Liability or Off-site Environmental Liability, Seller either shall employ qualified third party providers to perform the work on a timely basis in a workmanlike manner in accordance with all laws, and in a manner which shall not unreasonably interfere with the operations of the Company, or shall pay to unrelated third parties the Company's share of costs incurred by them to complete the required remediation or investigation. Seller shall not in any event be responsible for or pay consequential, punitive or other costs or damages incurred by the Company or Buyer over and above the actual costs necessary to effect Seller's obligations under clauses (i), (ii) or (iii) of the first sentence of this Subsection, except for consequential damages of the Company or Buyer arising as a direct result of a Governmental Shutdown (as hereinafter defined). The term "On-site Environmental Liability" shall mean liabilities with respect to the remediation and investigation of Hazardous Substances (as hereinafter defined) deposited, stored or buried under any of the Real Property described on Schedule 3.18A or the leased property described on Schedule 3.18B or any other property owned or occupied by the Company at any time prior to the Closing Date pursuant to (i) any valid governmental request, claim, directive or order based upon any requirement of law existing on the date of this Agreement, whether issued before or after the date of this Agreement, or (ii) any liability (whether incurred before or after the date of this Agreement) to any other person or entity arising from any requirement of law existing on the date of this Agreement. The term "Off-site Environmental Liability" shall mean amounts incurred to pay the Company's share of any costs which arise as a result of (i) any valid governmental request, claim, directive or order based upon any requirement of law existing on the date of this Agreement, whether issued before or after the date of this Agreement, or (ii) any liability (whether incurred before or after the date of this Agreement) to any other person or entity arising from any requirement of law existing on the Date of this Agreement which requires the Company to pay or share in the costs associated with the clean-up of Hazardous Substances (as hereinafter defined) which were removed from the Company's premises and which were disposed of by or on behalf of the Company or by a contractor employed by the Company. If any On-site Environmental Liability or Off-site Environmental Liability relates to activities conducted both before and after the Closing Date, Seller shall be responsible only for the proportionate share of the Indemnified Losses relating to activities occurring prior to the Closing Date. The term "Governmental Shutdown" means the closure of a Company plant or other significant facility for a period of three or more months as a consequence of a court or administrative order issued on the basis of a violation of an environmental law existing on the date of this Agreement. The term "Hazardous Substances" shall mean flammable explosives, radioactive materials, hazardous, toxic or dangerous wastes, petroleum or waste oil products, asbestos and urea formaldehyde. 9.2.2 Buyer's Obligation to Cooperate. Buyer on behalf of itself and the Company hereby agrees (i) to cooperate fully and in good faith and to do any and all such things as Seller, its agents, employees and technical professionals may reasonably request as being necessary or desirable to effect the obligation to be undertaken by Seller pursuant to Subsection 9.2.1, and (ii) to provide Seller assistance in undertaking to reduce the Company's exposure with respect to any environmental liabilities which may be covered by Subsection 9.2.1 or to prove that the Company is not obligated or has only a limited obligation with respect to any such exposure. Without limiting the foregoing, Buyer shall cause the Company and its employees to cooperate fully with the Seller and to afford the Seller, its agents, employees and technical professionals access to relevant records relating to matters which may be Seller's responsibility under Subsection 9.2.1. Nothing in this Section 9.2.2 shall be deemed to require that Buyer or the Company incur any third party expenses; provided, however that neither Buyer nor the Company shall be entitled to reimbursement for any costs or expenses incurred by them or by their agents or employees or by any technical professionals they elect to employ in connection with their obligations under this Subsection 9.2.2. If Seller believes that Buyer and/or Company have failed to co-operate in the manner required by this Section 9.2.2, Seller shall give Buyer written notice specifying the basis for such non-cooperation and Buyer shall have thirty (30) days within which to remedy such failure to cooperate. At the end of such thirty (30) day period, if Buyer is materially in violation of its obligations under the provisions of this Section 9.2.2, Seller's obligations under this Subsection 9.2.2 shall terminate with respect to the particular environmental liability with respect to which the non-cooperation notice was given ("Non-Cooperation Liability"), and from and after such termination all Indemnified Losses incurred in connection with such Non-Cooperation Liability shall be the sole obligation and responsibility of the Buyer and the Company. 9.2.3 Notice of Remediation. If Buyer believes that Seller is obligated to remedy an On-Site Environmental Liability or an Off-site Liability under clause (ii) or clause (iii) of the first sentence of Subsection 9.2.1, Buyer shall give Seller prompt written notice specifying in reasonable detail the nature of the On-site Environmental Liability or the Off-site Environmental Liability, as the case may be (an "Environmental Notice"). If Seller is required to remedy the alleged On-site Environmental Liability or the alleged Off-site Environmental Liability described in an Environmental Notice the parties shall meet to establish a reasonable plan of remediation. If either Seller does not believe it is required to remedy the alleged On-site Environmental Liability or alleged Off-site Environmental Liability described in an Environmental Notice or the parties are unable to agree upon a plan of remediation, either party may request arbitration under Section 11 to resolve the matter. 9.2.4 Expiration. All of the Seller's obligations under this Section 9.2 shall lapse and shall be of no further force or effect whatsoever from and after the earliest of (i) the date when the Company has made the payments or has otherwise incurred costs under this Section 9.2 in an aggregate amount which equals or exceeds the Maximum Environmental Liability Amount, (ii) the date when the Company is no longer an affiliate of the Buyer (provided, however, that Seller's obligations hereunder shall not expire if the Company is merged into Buyer). In addition, Seller's obligations under this Section 9.2.1 shall terminate in their entirety and shall be of no further force and effect with respect to any On-site Environmental Liability unless an Environmental Notice with respect thereto has been given to the Seller on or before the fifth (5th) anniversary of the Closing Date and Seller's obligations under this Section 9.2.1 shall terminate in their entirety and shall be of no further force or effect with respect to any Off-site Environmental Liability unless an Environmental Notice with respect thereto has been given to the Seller on or before the tenth (10th) anniversary of the Closing Date. 9.3 Other Actions. Each party hereto agrees to execute and to deliver such instruments, in form and substance mutually agreeable to the other party hereto, as such other party may reasonably require in order to carry out the terms of this Agreement or the transactions contemplated by this Agreement. 9.4 Best Efforts. Each party hereto will use those efforts that a prudent person desirous of achieving a result would use under similar circumstances to ensure that such result is achieved as expeditiously as possible in order to cause all conditions to the consummation of the transactions contemplated hereby to be satisfied, and shall not take any action that would cause any of its representations and warranties in this Agreement not to be true and correct as of the Closing Date. 10. Indemnifications. 10.1 Seller's Promise to Indemnify. Subject to Section 10.4 hereof, Seller agrees to indemnify, defend and hold harmless Buyer and the Company against any and all losses, claims, liabilities, damages, actions, penalties, fines, costs and expenses, including attorneys' fees and costs (the "Indemnified Losses"), arising from, in connection with or with respect to the following items: (i) any misrepresentation, breach or inaccuracy of any representation or warranty set forth in Section 3 hereof (except Section 3.17.8), or (ii) any nonfulfillment of or failure to comply with any agreement, condition or covenant on the part of Seller under this Agreement (except Sections 5.4, 5.7, 5.10, 5.11 and 9.2) or in any agreement or document delivered pursuant hereto or in connection herewith or with the Closing of the transactions contemplated hereby, (iii) any claim against Buyer or the Company for liability based upon those items which Seller has assumed liability for pursuant to Sections 3.17.8, 5.4, 5.7, 5.10, 5.11 and 9.2 hereof and the Tax Indemnity Agreement, or (iv) any claim for bodily injury or property damage against Buyer or the Company relating to any product sold or distributed by the Company prior to the Closing Date; provided, however, that as a condition precedent to any indemnification pursuant to clause (i) or (ii) hereof, the Indemnitor (as hereinafter defined) shall have received written notice of a claim from the Indemnified Party (as hereinafter defined) pursuant to Section 10.3 within sixty (60) days of the expiration of an eighteen month period following the Closing Date, and provided further that as a condition precedent to any indemnification pursuant to clause (iv) hereof, the Indemnitor shall have received written notice of a claim from the Indemnified Party (as hereinafter defined) within sixty (60) days of the fifth anniversary of the Closing Date. 10.2 Buyer's Promise to Indemnify. Buyer agrees to indemnify, defend and hold harmless Seller against any and all Indemnified Losses, arising from, in connection with or with respect to the following items: (i) any misrepresentation, breach or inaccuracy of any representation or warranty set forth in Section 4 hereof, or (ii) any nonfulfillment of or failure to comply with any agreement, condition or covenant on the part of Buyer under this Agreement or in any agreement or document delivered pursuant hereto or in connection herewith or with the Closing of the transactions contemplated hereby, or (iii) any claim against Seller for liability based upon those items which Seller has not assumed liability for pursuant to Section 9.2 hereof, or (iv) any loss, cost, claim, liability or expense arising out of the operation or ownership of the Company's business from and after the Closing Date, including, but not limited to, any claim for (a) wrongful discharge or (b) breach of any employment contract or union agreement listed on any schedule attached hereto which arises from any termination which occurs on or after the Closing Date or any claim of failure to provide severance benefits or notice of layoffs or plant closings as required by Section 6.2 hereof; provided, however, that as a condition precedent to any indemnification pursuant to clause (i) or (ii) of this Section 10.2, the Indemnitor (as hereinafter defined) shall have received written notice of a claim from the Indemnified Party (as hereinafter defined) pursuant to Section 10.3 within sixty (60) days of the expiration of an eighteen month period following the Closing Date; provided, further, that the indemnification obligation set forth in clauses (iii) and (iv) of this Section 10.2 shall survive in perpetuity. 10.3 Procedure for Indemnification. If there is asserted any claim, liability or obligation that in the judgment of a party indemnified above (the "Indemnified Party") may give rise to any Indemnified Losses, or if the Indemnified Party determines the existence of the foregoing whether or not the same shall have been asserted, such Indemnified Party shall give the party from whom indemnity is sought (the "Indemnitor") notice within thirty (30) business days of the assertion of any claim, liability or obligation, or within fifteen (15) business days of receipt of notice of the filing of any lawsuit based upon such assertion, or, with respect to a claim not yet asserted against the Indemnified Party, within fifteen (15) days after the determination by an executive officer of the Indemnified Party of the same, and shall give Indemnitor a reasonable opportunity of assuming the defense of such claim, liability or obligation, using counsel acceptable to the Indemnified Party; provided, however, that the Indemnified Party shall have the right to participate in such defense, except that if the Indemnified Party retains separate counsel, other than in the event of a conflict of interest requiring the retention of separate counsel, the Indemnified Party shall assume the expense of the separate counsel. Failure by the Indemnified Party to give timely notice pursuant to this Section 10.3 shall not relieve the Indemnitor of its obligations, except to the extent that the Indemnitor is actually prejudiced by such failure to give timely notice. No settlement or adjustment shall be made without the Indemnified Party's prior written consent, which consent will not be unreasonably withheld. If Indemnitor fails to contest in good faith any such claim, liability or obligation, the Indemnified Party shall have the right to defend, settle or pay the same and pursue its remedies against Indemnitor hereunder. The Indemnified Party shall cooperate with Indemnitor in any such defense which Indemnitor elects to assume in the event Indemnitor makes such request to the Indemnified party and such request is reasonable, provided Indemnitor will hold the Indemnified Party harmless from all its out-of-pocket expenses, including attorneys' fees, incurred in connection with the Indemnified Party's cooperation. If there is a disagreement among the parties as to whether any claim, liability or obligation may give rise to any Indemnified Loss, then the Indemnified Party shall have the right to defend, settle or pay the same, or to pursue its remedies against Indemnitor hereunder; provided, however, Indemnitor shall have the right to participate in such defense and no settlement or adjustment shall be made without Indemnitor's prior written consent, which consent shall not be unreasonably withheld. 10.4 Limitations on Seller's Liability. Except for Indemnified Losses incurred as a consequence of Seller's breach of a representation or warranty contained in any one or more of Sections 3.13 or 3.17.8 or Seller's covenants and agreements contained in Sections 5.2.8, 5.4, 5.7, 5.9, 5.10, 5.11, 9.2 or the Tax Indemnity Agreement (the "Fully Indemnified Provisions"), which Indemnified Losses Seller shall pay or reimburse without regard to a minimum amount, until such time as it is determined that Indemnified Losses which would be Seller's responsibility under this Section 10 arising as a consequence of any other provisions other than the Fully Indemnified Provisions of this Agreement, calculated by excluding amounts paid under the Fully Indemnified Provisions, exceed $750,000, Seller shall have no responsibility under this Section 10. However, once the $750,000 amount has been exceeded, Seller's responsibility shall extend to the full indemnified amount, including the items which were encompassed in the first $750,000. Notwithstanding any other provision of this Agreement or any provision of law, Seller's maximum liability for indemnification, breach of contract, or under any other theory of law, under this Agreement or in any other way related to the transactions contemplated by this Agreement shall not exceed $26,000,000 (the "Maximum Liability Amount"). The maximum amount for which Seller will have responsibility under this Section 10 will equal the Maximum Liability Amount. The maximum amount for which Seller will have responsibility under Section 9.2 (the "Maximum Environmental Liability Amount") will equal the Maximum Liability Amount, less any amounts incurred or payable by Seller under this Section 10.4 and less any other amounts which may be credited against the Maximum Liability Amount as provided in this Section 10.4. 10.5 No Double Benefit. No amount which results in a downward adjustment under Section 2.3.2 or caused Nine Month Operating Profit to be reduced below $6,688,000 under Section 12.4.3 shall be counted as an Indemnified Loss under this Section 10. 11. Arbitration. 11.1 Binding Arbitration of All Disputes. Any and all disputes or claims between the parties hereto arising out of or relating to the validity, interpretation, enforceability, or performance of this Agreement, including, without limitation, this arbitration clause, shall be solely and finally settled by binding arbitration in New York, New York and, except as otherwise provided in this Section 11, in accordance with the then prevailing commercial arbitration rules (the "Rules"), but not under the auspices, of the American Arbitration Association, provided that in any case where the rules of the American Arbitration Association or its successor do not exist or in the opinion of the arbitrators cannot be equitably applied, the arbitration shall proceed in accordance with the laws relating to arbitration then in effect in the State of New York. The parties hereto expressly agree that binding arbitration is intended by the parties to be the sole procedure available to either party for the resolution of any and all disputes or claims between the parties, and each party hereby waives the right to pursue any other procedure, including, without limitation, litigation, mediation, or any other form of dispute resolution other than that procedure described in this Section 11. Each party irrevocably waives any and all rights to trial by judge or jury relating to any such disputes or claims. 11.2 Demand and Designation of Arbitrator. By written notice to the other party (the "Demand Notice"), either party may demand that a disputed matter be submitted to arbitration. In the Demand Notice, the party shall specify the nature of the dispute and shall list not less than three persons who the party believes to possess the Required Qualifications (as hereinafter defined) to serve as an arbitrator. Within twenty (20) days of the notice, both parties shall agree upon the selection of an arbitrator, who may or may not have appeared in the list in the Demand Notice but who has the Required Qualifications. If at the end of the twenty (20) day period the parties have been unable to agree upon a single arbitrator, then (i) within (30) days of the Demand Notice, each party shall nominate an arbitrator who has the Required Qualifications, (ii) if at the end of the thirty (30) day period one of the parties has failed to nominate an arbitrator, the party who has made a nomination shall have an additional five (5) days to designate on behalf of the party who failed to make a nomination an additional arbitrator who has the Required Qualifications on behalf of the party who failed to make a nomination, and (iii) within the later of ninety (90) days following the Demand Notice or forty-five (45) days following their appointment, the two arbitrators shall select a third arbitrator who also possesses the qualifications specified below. If the two arbitrators are not able to agree on a third arbitrator, one shall be appointed by the American Arbitration Association. The parties agree that the "Required Qualifications" for any arbitrator shall include the following characteristics: (i) each arbitrator must be reasonably knowledgeable (through employment, education, general business or professional experience, or otherwise) about the food and beverage business being conducted by the Company; (ii) each arbitrator must be reasonably familiar with acquisitions of businesses of similar nature; (iii) each arbitrator must be reasonably proficient at analyzing financial information; and (iv) each arbitrator shall have no current or prior record of employment on a full or part time basis or as a consultant with any party or affiliate of a party. Any objections to the qualifications of the arbitrators not resolved by mutual agreement shall also be a proper subject of arbitration. 11.3 Discovery Procedures and Evidence. The arbitrator(s) shall permit discovery, and upon application to the arbitrator the parties may conduct discovery reasonably necessary for full understanding of any legitimate issue raised in the arbitration in accordance with the discovery rules of the Federal Rules of Civil Procedure (the "FRCP") then in effect. However, the arbitrators shall not be bound to follow formal rules of evidence and may impose time limits during which discovery procedures may be pursued. 11.4 Decision and Enforcement. The arbitrator(s) shall decide the dispute or claim in accordance with the Rules applying the substantive law of the State of New York; provided, however, the arbitrators shall not be empowered to award punitive damages, and their powers shall be further limited solely to the provision of compensatory damages (except as specifically authorized by Section 9.2) to the extent the arbitrator is, or the arbitrators are, satisfied, as the case may be, that the claiming party has adequately demonstrated actual direct damages. Compensatory damages may include all costs of arbitration, including reasonable attorney's fees and costs incurred in connection with the arbitration or enforcement or collection of the arbitration award. Judgment upon the arbitration award may be entered in or enforced by any court having jurisdiction over the parties or their assets. No party shall take any dispute or claim subject to arbitration hereunder to any court until an arbitration decision has been made. 11.5 Fees of Arbitrators. If one arbitrator has been selected by both the parties, each party shall pay 50% of the costs and expenses of the arbitration. If three arbitrators have been selected, each party shall bear the full cost of the arbitrator that the party originally selected (or which was selected by the other party on that party's behalf), and shall pay 50% of the cost of the third arbitrator and 50% of the other costs of arbitration. All such fees and costs shall be paid promptly as incurred, but nothing in this paragraph shall preclude the arbitrators from awarding such fees and costs as a part of compensatory damages as provided in Section 11.4 in which case a prevailing party may become entitled to partial or complete reimbursement of fees and costs previously advanced. 11.6 Service of Process. The parties agree that service of process and any notices required under this Section 11 or in connection with any arbitration conducted under this Section 11 may be given in the manner provided for the giving of notices under this Agreement as provided in Section 12.3. 11.7 Conflict in Governing Standards. In the event of any conflict between the provisions of (i) this Section 11, (ii) the Rules, or (iii) the FRCP, the provisions of this Section 11 shall prevail. Only the discovery provisions of the FRCP are referred to herein, but in the event such provisions are not inconsistent with the provisions of this Section 11 but are inconsistent with the Rules, the provisions of the FRCP shall prevail. The arbitrator or arbitrators, as the case may be, shall have the sole and exclusive right to interpret the provisions of this Section 11. 12. General Provisions. 12.1 Schedules. The disclosures in the Schedules hereto are to be taken as relating to the representations and warranties as a whole without regard to reference to a specific section of the Agreement. 12.2 Further Assurances. Each party hereto will, from time to time after the Closing, execute and deliver, and use their best efforts to cause other persons to execute and deliver, any such further documents and instruments, and will do or use their best efforts to cause to be done such other acts, as any party may reasonably request more completely to consummate and make effective the contemplated transactions. 12.3 Notices. Notices and other communications provided for herein shall be in writing, shall be sent via overnight courier, shall be deemed to have been given when received and shall be sent to the following addresses, or such other addresses as may be hereafter specified in a notice given in accordance with the terms of this Section 12.3, and, in any event, a copy of all such notices and communications shall be sent via telecopier to the fax number set forth below: Seller: Nestle Beverage Company 345 Spear Street San Francisco, CA 94105 Attn: Legal Department Fax: (415) 546-1412 Buyer: Chock Full O'Nuts Corporation 370 Lexington Avenue New York, New York 10017 Attn: Mr. Joseph Breslin, Chairman of the Board Fax: (212) 679-9737 With a Copy to: Dreyer and Traub 101 Park Avenue New York, New York 10178 Attn: George Lander, Esq. Fax: (212) 984-6262 12.4 Assignment. This Agreement shall not be assignable by any party without the prior written consent of the other party. Nothing contained in this Agreement, express or implied, is intended to confer upon any person or entity other than the parties hereto and their successors in interest and permitted assignees, any rights or remedies under or by reason of this Agreement unless expressly so stated to the contrary. 12.5 Time is of the Essence. Time is of the essence in respect to all provisions of this Agreement in which a definite time for performance is specified, provided, however, that the foregoing shall not be construed to limit or deprive a party of the benefit of any grace or use period provided for in this Agreement. 12.6 Entire Agreement. This Agreement and the schedules, exhibits and certificates specifically referred to herein or required to be delivered pursuant to the terms hereof represent the entire agreement of the parties hereto with respect to the subject matter hereof, superseding all prior agreements, understandings, discussions, negotiations and commitments of any kind. This Agreement may not be amended or supplemented, nor may any rights hereunder be waived, except in a writing signed by each of the parties affected thereby. 12.7 Expenses. Except as set forth below or as otherwise specified herein, each party hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement and to any action taken by such party in preparation for carrying this Agreement into effect. In addition, Seller shall be responsible for payment of the fees charged by Lazard Freres & Company in connection with this transaction. 12.8 Section Headings. The section headings in this Agreement are included for convenience only, are not a part of this Agreement and shall not be used in construing it. 12.9 Severability. In the event that any provision or any part of any provision of this Agreement is held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect the validity or enforceability of any other provision or part hereof. 12.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.11 Governing Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of New York. 12.12 Survival of Representations and Covenants. The respective representations and warranties and covenants of each party to this Agreement shall: (a) not be deemed waived or otherwise affected by any investigation made by or on behalf of the other party, and (b) survive the Closing and the consummation of the transactions contemplated hereby for eighteen (18) months following the Closing, at which time they shall be of no further force or effect, unless otherwise specified herein. 12.13 Definition of Knowledge. For purposes of Section 3 of this Agreement, all representations which are made as to the "knowledge of Seller" shall be deemed to have been made based upon the knowledge of either Tom Donnell, the President of the Company, or John Masters, the Vice President of Seller in charge of Seller's coffee division. 12.14 Special Adjustment with Respect to September 1992 Statements. 12.14.1 Operating Profit. The term "Operating Profit" shall mean Gross Sales by the Company less only (i) discounts and allowances, (ii) cost of goods (manufactured and purchased), including variable distribution costs and factory fixed overheads, (iii) depreciation on factory plant and equipment, vehicles, buildings and fixtures and restaurant equipment, (iv) fixed distribution and selling expenses, and (v) general and administrative expenses. Intercompany charges, including royalties and operational interest, have not been deducted from operating profit in order to reflect the Company's stand alone results. Any calculation of Operating Profit shall be computed in accordance with GAAP, except as modified by the provisions of Schedule 3.7.1B, in a manner which is consistent with the Opening Statement and with historical financial information previously supplied by Seller to Buyer. This calculation shall include adjustments which are required or permitted by GAAP which management has normally made at year end and which management believes are necessary to conform the results to the requirements of GAAP. The parties hereto agree that notwithstanding the preceding provisions of this Section, Operating Profit will not be reduced for any amount relating to annual bonuses paid or to be paid with respect to the 1992 year and no amount shall be accrued or expensed with respect to such bonuses. 12.14.2 Preparation. Seller shall prepare and deliver to Buyer at least two days prior to the Closing Date an Operating Profit statement for the nine months ended September 30, 1992 (the "Nine Month Operating Statement"). Buyer and its representatives shall be entitled to review the work papers, schedules and memoranda and other documents used in the preparation by Seller of the Nine Month Operating Statement. 12.14.3 Price Adjustment. If the Operating Profit shown on the Nine Month Operating Statement (the "Nine Month Operating Profit") is less than $6,688,000, then the Purchase Price shall be reduced by an amount equal to the difference between $6,688,000 and the greater of the (i) the Nine Month Operating Profit and (ii) $6,200,000. If the Nine Month Operating Profit is less than $6,200,000, then the Purchase Price shall be further reduced by the amount determined by multiplying (A) the difference between $6,200,000 and the greater of (x) the Nine Month Operating Profit and (y) $5,600,000 by (B) five. If the Nine Month Operating Profit is less than the $5,600,000, then there shall be no further reduction in the Purchase Price, but until the earlier of the tenth day following Buyer's receipt of the Nine Month Operating Statement or the Closing Date Buyer shall have the option exercisable by written notice to Seller to terminate this Agreement. If a termination occurs pursuant to the provisions of the preceding sentence, neither party shall have any further obligation under this Agreement of any kind and each shall bear any and all costs or expenses incurred by it. If Buyer fails to exercise its right to terminate in accordance with the preceding provisions of this Section 12.14 on a timely basis, such right shall terminate and shall be of no further force or effect. 12.14.4 Disputes. If Buyer shall in good faith disagree with the calculation of the Nine Month Operating Profit and the parties are unable to resolve the issues within three business days following the Seller's receipt of a written notice of objection setting forth in reasonable detail the nature of Buyer's disagreement, then the matter shall be resolved by a nationally recognized firm of independent public accountants agreed upon by Buyer and Seller. The determination made by such firm shall be conclusive, binding on, and non-appealable by, the parties hereto. The fees and disbursements of such firm of independent public accountants shall be divided and borne equally by Seller and Buyer. 12.15 Definition of Affiliate. For purposes of this Agreement, the term "affiliate" when used in connection with a company (e.g., Seller) shall mean a company (i) which is owned by such company, either directly or indirectly, (ii) which owns such company, either directly or indirectly, or (iii) which is under common control with such company. For purposes of this definition, a company shall be deemed to be in a position of ownership or control of a company if it holds at least 51% of the outstanding stock of such company. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above mentioned. BUYER: SELLER: CHOCK FULL O'NUTS CORPORATION NESTLe BEVERAGE COMPANY, a New York corporation a Delaware corporation By: By: Title: Title: EX-99.8%CONV 10 EXHIBIT 4 (A) (B) CROSS-REFERENCE TABLE CHOCK FULL O'NUTS CORPORATION Trust Indenture Act Section Indenture Section 310 (a) (1) 7.10 (a) (2) 7.10 (a) (3) Not Applicable (a) (4) Not Applicable (b) 7.08; 7.10; 12.02 (c) Not Applicable 311 (a) 7.11 (b) 7.11 (c) Not Applicable 312 (a) 2.05 (b) 12.03 (c) 12.03 313 (a) 7.06 (b) (1) Not Applicable (b) (1) 7.06 (c) 7.06; 12.02 (d) 7.06 314 (a) 4.02; 12.02 (b) Not Applicable (c) (1) 12.04 (c) (2) 12.04 (c) (3) Not Applicable (d) Not Applicable (e) 12.05 (f) Not Applicable 315 (a) 7.01 (b) (b) 7.05; 12.02 (c) 7.01 (a) (d) 7.01 ( c) (e) 6.11 316 (a) (last sentence) 12.06 (a) (1) (A) 6.05 (a) (1) (B) 6.04 (a) (2) Not Applicable (b) 6.07 317 (a) (1) 6.08 (a) (2) 6.09 (b) 2.04 318 (a) 12.01 Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. CHOCK FULL O'NUTS CORPORATION $50,000,000* 8% Convertible Subordinated Debentures due September 15, 2006 INDENTURE Dated as of September 15, 1986 MANUFACTURERS HANOVER TRUST COMPANY * Subject to a 30-day option to purchase up to an additional $7,500,000 principal amount of Convertible Subordinated Debentures granted to the underwriters by the Company. TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions 1 SECTION 1.02. Other Definitions 4 SECTION 1.03. Incorporation by Reference of Trust Indenture Act 4 SECTION 1.04. Rules of Construction 4 ARTICLE 2 SECTION 2.01. Dating; Incorporation of Form in Indenture 5 SECTION 2.02. Execution and Authentication 5 SECTION 2.03. Registrar and Agents 5 SECTION 2.04. Paying Agent to Hold Money in Trust 6 SECTION 2.05. Securityholder Lists 6 SECTION 2.06. Transfer and Exchange 6 SECTION 2.07. Replacement Securities 7 SECTION 2.08. Outstanding Securities 7 SECTION 2.09. Temporary Securities 7 SECTION 2.10. Cancellation 7 SECTION 2.11. Defaulted Interest 7 SECTION 2.12. Persons Deemed Owners 8 ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee 8 SECTION 3.02. Selection of Securities to be Redeemed 8 SECTION 3.03. Notice of Redemption 8 SECTION 3.04. Effect of Notice of Redemption 9 SECTION 3.05. Deposit of Redemption Price 9 SECTION 3.06. Securities Redeemed in Part 9 SECTION 3.07. Mandatory Redemption Provisions 9 - - -i- Page ARTICLE 4 COVENANTS SECTION 4.01. Payment of Securities 10 SECTION 4.02. SEC Reports 10 SECTION 4.03. Waiver of Stay, Extension or Usury Laws 10 SECTION 4.04. Limitation on Dividends and Other Distributions 10 SECTION 4.05 Liquidation 12 SECTION 4.06. Notice of Defaults 13 SECTION 4.07. Compliance Certificates 13 SECTION 4.08. Maintenance of Consolidated Net Worth 13 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, etc. 15 SECTION 5.02. Successor Corporation Substituted 15 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default 15 SECTION 6.02. Acceleration 16 SECTION 6.03. Other Remedies 17 SECTION 6.04. Waiver of Defaults and Events of Default 17 SECTION 6.05. Control by Majority 17 SECTION 6.06. Limitation on Suits 17 SECTION 6.07. Rights of Holders to Receive Payment 18 SECTION 6.08. Collection Suit by Trustee 18 SECTION 6.10. Priorities 19 SECTION 6.11. Undertaking for Costs 19 ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee 19 SECTION 7.02. Rights of Trustee 20 SECTION 7.03. Individual Rights of Trustee 21 SECTION 7.04. Trustee's Disclaimer 21 SECTION 7.05. Notice of Defaults 21 SECTION 7.06. Reports by Trustee to Holders 21 SECTION 7.07. Compensation and Indemnity 21 SECTION 7.08. Replacement of Trustee 22 SECTION 7.09. Successor Trustee by Merger, etc. 22 SECTION 7.10. Eligibility; Disqualification 22 SECTION 7.11. Preferential Collection of Claims Against Company 23 - - -ii- Page ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.01. Satisfaction, Discharge and Defeasance of the Securities23 SECTION 8.02 Satisfaction and Discharge of Indenture 23 SECTION 8.03. Survival of Certain Obligations 24 SECTION 8.04. Application of Trust Money 24 SECTION 8.05 Paying Agent to Repay Monies Held 24 SECTION 8.06. Return of Unclaimed Monies 25 SECTION 8.07. Reinstatement 25 ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders 25 SECTION 9.02. With Consent of Holders 26 SECTION 9.03. Compliance with Trust Indenture Act 26 SECTION 9.04. Revocation and Effect of Consents 26 SECTION 9.05 Notation on or Exchange of Securities 27 SECTION 9.06. Trustee to Sign Amendments, etc. 27 ARTICLE 10 SUBORDINATION SECTION 10.01. Securities Subordinated to Senior Indebtedness 27 SECTION 10.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances 27 SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company 28 SECTION 10.04. Securityholders to be Subrogated to Rights of Holders or Senior Indebtedness 30 SECTION 10.05. Obligation of the Company Unconditional 30 SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice 31 SECTION 10.07. Application by Trustee of Monies Deposited with it 31 SECTION 10.08. Continuing Offer of Subordination 31 SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness 32 SECTION 10.10. Securityholders Authorize Trustee to Effectuate Subordination of Securities 32 SECTION 10.11. Right of Trustee to Hold Senior Indebtedness; Trustee Owes No Fiduciary Duty to Holders of Senior Indebtedness 33 SECTION 10.12. Article 10 Not to Prevent Events of Default 33 SECTION 10.13. Officers' Certificate 33 SECTION 10.14. Paying Agents Other than the Trustee 33 - - -iii- Page ARTICLE 11 CONVERSION OF DEBENTURES SECTION 11.01. Right of Conversion; Conversion Price 33 SECTION 11.02. Issuance of Common Stock on Conversion 34 SECTION 11.03. No Adjustment for Interest or Dividends 34 SECTION 11.04. Adjustment of Conversion Price 35 SECTION 11.05. No Fractional Shares 38 SECTION 11.06. Effect of Reclassification, Consolidation, Merger, Sale, Lease or Conveyance 39 SECTION 11.07. Covenant to Reserve Shares 40 SECTION 11.08. Compliance with Legal and Governmental Requirements 40 SECTION 11.09. Payment of Taxes 41 SECTION 11.10. Notice of Certain Events 41 SECTION 11.11. Responsibility of Trustee and Conversion Agent 41 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls 42 SECTION 12.02. Notices 42 SECTION 12.03. Communications by Holders with other Holders 43 SECTION 12.04. Certificate and Opinion as to Conditions Precedent 43 SECTION 12.05. Statements Required in Certificate and Opinion 43 SECTION 12.06. When Treasury Securities Disregarded 43 SECTION 12.07. Rules by Trustee and Agents 44 SECTION 12.08. Legal Holidays 44 SECTION 12.09. Governing Law 44 SECTION 12.10. No Adverse Interpretation of Other Agreements 44 SECTION 12.11. No Recourse Against Others 44 SECTION 12.12. Successors 44 SECTION 12.13. Multiple Counterparts 44 SECTION 12.14. Table of Contents, Headings, etc. 44 SECTION 12.15. Severability 44 Signature 45 Exhibit A - Form of Security - - -iv- INDENTURE dated as of September 15, 1986 between CHOCK FULL O'NUTS CORPORATION,a New York corporation ("Company") and MANUFACTURERS HANOVER TRUST COMPANY, a New York corporation ("Trustee"). Each party agrees as follows for the benefits of the other party and for the equal and ratable benefit of the Holders of the Company's 8% Convertible Subordinated Debentures due September 15, 2006 ("Securities"): ARTICLE 1 DEFINITIONS AND INCORPORATION SECTION 1.01 Definitions "Affiliate" means any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. "Agent" means any Registrar, Paying Agent, Conversion Agent, co-registrar or agent for service of notices and demands, See Section 2.03. "Board of Directors" means the Board of Directors of the Company or any committee of the Board. "Business Day" means a day that is not a Legal Holiday. "Capital Stock" means any and all shares or other equivalents (however designated) of corporate stock except Redeemable Preferred Stock. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Consolidated Net Income" means, for any period, the aggregate of the Net Income of the Company and its subsidiaries for such period determined in accordance with generally accepted accounting principles consistently applied, provided that (i) the Net Income of any person which is not a Subsidiary and which is consolidated with the Company or is accounted for by the Company by the equity method of accounting shall be included only to the extent of the amount of cash dividends or cash distributions paid to the Company or a Subsidiary, (ii) the Net Income of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iii) the Net Income of any Subsidiary that is subject to restrictions, direct or indirect, on the payment of dividends or the making of distributions to the Company shall be excluded to the extent of such restrictions. "Consolidated Net Worth", as applied to any Person, means the consolidated Stockholders' Equity (exclusive any Redeemable Preferred Stock) of such Person and its consolidated subsidiaries. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 600 Fifth Avenue, New York, New York 10020. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. 1 "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture as amended or supplemented from time to time. "Net Income" of any person means the net income (loss) of such person, determined in accordance with generally accepted accounting principles consistently applied; excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to Sale and Leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any Capital Stock of the company or a Subsidiary owned by such person except to the extent that any such gain over the net book value of any such assets is represented by cash or fair value of other consideration as such value is determined in good faith by the Board of Directors of the Company. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 12.04 and 12.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee or the counsel to the Company or the Trustee. See Sections 12.04 and 12.05. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal" of a Security means the principal of the Security plus, when appropriate, the premium, if any, on the Security. "Redeemable Preferred Stock" mean (I) preferred stock of the Company which is subject to mandatory redemption or which is redeemable at the option of the holder thereof or (ii) corporate stock which may be exchanged or converted, directly or indirectly, into any security other than (A) Common Stock or (B) non-Redeemable Preferred Stock until extinguishment of the exchange rights, either by the terms of such Stock or pursuant to an irrevocable election the Company. "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to this Indenture. "Redemption Price", when used with respect to any Securities to be redeemed, means the price fixed for such redemption pursuant to this Indenture as set forth in the form of Security annexed hereto as Exhibit A. "Sale and Lease-Back Transaction" means any arrangement with any person (other than the Company or a Subsidiary), or to which any such person is a party, providing for the leasing to the Company or a Subsidiary of any property owned by the Company or a Subsidiary and sold or transferred by the Company or such Subsidiary to such person or to any other person (other than the Company or Subsidiary). "SEC" means the Securities and Exchange Commission. "Securities" means the securities that are issued under this Indenture as amended or supplemented from time to time, pursuant to this Indenture. 2 "Senior Indebtedness" means the principal, premium, if any, and interest on Indebtedness of the Company (including, without limitation, that certain Guaranty Agreement between the Company and the First Missouri Bank and Trust Company dated as of December 1, 1984, that certain Loan Agreement between the Company as successor to Chock Full O'Nuts Coffee Corporation ("Coffee") and the Industrial Development Authority of the City of St. Louis, Missouri ("Authority") dated as of December 1, 1984, and that certain Promissory Note in the original principal amount of $2,000,000 made on December 28, 1984 payable to the Authority to which the Company is the obligor as the successor to Coffee) outstanding at any time other than the Securities, Indebtedness of the Company to a Subsidiary for money borrowed or advanced from any Subsidiary and Indebtedness which by its terms expressly provides that it is not superior in right of payment to the Securities. "Indebtedness" with respect any person means: (1) any debt (I) for borrowed money, or (ii) evidenced by a bond, note, debenture, or similar instrument (including purchase money obligations) given in connection with or assumed as all or a part of the consideration for the acquisition of property or assets, whether by purchase, merger, consolidation or otherwise, but shall not include any trade accounts payable, or (iii) which is a direct or indirect obligation which arises as a result of banker's acceptances or drawings under bank letters of credit issued to secure obligations of such person, whether contingent or otherwise; (2) any debt of others described in the preceding clause (1) which such person has guaranteed or for which it is otherwise liable; (3) any obligation secured by a lien to which the property or assets of such person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such person's legal liability; (4) the obligation of such person as lessee under any lease of property which is reflected on such person's balance sheet as a capitalized lease; and (5) any deferral, amendment, renewal, extension, supplement or refunding of any liability of the kind described in any of the preceding clauses (1), (2), (3) and (4), and "Stockholders' Equity" as applied to any Person means such Person's stockholders' equity as determined according to generally accepted accounting principles, but shall not include any amounts attributable to securities which do not constitute Capital Stock. "Subsidiary" means a corporation the majority of whose voting stock is owned by the Company or a Subsidiary. Voting stock is Capital Stock having voting power under ordinary circumstances to elect directors. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) as in effect ion the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture an thereafter means the successor. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "United States" means the United States of America. 3 SECTION 1.02 Other Definitions. Term Defined in Section "Bankruptcy Law" 6.01 "Conversion Agent" 2.03 "Current Market Price" 11.04 (g) "Custodian" 6.01 "Event of Default" 6.01 "Legal Holiday" 12.08 "Paying Agent" 2.03 "Registrar" 2.03 "US Government Obligations" 8.01 SECTION 1.03 Incorporation Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means to SEC. "indenture securities" means the Securities. "indenture security holder" means Securityholder. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the indenture securities. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. SECTION 1.04 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date hereof; (3) "or" is not exclusive; and (4) words in the singular include the plural, and in the plural include the singular. 4 ARTICLE 2 THE SECURITIES SECTION 2.01 Dating; Incorporated of Form in Indenture. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A which is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication. SECTION 2.02 Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may by in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the tine the Trustee authenticates the Security, the Security shall be nevertheless valid. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security on the Security. Such signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue in the aggregate principal amount of up to $57,500,000 upon the execution of the Indenture and a written order or orders of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.07. The Trustee may appoint an authenticating agent to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 2.03 Registrar and Agents. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for payment ("Paying Agent"), an office or agency where Securities may be presented for conversion ("Conversion Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one of more additional paying agents and one or more additional conversion agents. The Company or any Subsidiary may act as Paying Agent and/or Conversion Agent. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. 5 The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent for service of notices and demands, or fails to give the foregoing notice the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands. SECTION 2.04 Paying Agent to Hold Money in Trust. On or prior to each due date of the principal of and interest on any Securities, the Company shall deposit with each Paying Agent a sum sufficient to pay such principal, premium, if any, and interest so becoming due. The Company shall require each Paying Agent to agree in writing that it will hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of, premium if any, or interest on the Securities and to notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the company or a Subsidiary acts as Paying Agent, it shall on or before each due date of the principal of, premium, if any, or interest on any Securities segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money. SECTION 2.05 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date and at such times as the Trustee may request in writing a list in such form an as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06 Transfer and Exchange. When a Security is presented to the Registrar or a co-registrar with a request to register the transfer, the Registrar or co-registrar shall register the transfer as requested and when Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall make the exchange as requested provided that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed, or by accompanied by a written instrument of transfer inform satisfactory to the Company and the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. To permit transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company may charge a reasonable fee for any transfer or exchange and may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, but this provision shall not apply to any exchange pursuant to Section 2.09, 3.06, 9.05, or 11.02. 6 SECTION 2.07 Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security presents evidence to the satisfaction of the Company and the Trustee that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of the Trustee and the Company are met. An indemnity bond may be required that is sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expense in replacing a Security. SECTION 2.08 Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it and those described in this Section 2.08 as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent (other than the Company or a Subsidiary) holds on a Redemption Date or maturity date money deposited with it by or on behalf of the Company sufficient to pay the principal of the accrued interest on Securities payable on that date, then on and after that date such securities cease to be outstanding and interest on them ceases to accrue. Subject to Section 12.06, a Security does not cease to be outstanding because the Company or an Affiliate holds the Security. SECTION 2.09 Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. SECTION 2.10 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee shall cancel all securities surrendered for transfer, exchange, payment or cancellation and destroy canceled Securities and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Securities to the Company. Subject to Section 2.07, the Company may not issue Securities to replace Securities that it has previously paid or delivered to the Trustee for cancellation. SECTION 2.11 Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest to the Persons who are Security Holders on a subsequent special record date. The Company shall fix the special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before the special record date, the Company shall mail to each Securityholder a notice that states the special record date, the payment date, and the amount of defaulted interest to be paid. The Company may pay defaulted interest in any other lawful manner. 7 SECTION 2.12 Persons Deemed Owners. Prior to presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. ARTICLE 3 REDEMPTION SECTION 3.01 Notices to Trustee. If the Company wants to redeem the Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee of the Redemption Date and the principal amount of Securities to be redeemed. If the Company wants to reduce the principal amount of Securities to be acquired pursuant to Paragraph 6 of the Securities, it shall notify the Trustee of the amount of the reduction and the basis for it. If the Company wants to credit against any such redemption Securities it has not previously delivered to the Trustee for cancellation, it shall deliver the Securities with such notice. The Company shall give each notice provided for in this Section 3.01 at least 60 days before the Redemption Date or such other period as the Company and the Trustee may agree. SECTION 3.02 Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed by a method the Trustee considers fair and appropriate. The Trustee shall make the selection from Securities outstanding and not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03 Notice of Redemption. At least 15 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) The Redemption Date; (2) the Redemption Price; (3) the then current conversion price; (4) the name and address of the Paying Agent and the Conversion Agent; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that interest on Securities called redemption ceases to accrue on and after the Redemption Date; 8 (7) Whether the redemption is pursuant to the optional or mandatory redemption provisions of the Securities; (8) that the right to convert the Securities as provided in Article 11 expires at the close of business on the Business Day prior to the Redemption Date; and (9) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price, plus accrued interest to the Redemption Date. SECTION 3.05 Deposit of Redemption Price. On or prior to the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust or cause such Subsidiary to segregate ad hold in trust) money sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date. SECTION 3.06 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.07 Mandatory Redemption Provisions. The Company shall redeem 7.5% of the principal amount of the Securities originally issued, on the dates, upon the terms and subject to the conditions set forth in Paragraph 6 of the Securities. Any such redemption shall be made pursuant to the provisions of the Article. 9 ARTICLE 4 COVENANTS SECTION 4.01 Payment of the Securities. The Company shall pay the principal of, premium, if any, and interest on the Securities on the dates and in the manner provide in the Securities and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or a Subsidiary) holds on that date money designated for and sufficient to pay the installment. The Company shall pay interest on overdue principal at the rate borne by the Securities; it shall pay interest on, including post-petition interest in the event of a proceeding under the Bankruptcy Laws, overdue installments of interest at the same rate to the extent lawful. SECTION 4.02 SEC Reports. The Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. The Company shall also comply with the other provision of TIA 314(a). So long as the Securities remain outstanding, the Company shall cause its annual reports to shareholders (containing audited financial statements) and any other financial reports furnished by it to shareholders to be mailed to the Holders at their addresses appearing in the register of Securities maintained by the Registrar. SECTION 4.03 Waiver of Stay, Extension or Usuary Laws, The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) that Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.04 Limitation on Dividends and Other Distributions. The Company will not declare or pay any dividend or make any distribution on its Redeemable Preferred Stock held by Subsidiaries or on its Capital Stock or to holders of its Capital Stock (other than dividends or distributions payable in Capital Stock of the Company), or purchase, redeem or otherwise acquire or retire for value any of its Capital Stock or Redeemable Preferred Stock held by Subsidiaries or any warrants, right or options to purchase or acquire any shares of its Capital Stock or Redeemable Preferred Stock held by Subsidiaries or permit any Subsidiary to purchase, redeem or otherwise acquire or retire for value any such Capital Stock or Redeemable Preferred Stock so held or any warrants, rights or options to purchase or acquire any shares of its Capital Stock or Redeemable Preferred Stock so held: 10 (1) if at the time of such action an Event of Default has occurred and it continuing or would exist immediately after giving effect to such action; or (2) if, upon giving effect to such dividend, distribution, purchase, redemption, other acquisition or retirement, the aggregate amount expended for all such purposes (the amount expended for such distribution, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee) subsequent to July 31, 1986, exceeds the sum of: (A) 50% of aggregate Consolidated Net Income accrued on a cumulative basis subsequent to July 31, 1986 (or, in case such aggregate Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate of the net proceeds received by the Company from the issue or sale of its Capital Stock subsequent to July 31, 1986, (other than to a Subsidiary) including, without limitation, any such issue or sale in connection with the conversion of any Indebtedness (including the Securities) or of any Redeemable Preferred Stock of the Company, said net proceeds being deemed for the purpose of this Section 4.04 to equal the aggregate of (a) the cash, if any, received by the Company from such issue or sale, plus (b) the fair value of the consideration other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidence by the resolution of the Board of Directors filed with the Trustee) received by the Company from such issue or sale, and (C) $5,000,000 provided, however, that the provisions of the Section 4.04 shall not prevent (I) the payment of any dividend within 60 days after the date of declaration thereof, it at said date of declaration such payment complied with the provisions hereof; or (ii) the retirement of any shares of the Company's Capital Stock by exchange for, or upon conversion of, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of shares of its Capital Stock, and neither such retirement nor the proceeds of any such sale or exchange shall be included in any computation made under this Section 4.04. For purposes of this Section 4.04, a distribution to holders of the Company's Capital Stock or Redeemable Preferred Stock held by subsidiaries of (i) shares of Capital Stock of any subsidiary or Redeemable Preferred Stock of any Subsidiary or similar securities of any Subsidiary of the Company, or (ii) other assets of the Company, without, in either case, the receipt of equivalent consideration therefor shall be regarded as the equivalent of a cash dividend equal to the excess of the fair market value of the shares or other assets being so distributed at the time of such distribution over the consideration, if any, received therefor. The fair market value of such shares or other assets and the value of any consideration therefore other than cash shall be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee. For purposes of this Section 4.04, the net proceeds from the issuance of shares of Capital Stock of the Company issued (a) upon conversion of debt securities shall be deemed to be the net book value of such debt securities or Redeemable Preferred Stock at the date of conversion (plus the additional amount required to be paid upon such conversion, if any) less any cash payment on account of fractional shares of (b) upon 11 exercise of warrants, rights and options shall be deemed to be the exercise price thereof less any cash payment on account of fractional shares. For purposes of this paragraph, the "net book value" of a security shall be the amount received by the Company on the issuance of such security, as adjusted on the books of the Company to the date of conversion. The foregoing shall not be interpreted to limit the authority of the Board of Directors, as set forth above, to determine the value of other securities of the Company or other property received as net proceeds, provided, however, that the value of the other property shall not exceed the net book value of such property. Before the Company pays any dividend or makes any distribution on its Capital Stock or Redeemable Preferred Stock held by Subsidiaries (other than dividends or distributions payable in Capital Stock of the Company), or purchases, redeems or otherwise acquires or retires for value any Capital Stock or Redeemable Preferred Stock or permits any Subsidiary to purchase, redeem or otherwise acquire or retire for value any such Capital Stock or Redeemable Preferred Stock, the Company shall file with the Trustee an Officers' Certificate (upon which the Trustee may conclusively rely) which shall conform to the provisions of Section 12.04 and 12.05 hereof and which shall set for the applicable computation required by subdivision (2) of this Section 4.04. SECTION 4.05 Liquidation. The Board of Directors or the Stockholders of the Company may not adopt a plan of liquidation which plan provides for, contemplates or the effectuation of which is preceded by (A) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company otherwise than substantially as an entirety (Section 5.01 of the Indenture being the Section which governs any such sale, lease, conveyance or other disposition substantially as an entirety), and (B) the distribution of all or substantially all of the proceeds of such sale lease, conveyance or other disposition and of the remaining assets of the Company to the holders of Capital Stock of the Company, unless the Company shall in connection with the adoption of such plan make provision for, or agree that prior to making any liquidating distributions it will make provision for, the satisfaction of the Company's obligations hereunder and under the Securities as to the payment of principal and interest. The Company shall be deemed to make provision for such payments only if (i) the Company delivers in trust to the Trustee U.S. Government Obligations in an aggregate principal amount equal to the unpaid principal amount of the Securities and having maturities and interest payment dates on or before the dates on which the principal of and interest on the Securities are due, or (ii) there is an express assumption of the due and punctual payment of the Company's obligations hereunder and under the Securities and performance and observance of all covenants and conditions to be performed by the Company hereunder, by the execution and delivery of a supplemental indenture in form satisfactory to the Trustee by a person which acquires, or will acquire (otherwise than pursuant to a lease) a portion of the assets of the Company, provided that at the time of such assumption no default or Event of Default shall have occurred and be continuing and such person will have a Consolidated Net Worth (immediately after the date of such express assumption) and pro-forma aggregate earnings adjusted to reflect the acquisition for such person's four full fiscal quarters (immediately preceding the date of such express assumption) equal to not less than the Consolidated Net Worth of the Company (immediately preceding the date of such express assumption) and the aggregate Net Income of the Company and its consolidated subsidiaries (for its four full fiscal quarters immediately preceding the date of such express assumption), respectively, and which is organized under the laws of the United States, any State thereof or the District of Columbia; provided, further, that the Company shall not make any liquidating distribution until after the company shall have certified to the Trustee with an Officers' Certificate at least five days prior to the making of any liquidating distribution that it has complied with the provisions of this Section 4.05. In the Event that the Company shall liquidate in compliance with clauses (A) or (B) above, it shall be relieved of all obligations hereunder except as set forth below. 12 However, in the case of a liquidation pursuant to clause (A), the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.06 and 8.07 shall survive until the Securities are no longer outstanding. Thereafter the Company's obligations in Section 7.07 shall survive. SECTION 4.06 Notice of Defaults. In the event that any Event of Default under Section 6.01(4) hereof occurs, the Company shall promptly give written notice to the Trustee of such Default. The Company will deliver to the Trustee, within 5 days after the occurrence thereof, written notice of any event which with the giving of notice and/or the lapse of time would become an Event of Default under Section 6.01(4) hereof. SECTION 4.07 Compliance Certificates. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company, which as of the date of this Indenture is July 31, an Officers' Certificate stating whether or not the signers know of any Default or Events of Default. If they do know of such a Default or Event of Default, the certificate shall describe the Default or Event of Default and the efforts to remedy the same. The certificate need not comply with Section 12.05. SECTION 4.08 Maintenance of Consolidated Net Worth. If the Company's Consolidated Net Worth at the end of each of any two consecutive fiscal quarters is less than 50% of the Consolidated Net Worth of the Company at July 31, 1986, then the Company shall make an offer to acquire (an "Offer") on the last day of the next following fiscal quarter (the "Accelerated Payment Date") 7.5% of the principal amount of Securities originally issued (or such lesser amount as may be outstanding at the time) at a purchase price of 100% of principal amount plus accrued interest to the Accelerated Payment Date. The Company may credit against its obligation to offer to repurchase Securities hereunder the principal amount of Securities acquired by the Company and surrendered for cancellation through purchase, redemption (otherwise than pursuant to Paragraph 6 of the Securities) or exchange, or upon conversation, and which were not previously used as a credit against (I) the redemption obligation set forth in Paragraph 6 of the Securities or (ii) any obligation to offer to repurchase Securities pursuant to this Section. In no event shall the failure to meet the minimum Consolidated Net Worth stated above at the end of any fiscal quarter be counted toward the making of more than one Offer hereunder. The Company shall provide the Trustee with notice of the Offer at least 30 days before any such Accelerated Payment Date (unless shorter notice shall be acceptable to the Trustee) but in no case less than 15 days before the notice of any Offer is mailed to Holders. The Company shall notify the Trustee promptly after the occurrence of any of the events specified in this Section 4.08 Notice of an Offer shall be mailed by the Trustee to all Holders not less than 15 days nor more than 60 days before the Accelerated Payment Date to the Holders of the Securities at their last registered addresses. The Offer shall remain open from the time of mailing until five days before the Accelerated Payment Date. The notice shall be accompanied by a copy of the information regarding the Company required to contained in a Quarterly Report on Form 10-Q for the second fiscal quarter referred to above if such second fiscal quarter is one of the Company's first three fiscal quarters. If such second fiscal quarter is the Company's last fiscal quarter, a copy of the information required to be contained in an Annual Report to Shareholders pursuant to Rule 14a-3 under the Securities Exchange Act of 1934 for the fiscal year ending with such second fiscal shall either accompany the notice or be delivered to Holders not less than 15 days before the Accelerated Payment Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Offer. The notice, which shall govern the terms of the offer, shall state: 13 (1) that the offer is being made pursuant to this Section 4.08; (2) the purchase price and the Accelerated Payment Date; (3) that any Security not tendered or accepted for payment will continue to accrue interest; (4) that any Security accepted for payment pursuant to the Offer shall cease to accrue interest after the Accelerated Payment Date; (5) that Holders electing to have a Security purchased pursuant to an Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice at least five days before the Accelerated Payment Date: (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than three Business Days prior to the Accelerated Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Security purchased; and (7) that Holders whose Securities were purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. Before an Accelerated Payment Date, the Company shall (i) accept for payment on a pro rata basis (rounded to the nearest $1,000) Securities on portions thereof tendered pursuant to the Offer; provided, however, that all Securities or portions thereof accepted for payment shall be amounts of $1,000 or multiples of $1,000, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officer's Certificate stating the Securities or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce by a press release the results of the Offer on the Accelerated Payment Date. For purposes of this Section 4.08, the Trustee shall act as the Paying Agent. 14 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge, etc. The Company shall not consolidate with or merge into, or transfer all or substantially all of its assets to , another Person unless (I) the resulting, surviving or transferee Person is a corporation which assumes by supplemental indenture all the obligations of the Company under the Securities and this Indenture; (ii) such corporation is organized and existing under the laws of the United States, a State thereof or the District of Columbia; (iii) such corporation and its consolidated subsidiaries shall have consolidated Stockholders' Equity immediately after such transaction at least equal to the consolidated Stockholders' Equity of the Company and its consolidated subsidiaries immediately prior to such transaction; (iv) immediately after giving effect to such transaction no Default or Event of Default shall have happened and be continuing, and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Indenture, and thereafter all obligations of the Company shall terminate. SECTION 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation has been named as the Company herein. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of (and premium, if any, on) any Security when the same becomes due and payable at maturity, upon redemption or otherwise (including payment pursuant to Paragraph 5 or Paragraph 6 of the Securities or Section 4.08 hereof: (3) the Company fails to comply with any of its other agreements in the Securities or this Indenture and the default continues for the period and after the notice specified in the last paragraph of this Section 6.01; (4) there shall be a default under any bond, debenture, note or other evidence of Indebtedness or under any mortgage, indenture or other instrument under which there may be issued or by which there may be secured or evidenced and Indebtedness of the Company 15 or any Subsidiary, whether any such Indebtedness now exists or shall hereafter be created, which (a) is a default in the payment of the principal, premium, if any, or interest on such Indebtedness unless such default is cured within 30 days after the date such payment is due or (b) if any other default, such default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable or on maturity, without such acceleration having been rescinded or annulled with 10 days after notice to the Company of such acceleration, or such Indebtedness having been discharged; provided, however, that no default under this paragraph (4) shall exist if the aggregate amount of such Indebtedness with respect to which a payment default under clause (a) or an acceleration under clause (b) had occurred shall be less than $2,000,000; (5) the Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case or proceeding, (B) consents to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; (6) a court of competent jurisdiction an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case or proceeding, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 90 days. The term "Bankruptcy Law" means Title 11 U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar officia l under any Bankruptcy Law. A default under clause (3) (other than defaults under Sections 4.04, 4.05 and 4.08, which defaults shall be Events of Defaults without the notice or passage of time specified in this paragraph) is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding notify the Company and the Trustee of the default and the Company does not cure the default within 30 days after receipt of such notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default". SECTION 6.02 Acceleration. If an Event of Default occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding by notice 16 to the Company and the Trustee, may declare to be due and payable immediately the principal amount of the Securities plus accrued interest to the date of acceleration. Upon any such declaration, such amount shall be due and payable immediately, and upon payment of such amount all of the Company's obligations under the Securities and this Indenture, other than obligations under Section 7.07, shall terminate. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if (x) all existing Events of Default, other than the non-payment of the principal of the Securities, which have become due solely by such declaration of acceleration, have been cured or waived, (y) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, and (z) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Notwithstanding anything contained in this Indenture or in the Securities to the contrary, in the case of any Event of Default specified in Section 6.01 occurring by reason of any willful action (or inaction) take (or not taken) by or on behalf of the Company, then upon the acceleration resulting therefrom, the unpaid principal amount of the Securities, to the extent lawful, shall deemed to be equal to the product of (I) the unpaid principal amount thereof and (ii) the then applicable percentage specified in Paragraph 5 of the Securities. SECTION 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal (and premium, if any) or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Defaults and Events of Default. Subject to Section 9.02, the Holders of a majority in principal amount of the Securities then outstanding, on behalf of the Holders of all of the Securities, by notice to the Trustee may waive a Default or Event or Event of Default and its consequences. When a Default or Event of Default is waived, it is cured and ceases. SECTION 6.05 Control by Majority. The Holder of a majority in principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Securityholders or that may involve the Trustee in personal liability; provided that, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.06 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Security unless: 17 (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the Securities then outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any loss, liability or expenses; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, request and offer of indemnity; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Holders of a majority in principal amount of the Securities then outstanding. A securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07 Rights of Holders to Receive Payment. Subject to Article 10, notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to convert the Security or to bring suit for the enforcement of such right shall not be impaired or affected without the consent of the Holder. SECTION 6.08 Collection Suite by Trustee. If an Event of Default in payment of interest or principal (and premium, if any) specified in Section 6.01 (1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of unpaid principal (and premium, if any) and accrued interest remaining unpaid, together with interest on overdue principal (and premium, if any) and to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expense, disbursement and advances of the Trustee, its agents and counsel. SECTION 6.09 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same. Any Custodian in any such judicial proceeding is hereby authorized by each Securityholder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee its agents and counsel, and any other amounts due the Trustee under Section 7.07. 18 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceedings. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratable, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively, and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorney's fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08, or a suit by Holders of more than 10% in principal amount of the Securities then outstanding. ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise its rights and powers and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. 19 (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error in judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability, expense or fee. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02 Rights of Trustee. Subject to Section 7.01. (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. 20 SECTION 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, is subject to Sections 7.10 and 7.11. SECTION 7.04 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication or in any document used in the sale of the Securities other than any statement in writing provided by the Trustee for use in such document. SECTION 7.05 Notice of Defaults. In a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a default in payment of principal of, premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06 Reports by Trustee to Holder. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA 313(a). The Trustee also shall comply with TIA 313 (b) and 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company agrees to notify the Trustee whenever the Securities become listed on any stock exchange. SECTION 7.07 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss of liability incurred by it in connection with its duties under this Indenture. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not reimburse the Trustee for any expenses or indemnify it against any loss or liability incurred by it through its negligence or bad faith. 21 To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except such money or property held in trust to pay principal and interest on particular Securities and such lien shall not be subordinate to any Senior Indebtedness. SECTION 7.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee with the Company's written consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall, upon payment of its charges, transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for a Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Security holder. SECTION 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA 310(a)(1). The Trustee have a combined capital and surplus of at least 22 $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA 310(b)(9). SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee is subject is TIA 311(a), excluding any creditor relationship listed in TIA 311(b). A Trustee who has resigned or been removed shall be subject to TIA 311(a) to the extent indicated therein. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE I SECTION 8.01 Satisfaction, Discharge and Defeasance of the Securities. The Company shall be deemed to have paid and discharged the entire indebtedness on the Securities from and after the ninety-first day after the date of the deposit referred to in paragraph (a) below, the provisions of this Indenture shall no longer be in effect in respect of the Securities, and the Trustee, at the expense of the Company, shall executive proper instruments acknowledging satisfaction and discharge of such indebtedness; provided that the following conditions shall have been satisfied: (a) the Company has deposited or caused to be deposited with the Trustee irrevocably as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, with referenced to this Section 8.01, (i) money or (ii) US Government Obligations or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on all the Securities for principal, premium, if any, and interest, if any, to September 15, 2006 as such principal, premium or interest, if any, becomes due and payable in accordance with the terms of this Indenture and the Securities; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company in connection with the Securities, including all fees and expenses of the Trustee; and (c) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the entire indebtedness on the Securities have been complied with. "U.S. Government Obligations" means direct, non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the timely payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. SECTION 8.02 Satisfaction and Discharge of Indenture. In addition to the rights under Section 8.01, the Company may terminate all of its obligations under this Indenture when: 23 (a) All of the Securities therefore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.07 hereof and (B) Securities for whose payment money has therefore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 2.04 and Section 8.06 hereof) have been delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company in connection with the outstanding Securities, including all fees and expenses of Trustee; and (c) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 8.03 Survival of Certain Obligations. Nothwithstanding the satisfaction and discharge of this Indenture pursuant to Section 8.01 and 8.02, the respective obligations of the Company in Paragraph 12 of the Securities in Section 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 7.07, 7.08, 8.06, 8.07 and in Article 11 shall survive until the Securities are no longer outstanding, and thereafter the obligations of the Company in such Paragraph 12 and in Sections 7.07 and 8.06 shall survive. Nothing contained in this Article Eight shall abrogate any of the obligations or duties of the Trustee under the Indenture. SECTION 8.04 Application of Trust Money. (a) Subject to the provisions of Section 8.06, all money and U.S. Government Obligations deposited with the Trustee for the Securities pursuant to Section 8.01 or Section 8.02, and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee for the Securities pursuant to Section 8.01 or Section 8.02 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any, and interest, if any, on the Securities; but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to the subordination provisions of Article 10. (b) The Trustee shall deliver or pay to the Company from time to time upon Company request any U.S. Government Obligations, or money held by it as provided in Section 8.01 or Section 8.02 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such U.S. Government Obligations, or money were deposited or received. SECTION 8.05 Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, 24 be repaid to it or paid to the appropriate Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 8.06 Return of Unclaimed Monies. Any monies deposited with or paid to the Trustee or any Paying Agent for the Securities, or then held by the Company, in trust for the payment of the principal, premium, if any, and interest, if any, on the Securities and not applied but remaining unclaimed by the Holders of the Securities for two years after the date upon which the principal of and interest, if any, on the Securities, as the case may be, shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Company by such Trustee or any Paying Agent on demand or (if then held by the Company) shall be discharged from such trust; and the Holders of the Securities entitled to receive such payment shall thereafter look only to the Company for the payment thereof; provided, however, that, before being required to make any such repayment, such Trustees may (at the expense of the Company) cause to be published once in an authorized newspaper in the same city in which the place of payment with respect to the Securities shall be located and in an authorized newspaper in the City of New York, or mail to each such Holder, a notice (in such form as may be deemed appropriate by such Trustee) that said monies remain unclaimed and that, after a date named herein, any unclaimed balance of said monies then remaining will be returned to the Company. SECTION 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01 by reason of any legal proceeding or by reason of any order or judgment of any courts or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.01 Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture (any indenture supplemental hereto to be in a form satisfactory to the Trustee) or the Securities without notice to or consent of any Securityholder: (1) to comply with Section 5.01; (2) to provide for uncertificated Securities in addition to or in place of certificate Securities, or (3) to cure any ambiguity, defect or inconsistency, or to make any other change that does not adversely effect the right of any Securityholder. 25 SECTION 9.02 With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding. The Holders of a majority in principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. Subject to Section 9.04, without the consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (1) reduce the amount of Securities whose Holders must consent to an amendment or waiver; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the fixed maturity of any Security; (4) waive (except, unless theretofore cured) a default in the payment of the principal of (and premium, if any on), interest on or redemption amounts with respect to any Security; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Sections 6.04, 6.07 or 9.02 (third sentence); (7) make any change that adversely affects the right to convert any Security; or (8) make any change in Article 10 that adversely affects the rights of any Securityholder. After an amendment under this Section becomes effective the Company shall mail to Securityholders a notice briefly describing such amendment. SECTION 9.03 Compliance with Trust Indenture Act, Every amendment or supplement to the Indenture or the Securities shall comply with TIA as then in effect. SECTION 9.04 Revocation and Effect of Consents. Subject to this Indenture, each amendment, waiver or instrument evidencing other action shall become effective in accordance with its terms. Until an amendment, waiver or other action becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Any such Holder or subsequent Holder, however, may revoke the consent as to his Security or portion of a Security, if the Trustee receives the notice of revocation before the date amendment, waiver or other action becomes effective. After an amendment, waiver or other action becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (8) of Section 9.02. In that case the amendment, waiver or other action shall bind each Holder 26 of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 9.05 Notation on or Exchange of Securities. If an amendment or waiver changes the terms of a Security, the Trustee may request the Holder of the Security to deliver it to the Trustee. The trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determine, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06 Trustee to Sign Amendments, etc. The Trustee need not sign any amendment that adversely affects its rights. In signing or refusing to sign any amendment the Trustee shall be entitled to receive and, subject to Section 7.01, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. The Company may not sign an amendment until its Board of Directors approves it. ARTICLE 10 SUBORDINATION SECTION 10.01 Securities Subordinated to Senior Indebtedness. The Company agrees, and each Holder of the Securities by his acceptance thereof likewise agrees, that the payment of the principal of, premium, if any, and interest on the Securities is subordinated and junior in right of payment, to the extent and in the manner provided in this Article 10, except as provided in Section 8.04, to the prior payment in full of all Senior Indebtedness whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed. The Senior Indebtedness of the Company shall continue to be Senior Indebtedness and entitled to the benefits of these subordination provisions irrespective of any amendment, modification or waiver of any term of any instrument relating to the Senior Indebtedness or the extension or renewal of the Senior Indebtedness. All the provisions of this Indenture and the Securities shall be subject to the provisions of this Article 10 so far as they may be applicable thereto, except that nothing in the Article 10 shall apply to claims for, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.02 Company Not to Make Payments with Respect to Securities in Certain Circumstances. (a) In the event the Company shall default in the payment of any principal of, premium, if any, or interest on any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest on the Securities, or on account of the mandatory redemption provision in the Securities (except mandatory redemption payments made in respect of Securities acquired by the Company before the coming due of such Senior Indebtedness). or in respect of any retirement, purchase or other acquisition of any of the Securities. 27 (b) Upon the happening of an event of default with respect to any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof (other than under circumstances when the terms of the preceding paragraph are applicable), upon written notice thereof given to the Company and the Trustee by any holder or holders of such Senior Indebtedness or their representative or representatives ("Payment Notice"), then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium if any or interest on the Securities or on account of the mandatory redemption provision of the Securities (except mandatory redemption payments made in Securities acquired by the Company before such Payment Notice), or in respect of any retirement, purchase or other acquisition of any of the Securities; provided, however, that this paragraph (b) shall prevent any such payment (which is not otherwise prohibited by the immediately preceding paragraph) only for a period which is the longer of (i) 90 days after Payment Notice shall have been given or (ii) any period during which the Senior Indebtedness in respect of which such event of default exists has become due and payable in its entirety and (A) such acceleration has not been rescinded or annulled or (B) such acceleration is being contested in good faith by the Company in an appropriate judicial proceeding. Notwithstanding the foregoing, no event of default which existed or was continuing on the date of any Payment Notice shall be made the basis for the giving of a second Payment Notice unless all events of default existing or continuing on the date of such first Payment Notice shall have been cured or waived after such date. (c) If any payment or distribution of any character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or any holder of the Securities, in contravention of any of the terms hereof and before all the Senior Indebtedness shall have been paid in full, such payment or distribution shall be paid over or delivered and transferred to the holders of the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness; provided, however, that such payment or distribution need not be so paid over or delivered and transferred at any time when the provisions of subsections (a) and (b) of this Section 10.02 would no longer prevent payments by the Company to be Holders of the Securities. SECTION 10.03 Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company. (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including any collateral at any time securing the Securities), to creditors upon any dissolution or winding up or total or partial liquidation or reorganization or readjustment of the Company, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or other cases or proceedings, all principal of and interest due or to become due upon all Senior Indebtedness shall first be paid in full before the Holders of the Securities shall be entitled to receive any assets (including any collateral at any time securing the Securities, but not including shares or 28 stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment) so paid or distributed in respect of the Securities (for principal, premium, if any, or interest); and upon any such dissolution or winding up or liquidation or reorganization or readjustment, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), to which the Holders of the Securities would be entitled except for the provisions of this Section 10.03, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be paid or distributed by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution directly to the holders of Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution in respect of the Securities (for principal, premium, if any, or interest) is made to the Holders of the Securities. (b) Upon any payment or distribution in connection with any cases or proceedings referred to in subsection (a) of this Section 10.03, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such cases or proceedings are pending, and the Trustee and the Holders of the Securities shall be entitled to rely upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders of the Securities for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 10.03. (c) If any payment or distribution of any character, whether in cash, property or securities (including any collateral at any time securing the Securities, but not including shares of stock of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Securities, to the payment of all senior Indebtedness which may at the time be outstanding, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or any Holder of the Securities in contravention of any of the terms of this Article 10 and before all the Senior Indebtedness shall have been paid in full, such payment or distribution shall be paid over or delivered and transferred to the holders of the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Senior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Senior Indebtedness in full, after giving 29 effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness; provided, however, that such payment or distribution need not be so paid over or delivered and transferred at any time when the provisions of subsection (a) of this Section 10.03 would no longer prevent payments by the Company to the Holders of the Securities; (d) The Company shall give prompt written notice to the Trustee of any insolvency or bankruptcy case or proceeding in respect of the Company and of any cases or proceedings for voluntary liquidation, dissolution or other winding up of the Company (whether or not involving insolvency or bankruptcy), within the meaning of this Section 10.03 or any other proceeding or event contemplated by this Section 10.03, of the declaration of any Senior Indebtedness as due and payable before its expressed Maturity, and of any event which pursuant to this Article 10 would prevent payment by the Company of the principal of, premium, if any, or interest on the Securities. SECTION 10.04 Securityholders to be Subrogated to Rights of Holders of Senior Indebtedness. Senior Indebtedness shall not be deemed to have been paid in full unless the holders thereof shall have received cash, or other property satisfactory to the holders of Senior Indebtedness , equal to the amount of such Senior Indebtedness then outstanding. Upon the payment in full of all Senior Indebtedness and not before, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which, by its express terms, ranks on a parity with the Securities and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions on the Senior Indebtedness, pursuant to Sections 10.02 and 10.03 hereof shall, as between the Company, its creditors other than the holders if Senior Indebtedness, the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness, and no payments or distribution to the Trustee or the Holders of the Securities of assets by virtue of the subrogation herein provided for shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment to or on account of the Securities. The provisions of this Article 10 are solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Indebtedness on the other hand. SECTION 10.05 Obligation of the Company Unconditional. Nothing contained in this Article 10 or elsewhere in this Indenture or in the Securities is intended to or shall impair the obligations of the Company, which is unconditional and absolute, to pay the principal of, premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Securities from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 10, of the holders of Senior Indebtedness in respect of cash, property or securities of the Company otherwise payable or delivered to the Trustee or such Holder upon the exercise of any such remedy. 30 SECTION 10.06 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Trustee shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee, and the Trustee shall not be required to withhold payment to the Holders of Securities as provided in Section 10.02(c), unless the Trustee shall have received written notice thereof, two Business Days prior to the day such payment is due, at its Corporate Trust Office from the Company or from the one or more holders of Senior Indebtedness or from any representative thereof or trustee therefor identifying the specific sections of this Indenture involved and describing in detail the facts that would obligate the Trustee to withhold payments to Holders of Securities, as well as any other facts required by the next succeeding paragraph of this Section 10.06; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of section 7.01 and 7.02, shall be entitled to assume conclusively that no such facts exits. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment or until such time as the Trustee shall be otherwise satisfied as to the right of such Person to receive such payment. SECTION 10.07 Application by Trustee of Monies Deposited with It. Nothing contained in this Article 10 or elsewhere in this Indenture, or in any of the Securities, shall (i) affect the obligations of the Company to make, or prevent the Company from making, at any time except during the pendency of a proceeding referred to in subjection (a) of Section 10.03 and except during the continuance of any default specified in subsection (a) or (b) of Section 10.02 to the extent provided therein, payments at any time of principal of, premium, if any, or interest on the Securities, (ii) prevent the application by the Trustee or any Paying Agent of any monies held by the Trustee or such Paying Agent, in trust for the benefit of the Holders of Securities as to which notice of redemption shall have been mailed or published, to the payment of or on account of principal of, premium, if any, or interest on the Securities if, at the time of such mailing or publishing, such payment would not have been prohibited by the provisions of this Article 10, or (iii) prevent the application by the Trustee or any Paying Agent of any monies deposited with it hereunder to (or, if the Company is acting as its own Paying Agent, segregated and held in trust as provided in Section 2.04 for) the payment of or on account of the principal of, premium, if any, or interest on Securities if, at the time of such deposit (or at the time such monies were so segregated and held in trust), such payment would not have been prohibited by the provisions of this Article 10. SECTION 10.08 Continuing Offer of Subordination. The provisions of this Article 10 are made for the benefit of all Persons who become holders of or continue to hold Senior Indebtedness, and such holders are hereby made obligees under this Article 10 to the same extent as if their names were written herein as such, and they and/or each of them may proceed to enforce such provisions. 31 In furthermore of the foregoing, each holder of Senior Indebtedness is hereby irrevocable authorized and empowered but shall not be obligated to demand, sue for, collect, receive and execute a receipt for such holder's ratable share of all payments and distributions in respect of the Securities which are required to be paid or delivered to holders of Senior Indebtedness as provided in this Article 10, and to file and prove all such claims and take all such other action (including the right to vote such holder's ratable share of the Securities) in the name of the Holders of Securities or otherwise, as such holder of Senior Indebtedness may reasonably determine to be necessary for the enforcement of the rights provided in this Article 10, and at the Company's expense (which expense must be paid by the Company in advance to each Securityholder from whom the Company requests such instruments and such other action) the Company may require the delivery to a holder of Senior Indebtedness by each Holder of Securities of such instruments reasonably necessary to confirm such authorization, such as powers of attorney, proofs of claim, assignments of claim and other instruments in form and substance reasonably satisfactory to the Securityholders, and the taking of all such other reasonable action, as the Company may reasonably request in order to enable such holder of Senior Indebtedness to enforce such holder's ratable share of all Securities and all such payments and distributions in respect thereof. The Trustee shall have no obligations whatsoever with respect to compliance with any of the provisions of this Section 10.08 by any Holder. SECTION 10.09 Subordination Rights Not Impaired by Acts or Omission of Company or Holders of Senior Indebtedness. The Holders of Senior Indebtedness may at any time or from time to time, and in their absolute discretion, change the manner, place or terms of payment of, change or extend the time of payment of, or renew or alter, any Senior Indebtedness, or amend or supplement any instrument pursuant to which any Senior Indebtedness is issued, or exercise or refrain from exercising any other of their right under the Senior Indebtedness including, without limitation, the waiver of defaults thereunder, all without notice to or assent from the Holders of the Securities or the Trustee. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part at the Company or by any act or failure to act by any such holder or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. SECTION 10.10 Securityholders Authorize Trustee to Effectuate Subordination of Securities. Each holder of the Securities by his acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 10 and irrevocably appoints the Trustee his attorney-in-fact for such purpose, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or otherwise) tending towards liquidation of the business and assets of the Company, the timely filling of a claim for the unpaid balance of its or his Securities in the form required in said proceedings and causing said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of Senior Indebtedness have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. 32 SECTION 10.11 Right of Trustee to Hold Senior Indebtedness; Trustee Owes No Fiduciary Duty to Holders of Senior Indebtedness. The Trustee, in its individual capacity, shall be entitled to all of the rights set forth in this Article 10 in respect of any Senior Indebtedness at any time held by it to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not be liable to any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to Holders of Securities, the Company or any other person monies or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.12 Article 10 Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Securities by reason of any provision in this Article 10 shall not be construed as preventing occurrence of an Event of Default under Section 6.01. SECTION 10.13 Officers' Certificate. If there occurs an event referred to in Section 10.02(a) or (b) or the first sentence of Section 10.03(a), the Company shall promptly give to the Trustee an Officers' Certificate (on which the Trustee may conclusively rely) identifying all holders of Senior Indebtedness and the principal amount of Senior Indebtedness then outstanding held by each such holder and stating the reasons why such Officers' Certificate is being delivered to the Trustee. SECTION 10.14 Paying Agents other than the Trustee. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 10 shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents as purposes as if such Paying Agent were named in this Article 10 in addition to or in place of the Trustee, provided, however, that Sections 10.05 and 10.11 hereof shall not apply to the Company if it acts as Paying Agent. ARTICLE 11 CONVERSION OF SECURITIES SECTION 11.01 Right of Conversion; Conversion Price. The Holder of any Security or Securities shall have the right, at his option, at any time before the close of business on September 15, 2006 (except that, with respect to any Security or portion of a Security which shall be called for redemption, such right shall terminate, at the close of business on the Business Day prior to the date fixed for redemption of such Security or portion of a Security unless the Company shall 33 default in payment due upon redemption thereof), to convert, subject to the terms and provisions of this Article 11, the principal of any such security or Securities or any portion thereof which is $1,000 or an integral multiple thereof into shares of Common Stock of the Company, initially at the conversion price per share of $10.20; or, in case an adjustment of such price had taken place pursuant to the provision of Section 11.04, then at the price as last adjusted (such price or adjusted price being referred to herein as the "conversion price"), upon surrender of the Security or Securities, the principal of which is so to be converted, accompanied by written notice of conversion duly executed, to the Company, at any time during usual business hours at the office or agency maintained by it for such purpose, and, if so required by the Conversion Agent or Registrar, accompanied by a written instrument or instruments of transfer in form satisfactory to the Conversion Agent or Registrar duly executed by the Holder or his attorney duly authorized in writing. For convenience, the conversion of any portion of the principal of any Security or Securities into the Common Stock of the Company is hereinafter sometimes referred to as the conversion of such Security or Securities. SECTION 11.02 Issuance of Common Stock on Conversion. As promptly as practicable after the surrender, as herein provided, of any Security or Securities for conversion, the Company shall deliver or cause to be delivered at its said office or agency, to or upon the written order of the holder of the Security or Securities so surrendered, certificates representing the number of fully paid and non-assessable shares of Common Stock of the Company into which such Security or Securities may be converted in accordance with the provisions of this Article 11. Such conversion shall be deemed to have been made at the close of business on the date that such Security or Securities shall have been surrendered for conversion with a written notice of conversion duly executed, so that the rights of the holder of such Security or Securities as a Securityholder shall cease at such time and, subject to the following provisions of this paragraph the person or persons entitled to receive the shares of Common Stock upon conversion of such Security or Securities shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time and such conversion shall be at the conversion price in affect at such time; provided, however, that no such surrender on any date when the stock transfer books of the Company shall closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which stock transfer books are open; such conversion shall be at the conversion price in effect on the date that such Security or Securities shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of any Security which is converted in part only, the Company shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in principal amount equal to the unconverted portion of such Security. SECTION 11.03 No Adjustment for Interest or Dividends. No payment or adjustment in respect of interest on the Securities or dividends on the Common Stock shall be made upon the conversion of any Security or Securities; 34 provided, however, that if a Security or any portion thereof shall be converted subsequent to any regular record date and on or prior to the next succeeding interest payment date, the interest falling due on such interest payment date shall be payable on such interest payment date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the person in whose name such Security is registered at the close of business on such regular record date (unless such Security shall have been called for redemption and the redemption date is prior to such interest payment date). SECTION 11.04 Adjustment of Conversion Price. The conversion price shall be subject to adjustment from time to time as follows: (a) In case the Company shall (i) declare a dividend or make a distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of its Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding shares of its Common Stock into a smaller number of shares, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of any Security surrendered for conversion after such time shall be entitled to receive the number of shares of Common Stock of the Company which he would have owned or been entitled to receive had such Security been converted immediately prior to such time. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. Any shares of Common Stock of the Company issuable in payment of a dividend shall be deemed to have been issued immediately prior to the time of the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock of the Company under subsections (b) and (c) below. In the event that any of the events for which a record date is set do not occur, the conversion price then in effect shall be readjusted effective as of the date when the Board of Directors determines not to effect such event, to the conversion price which would be then in effect if such record date had not been fixed. Such adjustment shall be made successively whenever any event specified above shall occur. (b) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of its Common Stock (or securities convertible into shares of its Common Stock) at a price per share (or having an initial conversion price per share) less than the Current Market Price (as defined in subsection (g) below) of a share of Common Stock of the Company on such record date, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding on such record date plus the number of shares of Common Stock of the Company which the aggregate offering price of the number of shares of such Common Stock so offered (or the aggregate initial conversion price of the convertible securities so offered) would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding on such record date plus the number of additional shares of Common Stock of the Company offered for subscription or purchase (or into which the convertible securities so offered are initially convertible). Shares of Common Stock of the Company owned or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed and shall become effective immediately after such record date. In the event that such rights or warrants are not issued, the conversion price then in effect shall be readjusted, effective as of the 35 date when the Board of Directors determines not to issue such rights or warrants, to the conversion price which would then be in effect if such record date had not been fixed. (c) In case the Company fixes a record date for the making of a distribution to all holders of shares of its Common Stock (i) of shares of any class other than its Common Stock (ii) of evidences of indebtedness of the Company or Subsidiary or (iii) of assets (excluding cash dividends or distributions, and dividends or distributions referred to in subsection (a) above) or (iv) of rights or warrants (excluding those referred to in subsection (b) above), in each such case the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding on such record date multiplied by the Current Market Price per share on such record date, less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a resolution of the Board of Directors certified by the Secretary or an Assistant Secretary of the Company and filed with the Trustee) of said shares or evidence or indebtedness or assets or rights or warrants so distributed, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding on such record date multiplied by such Current Market Price per share. Such adjustment shall be made successively whenever such a record date is fixed and shall become effective immediately after such record date. In the event that such distribution is not so made, the conversion price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to distribute such shares, evidences of indebtedness, assets, rights or warrants, as the case may be, to the conversion price which would then be in effect if such record date had not been fixed. (d) In case the Company shall issue shares of Common Stock, (excluding shares issued (i) in any of the transactions described in subsection (a) above, (ii) upon conversion or exchange of securities convertible into or exchangeable for Common Stock of the Company, (iii) to employees under the Company's 1984 Incentive Compensation Plan, if such shares would otherwise be included in this Section 11.04(d), (iv) to the Company's employees under bona fide employee benefit plans adopted by the Company's Board of Directors and approved by its stockholders, if such shares would otherwise be included in this Section 11.04(d) (but only to the extent that the aggregated number of shares excluded by this subdivision (iv), and issued after the date of this Indenture shall not exceed 50% of the Company's Common Stock outstanding at the time of any such issuance), or (v) upon exercise of rights of warrants issued to the holders of Common Stock of the Company, or issued to acquire, or in connection with the acquisition of, all or any portion of a business as a going concern, whether such acquisition shall be effected by purchase of assets, exchange of securities, merger, consolidation or otherwise, or upon exercise of rights or warrants issued in a bona fide public offering pursuant to a firm commitment underwriting, but only if no adjustment is required pursuant to this Section 11.04 (without regard to subsection (i) of this Section 11.04) with respect to the transaction giving rise to such rights) for a consideration per share less than the Current Market Price per share on the date the Company fixes the offering price of such additional shares, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the total number of shares of Common Stock of the Company outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock of the Company which the aggregate consideration received (determined as provided in subsection (f) below) for the issuance of such additional shares would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock of the Company outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made and shall become effective immediately after such an issuance is made and shall become effective immediately after such issuance. 36 (e) In case the Company shall issue any securities convertible into or exchangeable for its Common Stock (excluding securities issued in transactions described in subsections (b) and (c) above, or the Securities) for a consideration per share of Common Stock of the Company initially deliverable upon conversion or exchange of such securities (determined as provided in subsection(f) below) less than the Current Market Price per share in effect immediately prior to the issuance of such securities, the conversion price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the conversion price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock of the Company outstanding immediately prior to the issuance of such securities plus the number of shares of Common Stock which the aggregate consideration received (determined as provide in subsection (f) below) for such securities would purchase at the Current Market Price per share, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such issuance plus the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be make successively whenever such an issuance is made and shall become effective immediately after such issuance. Upon the termination of the right to convert or exchange such securities, the conversion price shall forthwith be readjusted to such conversion price as would have obtained had the adjustments made upon the issuance of such convertible or exchangeable securities been made upon the basis of the delivery of only number of shares of Common Stock actually delivered upon conversion or exchange of such securities and upon the basis of the consideration actually received by the Company (determined as provided in subsection (f) below) for such securities. (f) For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) above, the following shall apply: (i) in the case of the issuance of shares of Common Stock of the Company for cash, the consideration shall be the amount of such cash, provided that in no case shall any deductions be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (ii) in the case of the issuance of shares of Common Stock of the Company for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Certified Resolution which shall be filed with the Trustee and each Conversion Agent; and (iii) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock of the Company, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in subparagraphs (i) and (ii) of this subsection (f). (g) For the purpose of any contemplation under subsection (b), (c), (d) and (e) above the "Current Market Price" per share at any date shall be deemed to be the average of the daily closing prices for 30 consecutive trading days commencing 45 trading days before such date. The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices 37 regular way, in either case on the principal national securities exchange registered under the Securities Exchange Act of 1934 on which the Common Stock of the Company is admitted to trading or listed, or if not listed or admitted to trading on any national securities exchange, the average of the highest report bid and lowest reported asked prices as furnished by the National Quotation Bureau Incorporated or such other nationally recognized quotation service selected by the Company for the purpose, if said Bureau is not at the time furnishing quotations. (h) In any case in which this Article 11 shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Security converted after such record date and before the occurrence of such event the additional shares of Common Stock of the Company issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock of the Company issuable upon such conversion before giving effect to such adjustment and (ii) paying to such Holder any amount in cash in lieu of a fractional share of Common Stock of the Company pursuant to Section 11.05; provided, however, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional shares of Common Stock of the Company, and such cash, upon the occurrence of the event requiring such adjustment. (i) No adjustment in the conversion price need be made unless such adjustment would require an increase or decrease of at least 25 cents in such price; provided, however, that any such adjustment which is not required to be made shall be carried forward and taken into account in any subsequent adjustment. (j) Whenever the conversion price is adjusted as provided in this Section 11.04, the Company shall promptly file with the Trustee and each Conversion Agent (i) an Officers; Certificate in the case of an adjustment pursuant to subsection (a) of this Section 11.04, or (ii) both an Officers' Certificate and a certificate of a firm of independent public accountants, which shall conform to the provisions of Section 12.05, in the case of any other adjustment, in each case setting forth the conversion price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which Officers' Certificate or certificate of a firm of independent public accountants, as the case may be, shall be conclusive evidence of the correctness of any such adjustment, and promptly after such filing the Company shall mail or cause to be mailed a notice of such adjustment to each Securityholder at his last address as the same appears on the Security register. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect any such certificate except to exhibit the same to any holder of Securities desiring inspection thereof. (k) All calculations under this Article 11 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. SECTION 11.05 No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any Security or Securities. If the conversion of any Security or securities results in a fraction, an amount equal to such fraction multiplied by the last report sale price on the principal national securities exchange on which the Common Stock of the Company is admitted to trading or listed (or if not listed or admitted to trading on any national securities exchange, the last quoted bid price as furnished by the National Quotation Bureau Incorporated or such other nationally recognized quotation service selected by the Company for the purpose, if said Bureau is not at the time furnishing quotations) of the Common Stock of 38 the Company on the day prior to the day of conversion (or if such day is not a trading day on such exchange, on the next preceding day on which such exchange was open for business) shall be paid to such holder in cash by the Company. If more than one certificate evidencing Securities shall be surrendered for conversion at any one time by the same Holder, then the number of shares of Common Stock of the Company shall be computed on the basis of the aggregate principal amount of the Securities so surrendered. SECTION 11.06 Effect of Reclassification, Consolidation, Merger, Sale, Lease or Conveyance. (a) In case of any consolidation with or merger of the Company into another corporation (other than a merger or consolidation in which the Company is the continuing corporation), or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirely, such successor, leasing or purchasing corporation, as the case may be, shall execute with the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right thereafter to convert such Security solely into the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such consolidation, merger, sale, lease or conveyance by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale, lease or conveyance. (b) In case of any reclassification or change of the shares of Common Stock of the Company issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in the shares of Common Stock of the Company into two or more classes or series of shares) or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock of the Company (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in the shares of Common Stock of the Company into two or more classes or series of shares), the Company shall execute with the Trustee a supplemental Indenture providing that the Holder of each Security then outstanding shall have the right thereafter to convert such Security solely into the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such reclassification, change, consolidation or merger. (c) Any supplemental indenture entered into pursuant to this Section 11.06 shall (i) where appropriate, state the conversion price in terms of one full share of Common Stock of the Company or one full share of the common stock of any successor, leasing or purchasing corporation and (ii) provide for adjustment which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 11. The Company shall cause notice of the execution of each such supplemental indenture to be mailed to each Securityholder at his address as the same appears in the Security register. 39 (d) Neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind of amount of shares of stock or securities or property or cash receivable by Securityholders upon the conversion of their Securities after any such reclassification, change, consolidation, merger, sale or conveyance or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 7.01, may accept as conclusive evidence of the correctness of any such provisions and shall be protected in relying upon an Officers' Certificate or a certificate of a firm of independent public accountants which shall conform to the provision of Section 12.05 with respect thereto. (e) The above provisions of this Section 11.06 shall similarly apply to successive reclassifications and changes of shares of Common Stock of the Company and to successive consolidations, mergers, sales or conveyances. If this Section 11.06 applies, Section 11.04 does not apply. SECTION 11.07 Covenant to Reserve Shares. The Company covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized Common Stock, solely for the purpose of issuance upon conversion of Securities as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding Securities. The Company covenants that all shares of Common Stock which shall be so issuable shall be, when issued, duly and validly issued and fully paid and non-assessable. For purposes of this Section 11.07, the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding Securities shall be computed as if at the time of computation all outstanding Securities were held by a single holder. SECTION 11.08 Compliance with Legal and Governmental Requirements. Before taking any action which would cause an adjustment reducing the conversion price below the then stated or par value of the shares of Common Stock issuable upon conversion of the Securities, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted conversion price. Notwithstanding anything to the contrary that may be contained in this Indenture, in no event shall the conversion price be less than the then stated or par value of the shares of Common Stock issuable upon conversion of the Securities. The Company covenants that if any shares of Common Stock, required to be reserved for purpose of conversion of Securities hereunder, require registration with or approval of any governmental authority under any Federal or State law, or listing upon any national securities exchange, before such shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered, approved or listed, as the case may be. 40 SECTION 11.09 Payment of Taxes. The issuance of certificates for shares of Common Stock upon the conversion of Securities shall be made without charge to the converting Securityholders for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the Holders of the Securities converted; provided, however, that neither the Company nor any Conversion Agent shall be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder of the Security converted, and neither the Company nor any Conversion Agent shall be required to issue or deliver such certificate unless or until the person or person requested the issuance thereof shall have paid to the Company or the Conversion Agent the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 11.10 Notice of certain Events. In case at any time the Company shall propose: (a) to take any action that would require an adjustment in the conversion price pursuant to Section 11.04; or (b) to effect any reclassification or change of outstanding shares of its Common Stock, or consolidation or merger, or sale, lease or conveyance of property, requiring the execution of a supplemental indenture pursuant to Section 11.06; or (c) to effect any liquidation, dissolution or winding-up of the Company then, and in any one or more of such cases, the Company shall cause notice thereof to be filed with the Trustee and each Conversion Agent and to be mailed to each Holder of a Security at such Holder's last address as the same appears on the Security register at least 15 days prior to the date on which (i) the books of the Company shall close, or a record date be taken, for such dividend, distribution or issuance of rights or warrants or (ii) such reclassification, change, consolidation, merger, sale, lease, conveyance, liquidation, dissolution or winding-up shall be effective, as the case may be. SECTION 11.11 Responsibility of Trustee and Conversion Agent. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Securityholder to determine whether any facts exist which may require any adjustment of the conversion price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee, nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities of property or cash which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee or any Conversion Agent shall be responsible for any failure of the company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion, or, subject to Section 7.01, to comply with any of the covenants of the Company contained in this Article Eleven. 41 ARTICLE 12 MISCELLANEOUS SECTION 12.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provisions shall control. SECTION 12.02 Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, or first class mail, postage prepaid, (except that any notice by the Trustee to the Company of a default or an Event of Default under this Indenture shall be by registered or certified mail, postage prepaid, return receipt requested), addressed as follows: if to the Company: Chock full o'Nuts Corporation 370 Lexington Avenue New York, NY 10017 Attention: Chairman of the Board if to the Trustee: Manufacturers Hanover Trust Company 600 Fifth Avenue New York, NY 10020 Attention: Corporate Trust Department The Company or the Trustee by notice to the other may designate additional or different addresses as shall be furnished in writing by either party. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered, and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of address shall not be deemed to have been given until actually received by the addressee.) Any notice or communication mailed to a Securityholder shall be mailed to the address of such Securityholder as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect is sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice, as required by this indenture, then such method of notification as shall be make with the approval of the Trustee shall constitute a mailing of such notices. If the Company mails any notice or communication to Securityholders, it shall mail a copy to the Trustee and all Agents at the same time. 42 SECTION 12.03 Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section, 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04 Certificate and Opinion as to Conditions Precendent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statement set forth in Section 12.05) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 12.05) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.05 Statements Required in Certificate and Opinion. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement, as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such covenant or condition has been complied with. SECTION 12.06 When Treasury Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or such obligor shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Person directly or indirectly controlling or controlled by or under direct common control with the Company or such obligor. 43 SECTION 12.07 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions. SECTION 12.08 Legal Holiday. A "Legal Holiday" is a Saturday, a Sunday or a day on which banks or trust companies in the city in which the Trustee is located are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.09 Governing Law. The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflicts of law. SECTION 12.10 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.11 No Recourse against Others. All liability described in Paragraph 19 of the Securities of any director, officer, employee or stockholder, as such, of the Company is waived and released. SECTION 12.12 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.13 Multiple Counterparts. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same counterpart shall be deemed an original, but all of them together represent the same agreement. SECTION 12.14 Table of Contents, Headings, etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 12.15 Severability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall 44 not in any way be affected or impaired thereby, and Holder shall have no claim therefor against any party hereto. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. CHOCK FULL O'NUTS CORPORATION Attest: /s/ MARTIN J. CULLEN___ By:___/s/ HOWARD M. LEITNER__ SECRETARY PRESIDENT MANUFACTURERS HANOVER TRUST COMPANY Attest:__/s/ KATHY A. MURPHY________ By:___/s/ D. A. URSITTI, JR._____ ASSISTANT SECRETARY VICE PRESIDENT STATE OF NEW YORK ) SS: COUNTY OF NEW YORK ) On the 23rd day of September, 1986, before me personally came Howard M. Leitner, to me known, who, being by me duly sworn, did depose and say that the is the President of CHOCK FULL O'NUTS CORPORATION (the "Company"), a New York corporation described in and which executed the foregoing instrument; that the seal affixed to said instrument is the seal of the Company; that the seal affixed to said instrument is the seal of the Company; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _______/s/ ROSA DURSO__________________ Notary Public ROSA DURSO STATE OF NEW YORK ) NOTARY PUBLIC, STATE OF NEW YORK SS: NO. 43-4761049 COUNTY OF NEW YORK ) QUALIFIED IN RICHMOND COUNTY CERTIFICATE FILED IN NEW YORK COUNTY COMMISSION EXPIRES SEPT. 30, 1988 On the 23rd day of September, 1986, before me personally came D.A. URSITTI, JR., to me known, who, being by me duly sworn, did depose and say that he is the VICE PRESIDENT OF MANUFACTURERS HANOVER TRUST COMPANY (the "Company"), a New York corporation described in and which executed the foregoing instrument; that the seal affixed to said instrument is the seal of the Company; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ______/s/ ROSA DURSO___________________ Notary Public ROSA DURSO NOTARY PUBLIC, STATE OF NEW YORK NO. 43-4761049 QUALIFIED IN RICHMOND COUNTY CERTIFICATE FILED IN NEW YORK COUNTY COMMISSION EXPIRES SEPT. 30, 1988 EXHIBIT A [Face of Debenture] No. $ CHOCK FULL O'NUTS CORPORATION 8% CONVERTIBLE SUBORDINATED DEBENTURES DUE SEPTEMBER 15, 2006 CHOCK FULL O'NUTS CORPORATION, a New York corporation, promises to pay to or registered assigns the principal sum of Dollars, on September 15, 2006. Interest Payment Dates: March 15, and September 15 Record Dates: March 1 and September 1 Additional provisions of this Security are set forth on other side of this Security. Dated: CHOCK FULL O'NUTS CORPORATION By:_____________________________________ By:_____________________________________ Certificate of Authentication: Manufacturers Hanover Trust Company as Trustee, certifies that this is one of the Securities referred to in the within mentioned Indenture. By:____________________________________ Authorized Officer [Back of Debenture] CHOCK FULL O'NUTS CORPORATION 8% CONVERTIBLE SUBORDINATED DEBENTURES DUE SEPTEMBER 15, 2006 1. INTEREST. CHOCK FULL O'NUTS CORPORATION, a New York corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 15 and September 15 of each year beginning March 15, 1987. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 15, 1986; provided that, if there is no existing Default in the payment of interest, and if this Security is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders of the Securities at the close of business on the March 1 or September 1 next preceding the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal and interest by its check payable in such money. It may mail an interest check to a Holder's registered address. 3. REGISTRAR AND AGENTS. Initially, Manufacturers Hanover Trust Company (the "Trustee") will act as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands. The Company may change any Registrar, co-registrar, Paying Agent, Conversion Agent and agent for service of notices and demands without notice. The Company or any of its Subsidiaries may act as Registrar, co-registrar, Paying Agent or Conversion Agent. 4. INDENTURE; LIMITATIONS. The Company issued the Securities under an Indenture dated as of September 15, 1986 (the "Indenture"), between the Company and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are subject to all terms, and the Holders of the Securities are referred to the Indenture and said Act for a statement of them. A-2 The Securities are general unsecured obligations of the Company limited to 57,500,000 principal amount. The Indenture does not limit in any manner the incurrence by the Company of other debt, secured or unsecured. The Indenture imposes certain limitations on the ability of the Company to, among other things, make payments in respect of its Capital Stock, merge or consolidate with any other Person and sell, lease, transfer or otherwise dispose of its properties or assets. 5. OPTIONAL REDEMPTION. The Company may, at its option, redeem the Securities, in whole or from time to time in part (except that the Securities may not be so redeemed prior to September 15, 1988 unless the closing price per share of Common Stock of the Company on each of any 20 trading days within a period of 30 consecutive trading days ending not more 5 days prior to the date upon which notice of redemption is first mailed is at least 150% of the conversion price in effect on such day) at the following redemption prices, expressed as percentages of the principal amount, if redeemed during the 12 months beginning September 15 of the years indicated below, plus accrued interest to the Redemption Date. Year Percentage Year Percentage 1986 108.000% 1991 104.000% 1987 107.200% 1992 103.200% 1988 106.400% 1993 102.400% 1989 105.600% 1994 101.600% 1990 104.800% 1995 100.800% 1996 and thereafter 100.000% 6. MANDATORY REDEMPTION. The Company will redeem, on September 15, 1996 and on each September 15 thereafter through and including September 15, 2005, 7.5% of the principal amount of Securities originally issued, at a redemption price of 100% of principal amount, plus accrued interest to the Redemption Date. The Company may reduce the principal amount of Securities to be redeemed pursuant to this paragraph 6 by subtracting 100% of the principal amount of any Securities that the Company had delivered to the Trustee for cancellation or redeemed otherwise than pursuant to this paragraph 6. The Company may so subtract the same Security only once. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 15 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1000 may be redeemed in part, but only in whole multiples of $1000. On and after the Redemption Date interest ceases to accrue on Securities or portions of them called for redemption. 8. CONVERSION. A Holder of a Security may convert such Security into Common Stock of the Company at any time before the close of business on September 15, 2006. If the Security is called for redemption, the Holder may convert it at any time before the close of business on the Business Day prior to the date fixed for such redemption. The initial conversion price is $10.20 per share, subject to adjustment in certain events. To determine the number of shares issuable upon conversion of a Security, divide the principal A-3 amount to be converted by the conversion price in effect on the conversion date. The Company will deliver a check for any fractional share. To convert a Security, a Holder must (1) complete and sign the conversion notice on the back of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent and (4) pay any transfer or similar tax if required. No adjustment is to be made on conversion for interest accrued hereon or for dividends on shares of Common Stock issued on conversion, provided, however, that if a Security is surrendered for conversion after the record date for a payment of interest and on or before the interest payment date, then, notwithstanding such conversion, the interest falling due on such interest payment date will be paid to the Person in whose name the Security is registered at the close of business on such record date. A Holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. If the Company is a party to a consolidation or merger or a transfer or lease of all or substantially all of its assets, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another. 9. SUBORDINATION. This Security is subordinated to all Senior Indebtedness of the Company. To the extent and in the manner provided in the Indenture, Senior Indebtedness must be paid before any payment may be made to any Holders of Securities. Any Securityholder by accepting this Security agrees to the subordination and authorized the Trustee to give it effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of any instrument relating to the Senior Indebtedness or extension or renewal of the Senior Indebtedness. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered form without coupons in denominations of $1000 and integral multiples of $1000. A Holder may register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption or register the transfer of or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed. 11. PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as the owner of it for all purposes. 12. UNCLAIMED MONEY. If money for the payment of principal or interest on any Securities remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders must look to the Company for payment. A-4 13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Indenture will be discharged and canceled except for certain sections thereof upon payment of all the Securities, or upon the irrevocable deposit with the Trustee of funds or U.S. Government Obligations maturing on or before such payment date or Redemption Date, sufficient to pay principal, premium, if any, and interest on such payment or redemption. 14. AMENDMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the Securities then outstanding and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the Securities then outstanding. Without the consent of or notice of any Securityholder, the Company may amend the Indenture or the Securities to, among other things, provide for uncertificated Securities, to cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Securityholder. 15. SUCCESSORS. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 16. DEFAULTS AND REMEDIES. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of Securities may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of Default. 17. OFFER TO PURCHASE. If the Company's Consolidated Net Worth at the end of each of any two consecutive fiscal quarters is less than 50% of the Consolidated Net Worth of the Company on July 31, 1986, then the Company will be required to make an offer to acquire on the last day of the fiscal quarter next following such second fiscal quarter 7.5% of the aggregate principal amount of Securities originally issued (or such lesser amount as may be outstanding at that time), at a purchase price of 100% of their principal amount plus accrued interest to the date of payment. The failure to meet the minimum required Consolidated Net Worth at the end of any fiscal quarter may only be counted once toward the Company's requirement to make such an offer. 18. TRUSTEE DEALINGS WITH THE COMPANY. Manufacturers Hanover Trust Company, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its affiliates, and may otherwise deal with the Company or its affiliates, as if it were not Trustee. A-5 19. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer or incorporator, as such, past, present or future, of the Company or any successor corporation shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 20. AUTHENTICATION. This Security shall not be valid until the Trustee signs the certificate of authentication on the other side of this Security. 21. ABBREVIATIONS. Customary abbreviations may be used in the name of a Securityholder or any assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenant by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A/ (= Uniform Gifts to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. It also will furnish the text of this Security in larger type. Requests may be made to: CHOCK FULL O'NUTS CORPORATION, 370 Lexington Avenue, New York, New York 10017, Attention: Secretary A-6 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.08 of the Indenture, check the box: ___ If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.08 of the Indenture, state the amount (which must be a minimum of $1,000 or any multiple of $1,000): $__________________. DATE:_______________________ Your Signature:__________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:___________________________________________________ CONVERSION NOTICE To convert this Security into Common Stock of the Company, check the box:___ To convert only part of this Security, state the amount (which must be a minimum of $1,000 or any multiple of $1,000): $___________________________________________. If you want the stock certificate made out in another person's name, fill in the form below: _____________________________________________________________________ (Insert other person's social security or tax I.D. no.) _____________________________________________________________________ (Print or type other person's name, address and zip code) _____________________________________________________________________ _____________________________________________________________________ Date:________________________ Your Signature:________________________ (Sign exactly as your name appears on the other side of this Security) A-7 ASSIGNMENT FORM If you the Holder want to assign this Security, fill in the form below and have your signature guaranteed: I or we assign and transfer this Security to - - -------------------------------------------------------------------------- - - -------------------------------------------------------------------------- (Insert assignee's social security or tax ID number) - - -------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - - ------------------------------------------------------------------------- and irrevocably appoint - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- - - ------------------------------------------------------------------------- agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - - ------------------------------------------------------------------------- Date:__________________________ Your signature:_________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:______________________________________________________ INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of August 9, 1993, among Chock full O'Nuts Corporation, a corporation duly organized and existing under the laws of the State of New York, having its principal office at 370 Lexington Avenue, New York, New York, 10017 (the "Company"), Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, a banking corporation duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 450 West 33rd Street, New York, New York 10001 (the "Resigning Trustee"), and Liberty Bank and Trust Company of Oklahoma City, National Association, a national banking association duly organized and existing under the laws of the United States of America having its principal corporate trust office at 100 N. Broadway, Oklahoma City, OK 73102 (the "Successor Trustee"); RECITALS There are presently issued and outstanding $43,268,000.00 in aggregate principal amount of the Company's 8% Convertible Subordinated Debentures due September 15, 2006 (the "Securities") under an Indenture, dated as of September 15, 1986 (the "Indenture"), between the Company and the Resigning Trustee. The Resigning Trustee wishes to resign as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands under the Indenture; the Company wishes to appoint the Successor Trustee to succeed the Resigning Trustee as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands under the Indenture; and the Successor Trustee wishes to accept such appointment as Trustee, Registrar, Paying Agent, Conversion Agent and agent for service of otices and demands under the Indenture. NOW THEREFORE, the Company, the Resigning Trustee and the Successor Trustee agree as follows: ARTICLE ONE THE RESIGNING TRUSTEE Section 101. Pursuant to Section 7.08 of the Indenture, the Resigning Trustee hereby confirms previous notification to the Company that the Resigning Trustee is hereby resigning as Trustee under the Indenture. - - -2- Section 102. The Resigning Trustee hereby represents and warrants to the Successor Trustee that: (a) To the best of the knowledge of the Responsible Officers of the Resigning Trustee assigned to its Corporate Trust Department, no Event of Default and no event which, after notice or lapse of time or both, would become an Event of Default, has occurred and is continuing under the Indenture. (b) No covenant or condition contained in the Indenture has been waived by the Resigning Trustee or by the Holders of the percentage in aggregate principal amount of the Securities required by the Indenture to effect any such waiver. (c) There is no action, suit or proceeding pending or, to the best of the knowledge of the Responsible Officers of the Resigning Trustee assigned to its Corporate Trust Department, threatened against the Resigning Trustee before any court or governmental authority arising out of any action or omission by the Resigning Trustee as Trustee under the Indenture. Section 103. The Resigning Trustee hereby assigns, transfers, delivers and confirms to the Successor Trustee all right, title and interest of the Resigning Trustee in and to the trust under the Indenture and all the rights, powers and trusts of the Trustee under the Indenture. The Resigning Trustee shall execute and deliver such further instruments and shall do such other things as the Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in the Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to the Successor Trustee. Section 104. The Resigning Trustee hereby resigns as Paying Agent, Registrar, Conversion Agent, agent for service of notices and demands and as the Office or agency maintained by the Company pursuant to the terms of the Indenture. - - -3- ARTICLE TWO THE COMPANY Section 201. The Secretary or Assistant Secretary or the Company attesting to the execution of this Instrument by the Company hereby certifies that annexed hereto marked Exhibit A is a copy of Board Resolutions duly adopted by the Board of Directors of the Company, and in full force and effect on the date hereof authorizing certain officers of the Company to: (a) accept the Resigning Trustee's resignation as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency; (b) appoint the Successor Trustee as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency; and (c) execute and deliver such agreements and other instruments as may be necessary or desirable to effectuate the succession of the Successor Trustee under the Indenture. Section 202. The Company hereby appoints the Successor Trustee as Trustee under the Indenture and confirms to the Successor Trustee all the rights, powers and trusts of the Trustee under the indenture. The Company shall execute and deliver such further instruments and shall do such other things as the Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in the Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to the Successor Trustee. Section 203. The Company hereby appoints the Successor Trustee as Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as the Company's office or agency maintained pursuant to the terms of the Indenture. - - -4- ARTICLE THREE THE SUCCESSOR TRUSTEE Section 301. The Successor Trustee hereby represents and warrants to the Resigning Trustee and to the Company that the Successor Trustee is qualified and eligible under the provisions of Section 7.10 of the Indenture to act as Trustee under the Indenture. Section 302. The Successor Trustee hereby accepts its appointment as Trustee under the Indenture and shall hereby be vested with all the rights, powers, trusts and duties of the Trustee under the Indenture. Section 303. The Successor Trustee hereby accepts its appointment as Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as Company's office or agency maintained pursuant to the terms of the Indenture. ARTICLE FOUR MISCELLANEOUS Section 401. Except as otherwise expressly provided or unless the context otherwise requires, all terms used herein which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Section 402. This instrument and the resignation, appointment and acceptance effected hereby shall be effective as of the opening of business on the date first above written upon the execution and delivery hereof by each of the parties hereto. Section 403. Notwithstanding the resignation of the Resigning Trustee effected hereby, the Company shall remain obligated under Section 7.07 of the Indenture to compensate, reimburse and indemnify the Resigning Trustee in connection with its trusteeship under the Indenture. Section 404. This Instrument shall be governed by and construed in accordance with the laws of the jurisdiction which govern the Indenture and its construction. Section 405. This Instrument may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereby have caused this Instrument of Resignation, Appointment and Acceptance to be duly executed and their respective seals to be affixed hereunto and duly attested all as of the day and year first above written. - - -5- [Corporate Seal] CHOCK FULL O'NUTS CORPORATION By_____________________________ Name: Howard Leitner Title: President Attest: ___________________________ Secretary CHEMICAL BANK [Corporate Seal] By_____________________________ Name: G.K. Burke Title: Vice President Attest: ______________________________ Assistant Trust Officer LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, NATIONAL ASSOCIATION [Corporate Seal] By_______________________________ Name: Jake Riley Title: Senior Vice President Attest: _______________________ Assistant Secretary - - -6- STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On the 11th day of June, 1993, before me personally came Howard Leitner, to me known, who, being by me duly sworn, did depose and say that he resides at Chappaqua, NY; that he is a president of Chock Full O'Nuts Corporation, corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to the authority of the Board of Directors of said corporation; and that he signed his name thereto pursuant to like authority. ____________________________ Notary Public STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On the 13th day of April, 1993, before me personally came G.K. Burke, to me known who, being by me duly sworn, did depose and say that he resides at 489 Hoyt Street, Darien, CT 06820; that he is a Vice President of Chemical Bank, a corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixe d to said instrument is such corporate seal; that it was so affixed pursuant to the authority of the Board of Directors of said corporation; and that he signed his name thereto pursuant to like authority. ____________________________ Notary Public - - -7- STATE OF OKLAHOMA ) ) SS: COUNTY OF OKLAHOMA ) On the 16th day of July, 1993, before me personally came Jake L. Riley, to me known, who, being by me duly sworn, did depose and say that he is a Senior Vice President of Liberty Bank and Trust Company of Oklahoma City, National Association, a national banking association described in and which executed the above instrument; that he knows the seal of said association; that the seal affixed to said instrument is such seal; that it was so affixed pursuant to the authority of the Board of Directors of said association; and that he signed his name thereto pursuant to like authority. ____________________________ Notary Public - - -8- EXHIBIT A BOARD RESOLUTIONS The following is a true copy of resolutions duly adopted on April 29, 1993, by the Board of Directors of Chock Full O'Nuts Corporation. "RESOLVED, that any officer of this Company is hereby authorized to accept the resignation of Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, as Trustee, Registrar, Paying Agent, Conversion Agent, agent for service of notices and demands and as Company's office or agency under the Company's Indenture, dated as of September 15, 1986, and to appoint Liberty Bank and Trust Company of Oklahoma City as Successor Trustee under said Indenture and as this Company's agent for the service of notices and demands in connection with the securities issued under said Indenture; and FURTHER RESOLVED, that any officer of this Company is hereby authorized to enter into such agreements and other instruments as may be necessary or desirable to effectuate the appointment of said Successor Trustee under said Indenture." EX-99.RESTRST 11 Chock Misc.#1 RestrSt.ltr (CHOCK FULL O'NUTS CORPORATION LETTERHEAD) January 2, 1988 Dear _____________: Reference is made to the Incentive Compensation Plan adopted by the shareholders of Chock Full O'Nuts Corporation ("Chock") on March 1, 1984, as amended on December 18, 1987 (the "Plan"). This letter agreement sets forth the terms of an award by Chock in the form of shares of Chock's Common Stock pursuant to the Restricted Stock Plan described in Article VI of the Plan. In consideration of the services to Chock Full O'Nuts Corporation ("Chock") which you have rendered, Chock hereby awards to you 60,000 shares of its Common Stock, $.25 par value per share (the "Shares") pursuant to the terms and conditions of this letter. Chock represents that the Shares are fully paid and non-assessable. The Shares are subject to certain restrictions as provided below. You are entitled to all the rights and privileges of a holder of the Shares (including the right to receive and retain all cash dividends declared thereon). As used herein the term "Shares" shall mean and include, in addition to the above referenced number of shares, any new shares or other securities convertible into shares resulting from any merger or reorganization of Chock, or the recapitalization, reclassification or split of the Shares, or any stock dividend paid on the Shares. By accepting the Shares you agree as follows: 1. No Shares shall be sold, conveyed, transferred, pledged, encumbered or otherwise disposed of (any such disposition being herein called a "Transfer") prior to March 31, 2001 (the period beginning on the date hereof and ending on March 31, 2001 being hereinafter called the "Risk Period"), except that this Transfer restriction shall lapse (a) with respect to one-seventh (1/7) of the Shares on every other March 31 during the Risk Period, beginning on March 31, 1989 (i.e. the Transfer restriction shall lapse with respect to 1/7 of the Shares on March 31, 1989, with respect to an additional 1/7 of the Shares on March 31, 1991, etc.); (b) with respect to all of the Shares on the date on which your employment is terminated by Chock for any reason other than for Cause (as defined below); (c) with respect to all of the Shares on the date on which you elect to terminate your employment with Chock for a Good Reason (as defined below) after a Change in Control (as defined below); and (d) with respect to all of the Shares if your employment is terminated on account of (i) your death or (ii) your disability (which in the opinion of your personal physician prevents you from being employed by Chock full time). 2. If at any time prior to March 31, 2001, either (a) Chock terminates your employment for Cause or (b) you terminate your employment with Chock for any reason other than a reason described in subsections (c) or (d) in paragraph 1 above (each such termination being herein called an "Event of Retransfer") then, upon such Event of Retransfer, you shall transfer to Chock that number of the Shares as to which the Transfer restriction shall still apply on the day following such termination as provided in paragraph 1 above. Upon an Event of Retransfer, you shall deliver to Chock all stock certificates representing such Shares, duly endorsed with your signature guaranteed thereon by a New York City bank and with all necessary transfer stamps affixed, and Chock shall deliver to you a receipt therefor. Immediately upon such Event of Retransfer, such Shares shall be deemed to have been transferred to Chock and you shall have no further rights or privileges as a holder of the Shares so retransferred. The following terms in this paragraph 2 shall have the meanings specified below: (a) A "Change in Control" will be deemed to have occurred if following (i) a tender or exchange offer for voting securities of Chock, (ii) a proxy contest for the election of directors of Chock, or (iii) a merger or consolidation or sale of all or substantially all of the business or assets of Chock, the persons constituting the Board of Directors of Chock immediately prior to the initiation of such event cease to constitute a majority of the Board of Directors of Chock upon the occurrence of such event or within one year after such event. (b) Termination of your employment with Chock for "Good Reason" shall mean termination by you of your employment, subsequent to a Change in Control, because of: (i) the assignment to you, without your express written consent, of any duties inconsistent with your positions, duties, responsibilities, authority and status with Chock and its subsidiaries immediately prior to such Change in Control, or a change in your reporting responsibilities, titles or offices as in effect immediately prior to the Change in Control, or any removal of you from or any failure to reelect you to any of such positions, except in connection with the termination of your employment by you without Good Reason; (ii) a reduction by Chock in your salary as in effect at the time of such Change in Control; (iii) Chock's requiring you to maintain your principal office or conduct your principal activities anywhere other than at Chock's principal executive offices in New York City or at such other place of business where you maintained your principal office or conducted your principal activities at the time of such Change in Control; (iv) the failure by Chock to continue in effect (or to replace with equivalent plans) any life insurance plan, hospital-medical plan, dental plan, or disability plan in which you are participating or eligible to participate at the time of such Change in Control, or the taking of any action by Chock which would adversely affect your participation in or materially reduce your benefits under any such plans (or equivalent plans) or deprive you of any material fringe benefit enjoyed or to be enjoyed by you at the time of such Change in Control; or (v) a determination made by you in good faith, whether before or after the date you are eligible for early retirement under Chock's policy in effect immediately prior to the Change in Control, that as a result of such Change in Control you are not able to discharge your duties effectively. (c) Termination of your employment for "Cause" shall mean termination by Chock of your employment because of: (i) your having engaged in any activity in competition with Chock without Chock's consent; (ii) your having divulged any secret or confidential information belonging to Chock without Chock's consent; or (iii) your dishonesty, misconduct or action that is damaging or detrimental to Chock or any of its affiliates in any material respect. 3. You represent and agree that you will only sell, transfer, pledge or hypothecate any of the Shares pursuant to an effective registration statement under the Securities Act of 1933 or in a transaction wherein registration under the Securities Act of 1933 is not required. 4. All certificates for Shares shall be endorsed as follows: "The shares of stock represented by this certificate are subject to certain restrictions and obligations stated in and are transferable only upon compliance with the provisions of an Agreement dated January 2, 1988 between this Corporation and the registered holder, a copy of which Agreement is on file in the office of the Secretary of this Corporation." "The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares have been acquired for investment and must be held unless they are subsequently registered under the Securities Act of 1933 or, in the opinion of counsel to Chock, an exemption from registration under said Act is available. Any routine sales of the securities which may be made in reliance upon Rule 144 under said Act, if available, can be made only in limited amounts in accordance with all of the terms and conditions of that Rule." 5. In order to facilities compliance with the transactions described herein, the certificates representing the Shares are being deposited in escrow with Howard L. Morse, Esq., as Escrowee, together with stock powers duly endorsed by you, in blank, with your signature guaranteed thereon by a New York City bank, and shall be held and disposed of by the Escrowee in accordance with all of the terms hereof. Provided an Event of Retransfer has not then occurred, the Escrowee, on March 31, 2001 or upon such earlier date when the Transfer restrictions to which any of the Shares are subject lapse (or as soon thereafter as is reasonably practicable), shall return to you such certificates and powers as shall represent the number of Shares to which the Transfer restrictions shall have lapsed. Such deposit shall not affect your rights as holder of the Shares. The Escrowee shall be under no duty except to receive the certificates and dispose of same in accordance with the terms hereof. The Company may redesignate an Escrowee at any time on notice to you; provided, however, that if a Change of Control has occurred and the Escrowee immediately prior to such Change of Control shall at any time thereafter cease to act as Escrowee, a new Escrowee shall be designated only by mutual agreement between you and Chock. Your agreement to any such designation may be withheld by you in your sole discretion. Should you and Chock fail to designate a new Escrowee within five business days after notice to you that the original Escrowee has ceased or will cease to act as Escrowee, the certificates and stock powers for the shares deposited with the Escrowee shall be delivered to you. 6. This agreement shall be binding upon and inure to the benefit of you and Chock and your and its respective successors and legal representatives. Very truly yours, CHOCK FULL O'NUTS CORPORATION By: _________________________ Acceptance by Purchaser: I hereby purchase the Shares and agree to all of the terms and conditions described herein. Dated: As of January 2, 1988 ____________________________ Acceptance by Escrowee: __________________________ Howard L. Morse, Esq. Dated: As of January 2, 1988 EX-99.CK-BYLAW 12 EXHIBIT 3(b) CK-BYLAW.DOC 10/12/94 AMENDED AND RESTATED BY-LAWS of CHOCK FULL O'NUTS CORPORATION (a New York Corporation) CHOCK FULL O'NUTS CORPORATION BY-LAWS ARTICLE I - STOCKHOLDERS 1.01 Meetings. Annual and Special Meetings of Stockholders shall be called and held at such time and place within or without the State of New York as shall be determined from time to time by the Chairman of the Board, the Chief Executive Officer or a majority of the members of the Board of Directors then in office. 1.02 Notice of Meetings. Except as otherwise expressly provided by statute, written notice of the time, place and purpose or purposes of the annual and each special meeting of stockholders shall be given by mailing a copy thereof, not less than ten nor more than fifty days before the meeting, to each stockholder of record entitled to vote at such meeting and to each stockholder of record who, by reason of any action proposed at such meeting, would be entitled to have his stock appraised if such action were taken. Such copy shall be directed to each such stockholder at his address as it appears on the stock book unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. 1.03 Quorum. The presence, in person or by proxy, of the holders of record of forty percent of the stock outstanding and entitled to vote is requisite for and shall constitute a quorum for the transaction of business at all meetings of the stockholders, except as otherwise provided by law or by the Certificate of Incorporation or by these By-Laws. In the absence of a quorum, the stockholders present in person or by proxy and entitled to vote shall have power to adjourn the meeting from time to time, to a designated time and place, without notice other than announcement at the meeting, until the requisite amount of stock shall be present, whereupon any business may be transacted which might have been transacted at the meeting as originally noticed. 1.04 Voting. At each meeting of stockholders, except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his name on the books of the Corporation. Each proxy to vote shall be in writing and signed by the stockholder or by his duly authorized attorney. Any stockholder entitled to vote may, on any question, demand a vote by ballot. ARTICLE II - BOARD OF DIRECTORS 2.01 Number. The business and affairs of the Corporation shall be managed by its Board of Directors, consisting of not fewer than nine or more than twenty-seven directors, the exact number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into there classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. 2.02 Election. At each annual meeting of stockholders, successors to the class of directors whose term expires at the annual meeting shall be elected by a plurality of the votes cast at such election to serve for a three-year term. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject however, to prior death, resignation, retirement, disqualification or removal from office. Each director shall be at least twenty-one years of age. A director need not be a stockholder, a citizen of the United States or a resident of the State of New York. 2.03 Vacancies. New created directorships resulting from any increase in the authorized number of directors or vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or any other cause shall be filled only by a majority of the remaining directors then in office, even if less than a quorum or by the sole remaining director. 2.04 First Meeting. The newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after each annual meeting of the stockholders and at the same place, and notice of such meeting need not be given. Such first meeting may be held at any other time and place which may be specified in a notice given as hereinafter provided for special meetings of the Board of Directors or in a consent and waiver of notice thereof signed by all the directors. 2.05 Chairman of the Board of Directors. The Board of Directors shall at its first meeting after each annual meeting of stockholders elect from among its members a Chairman of the Board of Directors who may, but need not, also be an officer of the Corporation. The Chairman of the Board shall preside at all meetings of the Board of Directors, unless he delegates this power to another director. 2.06 Vice Chairmen of the Board of Directors. The Board of Directors may elect from among its members one or more Vice Chairmen of the Board of Directors who may, but need not, be officers of the Corporation. In the absence or inability of the Chairman of the Board a Vice Chairman (in the order of their election) shall preside at all meetings of the Board of Directors, unless the Chairman of the Board shall have delegated this power to another director. 2.07 Regular Meetings. Regular meetings of the Board of Directors may be held at such places and times as may be fixed from time to time by resolution of the Board of Directors. Notice of the time and place of holding of regular meetings shall be given to each director at his residence or usual place of business by mail at least three days before the meeting or by telegram, cable, radiogram or personal service at least three days before the meeting. 2.08 Special Meetings. Special meetings of the Board of Directors may be called at any time either (a) by the Chairman of the Board of Directors, (b) by the Chief Executive Officer or (c) upon the written request of a majority of the directors, in which event the Secretary shall call such meeting. Notice of the time and place of the holding of special meetings shall be given to each director at his residence or usual place of business at least three hours before the meeting by telegram, cable, radiogram, personal service or telephone. Notice of a special meeting need not be given to any director who may waive such notice either in writing or by telegram, cable or radiogram. Except as otherwise provided by these By-Laws or unless otherwise stated in the notice thereof, any and all business may be transacted at any meeting without specification of such business in the notice. 2.09 Place of Meeting. The directors may hold their meetings, have one or more offices, and keep the books of the Corporation (except as may otherwise be provided by law), at any place as they may from time to time determine. 2.10 Participation by Conference Telephone. Any one or more members of the Board of Directors may participate in a meeting of such Board of Directors by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. 2.11 Quorum. At all meetings of the Board of Directors the presence of a majority of the directors shall be necessary and sufficient t o constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. 2.12 Removal. Directors of any class of directors may be removed at any time for cause at any special meeting of stockholders by the affirmative vote of the holders of at least a majority of the shares entitled to vote at such meeting. The Board of Directors may, at any time, with cause, remove any director. 2.13 Powers of Directors. The Board of Directors shall exercise all the powers of the Corporation, subject to the restrictions imposed by law, by the Certificate of Incorporation, or by these By-Laws. 2.14 Compensation of Directors. The Board of Directors may determine, from time to time, the amount of compensation which shall be paid to its outside (non-employee) members. The Board of Directors shall also have power, in its discretion, to allow a fixed sum for attendance at each regular or special meeting of the Board of Directors, or of any Committee of the Board of Directors; in addition, the Board of Directors shall also have power, in its discretion, to provide for and pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board of Directors from time to time. 2.15 Nominations of Board Members. Only persons who are nominated in accordance with the procedures set forth in this Section 2.15 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors, or (ii) by any nominating committee or person appointed by the Board of Directors, or (iii) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.15. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to notice in writing to the Secretary of the Corporation, which notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, any notice of nomination by the stockholder must be so received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of the meeting was mailed or (ii) the day on which such public disclosure was made. A stockholder's notice of nomination shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares that are entitled to vote of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director, if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares that are entitled to vote of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.15. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE III - COMMITTEES 3.01 Designation of Committees. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate one or more Committees consisting of three or more directors, as the Board of Directors by like resolution from time to time may determine. The Board of Directors shall have power at any time to fill vacancies in these Committees and to remove any member or members thereof either for or without cause. 3.02 Powers of Committees. All Committees established by the Board shall have only such power and authority as specifically delegated to it by the Board of Directors. 3.03 Procedure; Meetings; Quorum. All Committees shall keep regular minutes of their acts and proceedings and report the same to the Board of Directors and each Committee may meet at stated times without notice or on notice to all by one of their number. A majority of each Committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the Committee. ARTICLE IV - OFFICERS 4.01 Titles and Election. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall not be limited in number, but shall include a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary and a Treasurer. The Board of Directors may choose additional officers and agents as it shall deem necessary, and may define their powers and duties. One person may hold any two offices except those of President and Secretary. The Chief Executive Officer and the President shall be chosen from among the directors; the other officers need not be directors. 4.02 Terms of Office. The officers shall hold office until their successors are chosen and qualify. 4.03 Removal. Any officer may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the Board of Directors. 4.04 Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer or to the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 4.05 Vacancies. If the office of any officer becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the directors may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. 4.06 Chief Executive Officer. The Chief Executive Officer of the Corporation shall preside at all meetings of the stockholders, unless he delegates this power to another officer or director. He shall exercise the powers and perform the duties usual to the chief executive officer and shall have general management and control of the affairs and business of the Corporation; he shall appoint and discharge employees and agents of the Corporation and fix their compensation; he shall see that all orders and resolutions of the Board of Directors are carried into effect; and shall do and perform such other duties as from time to time may be assigned to him by the Board of Directors. He shall have the power to execute bonds, mortgages and other contracts, agreements and instruments of the Corporation. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer or another officer of the Corporation designated by the Chief Executive Officer, shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meetings of security holders of corporations in which the Corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities, and which, as the owner thereof, the Corporation might have possessed and exercised, if present. The Board of Directors by resolution from time to time may confer like powers upon any other person or persons. 4.07 President. The President shall do and perform such duties as from time to time may be assigned to him by the Board of Directors and the Chief Executive Officer and, in the absence or inability of the Chief Executive Officer, the President shall preside at all meetings of the stockholders unless the Chief Executive Officer shall have designated this power to another officer or director. He shall have the power to execute bonds, mortgages and other contracts, agreements and instruments of the Corporation. 4.08 Vice-Presidents. The Board of Directors may elect one or more Vice-Presidents who shall perform such duties as the Chief Executive Officer or the President shall direct and as are incident to the office of Vice-President. 4.09 Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall, when authorized by the Board of Directors, affix the corporate seal to any instrument requiring it, and when so affixed, it shall be attested by the signature of the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer any one of whom may affix the seal to any such instrument in the event of the absence or disability of the Secretary. 4.10 Treasurer. The Treasurer shall be responsible for disbursing the corporate funds as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all his transactions as Treasurer. 4.11 Duties of Officers May Be Delegated. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director. 4.12 Authorized Signatures. Other than routine purchases and sales of products used in the normal operation of business of the Corporation, no one may sign any agreement obligating the Corporation, or any of its subsidiaries, except the Chief Executive Officer or the President or any of them may give such authority in writing to their designee or designees. ARTICLE V - SEAL 5.01 Corporate Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors and may be altered from time to time at the discretion of the Board of Directors. ARTICLE VI - CHECKS, DRAFTS, NOTES, ETC. 6.01 Execution of Checks, Drafts, Notes, etc. All checks, drafts, notes and other instruments or orders for the payment of money shall be signed by such officer or officers as the Board of Directors from time to time may designate. ARTICLE VII - CERTIFICATES OF STOCK AND TRANSFER OF STOCK 7.01 Certificates of Stock. Certificates of stock shall be in such form as shall be approved by the Board of Directors, shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name. Each certificate shall be signed by the Chairman of the Board, Chief Executive Officer, President or a Vice-President and by a Secretary or the Treasurer and sealed with the seal of the Corporation. Such seal may be a facsimile, engraved or printed. Where any such certificate is signed by a transfer agent or transfer clerk and by a registrar, the signature of any such officers upon such certificate may be facsimiles, engraved or printed. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the date of issue. 7.02 Transfers of Stock. Transfers of shares of stock shall be made only upon the books of the Corporation by the registered holder in person or by attorney, duly authorized and upon surrender of the certificate or certificates for such shares, properly assigned for transfer. 7.03 Lost or Destroyed Stock Certificates. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of the fact and shall give the Corporation a bond of indemnity in form and with one or more sureties satisfactory to the Board of Directors, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. In the issuing of said new certificate, the Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of New York. ARTICLE VIII - CLOSING TRANSFER BOOKS OR SETTING RECORD DATE 8.01 Meetings of Stockholders. The Board of Directors may prescribe a period not exceeding fifty days prior to the date of meetings of the stockholders during which no transfer of stock on the books of the Corporation may be made or, in lieu of prohibiting the transfer of stock, the Board of Directors may fix a time not more than fifty days prior to the date of any meeting of stockholders as the time as of which stockholders entitled to notice of and to vote at such meeting shall be determined, and all persons who are holders of record of voting stock at such time and no others shall be entitled to notice of and to vote at such meeting. 8.02 Distributions. The Board of Directors may fix a time not exceeding forty days preceding the date fixed for the payment of any dividend or the making of any distribution, or for the delivery of evidences of rights or evidences of interests arising out of any change or conversion or exchange of capital stock, as a record time for the determination of the stockholders entitled to receive any such dividend, distribution, right or interest, and in such case only stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution, right or interest. The Board of Directors at its option in lieu of so fixing a record time, may prescribe a period not exceeding forty days prior to the date for such payment, distribution or delivery during which no transfer of stock on the books of the Corporation may be made. ARTICLE IX - AMENDMENT 9.01 Amendment of By-Laws. These By-Laws may be altered, amended or repealed at any regular or special meeting of the Board of Directors, by the affirmative vote of a majority of the whole Board of Directors, or at any regular or special meeting of the stockholders by the affirmative vote of the holders of a majority of the stock outstanding and entitled to vote thereon; provided that, in either case, notice of the proposed alteration, amendment or repeal shall have been stated in the notice of such meeting. Any By-Law made or amended by the Board of Directors may be altered or repealed by the stockholders. -----END PRIVACY-ENHANCED MESSAGE-----