-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MCdp+1JpwGEHvrT88qYvbNApmpo1tPim8WP5+iT7lhVsqdHFZ5MjXxKlhgyK7cW1 o+f4QnEdWMwbIA2YkMXotw== 0000912057-97-013095.txt : 19970416 0000912057-97-013095.hdr.sgml : 19970416 ACCESSION NUMBER: 0000912057-97-013095 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLE SOUTH INC CENTRAL INDEX KEY: 0000849101 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 592778983 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-25205 FILM NUMBER: 97580992 BUSINESS ADDRESS: STREET 1: HANCOCK AT WASHINGTON CITY: MADISON STATE: GA ZIP: 30650 BUSINESS PHONE: 7063424552 MAIL ADDRESS: STREET 1: HANCOCK AT WASHINGTON CITY: MADISON STATE: GA ZIP: 30650 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLE SOUTH FINANCING I CENTRAL INDEX KEY: 0001037657 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-25205-01 FILM NUMBER: 97580993 BUSINESS ADDRESS: STREET 1: C/O APPLE SOUTH INC STREET 2: HANCOCK AT WASHINGTON CITY: MADISON STATE: GA ZIP: 30650 BUSINESS PHONE: 7063424552 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ APPLE SOUTH, INC. APPLE SOUTH FINANCING I (Exact name of registrant as specified in its charter) GEORGIA 59-2778983 DELAWARE [ ] (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
HANCOCK AT WASHINGTON MADISON, GEORGIA 30650 (706) 342-4552 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ERICH J. BOOTH TREASURER AND CHIEF FINANCIAL OFFICER APPLE SOUTH, INC. HANCOCK AT WASHINGTON MADISON, GEORGIA 30650 (706) 342-4552 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ Copies to: LARRY D. LEDBETTER KILPATRICK STOCKTON LLP 1100 PEACHTREE STREET, SUITE 2800 ATLANTA, GEORGIA 30309 (404)815-6500 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / - ------------- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / - ------------- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------------ CALCULATION OF REGISTRATION FEE PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(4) PRICE(4) FEE(1) Convertible Trust Preferred Securities of Apple South Financing I................ 2,300,000 $54.25(1) $124,775,000.00(1) $37,811.00 Convertible Subordinated Debentures of Apple South, Inc....................... (2) -- -- -- Common Stock of Apple South, Inc......... (3) -- -- -- Preferred Securities Guarantee of Apple South, Inc. and certain back-up undertakings(5)........................ -- -- -- Total.................................... 2,300,000 $124,775,000.00 $37,811.00
(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) of the Securities Act. (2) $115,000,000 in aggregate principal amount of 7% Convertible Subordinated Debentures Due March 1, 2027 (the "Convertible Debentures") of Apple South, Inc. (the "Company") were issued and sold to Apple South Financing I (the "Trust") in connection with the issuance by the Trust of 2,300,000 of its $3.50 Term Convertible Securities, Series A (the "Trust Preferred Securities"). The Convertible Debentures may be distributed, under certain circumstances, to the holders of Trust Preferred Securities for no additional consideration. (3) 7,774,230 share of Common Stock of the Company ("Common Stock") are issuable initially upon conversion of the Trust Preferred Securities being registered hereunder at the conversion rate of 3.3801 shares of Common Stock for each Trust Preferred Security. An indeterminate number of shares of Common Stock as may be issuable upon conversion of the Trust Preferred Securities are registered hereunder, including such shares as may be issuable pursuant to antidilution adjustments. The Common Stock issuable upon conversion of the Trust Preferred Securities, if issued, will be issued for no additional consideration. (4) Exclusive of accrued interest and distributions, if any. (5) No separate consideration will be received for the Preferred Securities Guarantee. The Preferred Securities Guarantee includes the rights of holders of the Trust Preferred Securities under the Preferred Securities Guarantee, the Convertible Debentures and certain back-up undertakings, comprised of obligations of the Company under the Indenture and pursuant to the Declaration to provide certain indemnities in respect of, and be responsible for certain costs, expenses, debts and liabilities of the Trust, as described in the Registration Statement. All obligations under the Declaration, including the indemnity obligation, are included in the back-up undertakings. ------------------------------ THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED APRIL 15, 1997 PROSPECTUS 2,300,000 SECURITIES APPLE SOUTH FINANCING I $3.50 TERM CONVERTIBLE SECURITIES, SERIES A ("TECONS-SM-") (LIQUIDATION PREFERENCE $50 PER SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK OF, APPLE SOUTH, INC. The $3.50 Term Convertible Securities, Series A (the "TECONS"), liquidation preference $50 per security, offered for resale hereby were issued by Apple South Financing I, a statutory business trust created under the laws of the State of Delaware ("Apple South Financing" or the "Trust"). These TECONS represent preferred undivided beneficial interests in the assets of the Trust. The TECONS were issued and sold (the "Original Offering") on March 11, 1997 and March 18, 1997 (the "Original Offering Date") to certain initial purchasers (the "Initial Purchasers") and were simultaneously sold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in the United States to persons reasonably believed by the Initial Purchasers to be qualified institutional buyers as defined in Rule 144A under the Securities Act and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. Apple South, Inc., a Georgia corporation ("Apple South" or the "Company"), owns all the common securities (the "Trust Common Securities" and, together with the TECONS, the "Trust Securities"), representing undivided beneficial interests in the assets of Apple South Financing. Apple South Financing exists for the sole purpose of issuing the TECONS and Trust Common Securities and investing the proceeds thereof in 7% Convertible Subordinated Debentures due March 1, 2027 (the "Convertible Debentures") of Apple South in an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities. The Convertible Debentures are unsecured obligations of Apple South and are subordinate and junior in right of payment to certain other indebtedness of Apple South as described herein. Upon an event of default under the Declaration (as defined herein), the holders of TECONS will have a preference over the holders of the Trust Common Securities with respect to payment in respect of distributions and payments upon redemption, liquidation and otherwise. The TECONS (and the Convertible Debentures and the securities issuable upon conversion) in respect of which this Prospectus is being delivered (the "Offered Securities") may be offered and sold from time to time by the holders thereof named herein or in a supplement hereto (collectively, the "Selling Holders") pursuant to this Prospectus as supplemented. The Offered Securities may be sold by the Selling Holders from time to time directly to purchasers or through agents, underwriters or dealers. (CONTINUED ON FOLLOWING PAGE) SEE "SAFE HARBOR STATEMENT" AND "RISK FACTORS", COMMENCING ON PAGE 11, FOR A DESCRIPTION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. May , 1997 (CONTINUED FROM PRECEDING PAGE) See "Plan of Distribution" and "Selling Holders." If required, the names of any such agents or underwriters involved in the sale of the Offered Securities and the applicable agent's commission, dealer's purchase price or underwriter's discount, if any, will be set forth in an accompanying supplement to this Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all of the net proceeds from the sale of the Offered Securities and will pay all underwriting discounts and selling commissions, if any, applicable to any such sale. The Company is responsible for payment of all other expenses incident to the offer and sale of the Offered Securities. The Selling Holders and any broker-dealers, agents or underwriters which participate in the distribution of the Offered Securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission received by them and any profit on the resale of the Offered Securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution" for a description of indemnification arrangements. Holders of the TECONS are entitled to receive cumulative cash distributions at an annual rate of $3.50 per TECONS accumulating from March 11, 1997 and payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing June 1, 1997 ("Distributions"). The payment of Distributions out of money held by Apple South Financing and payments on liquidations of Apple South Financing or the redemption of TECONS, as set forth below, are guaranteed by Apple South (the "Guarantee") to the extent described herein. The Guarantee covers payments of Distributions and other payments on the TECONS only if and to the extent that Apple South Financing has funds available therefor, which will not be the case unless Apple South has made a payment of interest or principal or other payments on the Convertible Debentures held by Apple South Financing as its sole assets. The Guarantee, when taken together with the obligations of Apple South under the Convertible Debentures and the Indenture (as defined herein) and its obligations under the Declaration, including its liabilities to pay costs, expenses, debts and obligations of Apple South Financing (other than with respect to the Trust Securities), provides a full and unconditional guarantee of amounts due on the TECONS. See "Risk Factors--Rights Under the Guarantee." The obligations of Apple South under the Guarantee are subordinate and junior in right of payment to all other liabilities of Apple South and rank PARI PASSU with the most senior preferred stock issued, from time to time, if any, by Apple South. The obligations of Apple South under the Convertible Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of Apple South. The Convertible Debentures purchased by the Trust may be subsequently distributed PRO RATA to holders of the TECONS and Trust Common Securities in connection with the dissolution of the Trust upon the occurrence of certain events. Each TECONS is convertible in the manner described herein at the option of the holder, at any time prior to the Conversion Expiration Date (as defined herein), into common shares, $0.01 par value, of Apple South ("Apple South Common Stock"), at the initial rate of 3.3801 shares of Apple South Common Stock for each TECONS (equivalent to an initial conversion price of $14.793 per share of Apple South Common Stock), subject to adjustment in certain circumstances. See "Description of the TECONS-- Conversion Rights." The last reported bid price of Apple South Common Stock, which is reported under the symbol "APSO" on the Nasdaq National Market, on May , 1997, was $ per share. The Distribution rate and the Distribution payment date and other payment dates for the TECONS will correspond to the interest rate and interest payment date and other payment dates for the Convertible Debentures, which will be the sole assets of the Trust. As a result, if principal or interest is not paid on the Convertible Debentures, no amounts will be paid on the TECONS. If Apple South does not make principal or interest payments on the Convertible Debentures, the Trust will not have sufficient funds to make Distributions on the TECONS, in which event the Guarantee will not apply to such Distributions until the Trust has sufficient funds available therefor. 2 So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right to defer payments of interest on the Convertible Debentures from time to time for successive periods (each, an "Extension Period") by extending the interest payment period on the Convertible Debentures at any time for up to 20 consecutive quarters. If interest payments are so deferred, Distributions to holders of the TECONS will also be deferred. During such Extension Period, Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law) at the Distribution rate, compounded quarterly, and during any Extension Period, holders of TECONS will be required to include deferred interest income in their gross income for U.S. federal income tax purposes in advance of receipt of the cash Distributions with respect to such deferred interest payments. There could be multiple Extension Periods of varying lengths throughout the term of the Convertible Debentures. See "Risk Factors--Option to Extend Interest Payment Period," "Description of the TECONS-- Distributions," "Description of the Convertible Debentures--Option to Extend Interest Payment Period" and "Certain Federal Tax Consequences--Original Issue Discount." The Convertible Debentures are redeemable by Apple South, in whole or in part, from time to time, on or after March 3, 2000, at the prices set forth herein (the "Redemption Price"), plus accrued and unpaid interest thereon to the date fixed for redemption, including Compound and Additional Interest (as defined herein). In addition, in certain circumstances upon the occurrence of a Special Event (as defined herein) the Convertible Debentures may be redeemed by Apple South at 100% of the principal amount thereof, plus accrued and unpaid interest thereon. If Apple South redeems the Convertible Debentures, the Trust will redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed. See "Description of the TECONS-- Mandatory Redemption." The outstanding TECONS will be redeemed upon maturity and repayment of the Convertible Debentures after notice to the holders. The Convertible Debentures mature on March 1, 2027. Upon the occurrence of a Special Event arising from a change in law or a change in legal interpretation, unless the Convertible Debentures are redeemed in the limited circumstances described herein, the Trust may be dissolved (with the consent of Apple South), with the result that the Convertible Debentures would be distributed to the holders of the TECONS, on a PRO RATA basis, in lieu of any cash Distribution. See "Description of the TECONS--Special Event Distribution." If Apple South declines to consent to such dissolution and Distribution, Apple South may incur an obligation to pay Additional Interest (as defined herein). See "Description of the Convertible Debentures--Additional Interest." In the event of the involuntary or voluntary dissolution, winding up or termination of the Trust, after satisfaction of liabilities to creditors the holders of the TECONS will be entitled to receive for each TECONS a liquidation amount of $50 plus accumulated and unpaid Distributions thereon (including interest thereon) to the date of payment, unless, in connection with such dissolution in the case of a Special Event, the Convertible Debentures are distributed to the holders of the TECONS. See "Description of the TECONS--Liquidation Distribution Upon Dissolution." AVAILABLE INFORMATION Apple South is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"), most of which it files electronically under the Commission's EDGAR system. These materials can be inspected and copied at the public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at: Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information 3 regarding registrants that file electronically with the Commission. The address of that Web site is http://www.sec.gov. Apple South Common Stock, $.01 par value per share, is quoted on the Nasdaq National Market. Reports, proxy statements and other information concerning Apple South may be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. No separate financial statements of the Trust have been included herein. The Company does not consider that such financial statements would be material to holders of TECONS because (i) all of the voting securities of the Trust will be owned, directly or indirectly, by the Company, a reporting company under the Exchange Act, (ii) the Trust has no independent operations and exists for the sole purpose of issuing securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in the Convertible Debentures issued by the Company and (iii) the obligations of the Trust under the Trust Securities are fully and unconditionally guaranteed by the Company pursuant to the Guarantee, when taken together with the Company's obligations under the Convertible Debentures, the Indenture and the Declaration, including its obligations under the Indenture to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities). See "Description of the Convertible Debentures" and "Description of the Guarantee." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Apple South hereby incorporates by reference in this Prospectus the following documents: (a) Apple South's Annual Report on Form 10-K for the fiscal year ended December 29, 1996; (b) Apple South's Current Reports on Form 8-K filed with the Commission on February 10, 1997 and February 24, 1997; (c) Apple South's registration statement on Form 8-A, as amended; and (d) All documents filed by Apple South with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and before the termination of the offering of the TECONS hereby. Any statement incorporated herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Apple South will provide without charge to each recipient of this Prospectus, upon written or oral request of such recipient, a copy of any or all of the documents incorporated herein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into the document that this Prospectus incorporates by reference). Requests should be directed to Erich J. Booth, Chief Financial Officer and Treasurer, Apple South, Inc., Hancock at Washington, Madison, Georgia 30650, telephone number (706) 342-4552. 4 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS WITH RESPECT TO SHARES OF APPLE SOUTH COMMON STOCK REFLECTS STOCK DIVIDENDS OF ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON NOVEMBER 2, 1992, ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON JANUARY 29, 1993, ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON AUGUST 30, 1993 AND ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON JUNE 1, 1994. IN NOVEMBER 1995, APPLE SOUTH MERGED WITH DF&R RESTAURANTS, INC. ("DF&R") IN A TRANSACTION ACCOUNTED FOR AS A POOLING OF INTERESTS AND, ACCORDINGLY, ALL FINANCIAL AND OTHER INFORMATION CONCERNING APPLE SOUTH IN THIS PROSPECTUS INCLUDES DF&R FOR ALL PERIODS UNLESS OTHERWISE INDICATED. REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "APPLE SOUTH" INCLUDE APPLE SOUTH, INC. AND ITS SUBSIDIARIES UNLESS THE CONTEXT INDICATES OTHERWISE. SEE "SAFE HARBOR STATEMENT" AND "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. THE COMPANY Apple South is a rapidly growing, multi-concept restaurant operating company. Since its inception in 1986, Apple South has increased its profitability and size through the efficient management of restaurant operations and through a series of strategic restaurant openings and acquisitions. Over the last five fiscal years, restaurant sales have increased at a compound annual growth rate of 37%, and restaurant margins have increased from 12.2% in 1991 to 15.7% in 1996. At May , 1997, Apple South operated 345 casual dining restaurants, consisting of 236 restaurants operating under the name "Applebee's Neighborhood Grill & Bar," 63 "Don Pablo's" restaurants featuring traditional Mexican and Tex-Mex dishes, 11 "Harrigan's" restaurants offering traditional classics such as mesquite-smoked prime rib, hickory-grilled steaks and chicken, 16 "McCormick's" or "McCormick & Schmick's" upper-end casual seafood restaurants, and 19 "Hops Grill & Bar" casual dining restaurants that feature an on-premise micro-brewery. In addition, Apple South operates ten franchised Hardee's fast- food hamburger restaurants which Apple South has a signed contract to sell. Apple South acquired the McCormick & Schmick's restaurants on March 3, 1997, and the Hops Grill & Bar restaurants on March 13, 1997. For the year ended December 29, 1996, Apple South's restaurant sales were $546 million. Each Apple South restaurant concept is established as an entrepreneurial operating division and functions on a decentralized basis with individual recruiting, training, marketing, accounting and restaurant operations. Each division is supported by various centralized functions such as human resources, finance, treasury and capital formation. This multi-concept strategy allows the Company to reach a broad customer base through specialized restaurant market segments. By operating restaurant concepts as separate divisions, the Company protects each concept's individuality, but allows each division to leverage the best practices of other divisions. As a franchisee of Applebee's International, Inc. (the "Franchisor"), Apple South holds the exclusive development rights for Applebee's restaurants in all or part of 22 states in the South, Mid-Atlantic and Midwest regions of the United States. Apple South opened its first Applebee's restaurant in Greenville, South Carolina in 1986 and is currently the largest Applebee's operator. In November 1995, Apple South merged with DF&R, which operates Don Pablo's and Harrigan's restaurants on a proprietary basis. The Don Pablo's restaurants are concentrated in Texas and the Midwest region, while Harrigan's restaurants are located in Texas, Oklahoma and New Mexico. In early 1997 Apple South acquired the McCormick & Schmick's seafood restaurant group, located in the West-Coast region and Washington, D.C., and Hops Grill & Bar, a casual dining restaurant group featuring on-premises microbreweries, located primarily in Florida. Apple South's growth strategy includes: - expanding existing restaurant concepts; 5 - acquiring new restaurant concepts; and - leveraging Company-wide expertise and resources across concepts to improve the effectiveness of existing restaurants while maintaining concept integrity and individuality. Apple South expects to open a total of 70 restaurants in 1997, including at least 34 in the Applebee's division and 25 in the Don Pablo's division. Apple South expects to open nine restaurants in the Hops Grill & Bar division and two restaurants in the McCormick & Schmick's division in 1997. Through , 1997, Apple South has opened new restaurants. Expansion efforts during the next few years will be focused on the development of additional Applebee's restaurants in Apple South's existing development territories and Don Pablo's restaurants in the Midwest, Mid-Atlantic, Southeast and Northeast. In 1996, Apple South closed its Tomato Rumba's division and is holding those assets for redeployment. The Company's principal executive offices are located at Hancock at Washington, Madison, Georgia 30650, and its telephone number is (706) 342-4552. ------------------------ Applebee's Neighborhood Grill & Bar-Registered Trademark- and Applebee's-Registered Trademark- are registered trademarks of Applebee's International, Inc. Don Pablo's-Registered Trademark- is a registered trademark of DF&R Ohio, Inc., a Company subsidiary. Hops Grill & Bar Microbrewery-Registered Trademark- is a registered trademark recently purchased by the Company from Hops Restaurants, Inc. McCormick & Schmick's-Registered Trademark- and McCormick's-Registered Trademark- are registered trademarks of McCormick & Schmick Restaurants, Inc., a Company subsidiary. Hardee's-Registered Trademark- is a registered trademark of Imasco, Ltd. 6 THE OFFERING Securities Offered.............. 2,300,000 $3.50 Term Convertible Securities, Series A ("TECONS" or "Trust Preferred Securities"). The Issuer...................... Apple South Financing I, a Delaware business trust. The sole assets of the Trust will consist of the 7% Convertible Subordinated Debentures due March 1, 2027 (the "Convertible Debentures") of Apple South. Guarantor....................... Apple South, Inc., a Georgia corporation. Distributions................... Distributions on the TECONS accumulate from March 11, 1997 and are payable at an annual rate of $3.50 per TECONS. Subject to the Distribution deferral provisions described below, distributions will be payable quarterly in arrears on each March 1, June 1, September 1 and December 1, commencing June 1, 1997. Because distributions on the TECONS constitute interest for U.S. federal income tax purposes, corporate holders thereof will not be entitled to a dividends-received deduction. Distribution Deferral The ability of the Trust to pay distributions on the Provisions.................... TECONS is solely dependent on the receipt of interest payments from Apple South on the Convertible Debentures. So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right to defer payments of interest on the Convertible Debentures for successive Extension Periods not exceeding 20 consecutive quarters for each such period. Quarterly Distributions on the TECONS would be deferred by the Trust (but would continue to accumulate quarterly and would accrue interest) until the end of any such Extension Period. Upon the termination of an Extension Period, payment is due on all accrued and unpaid amounts on the Convertible Debentures and upon such payment, the Trust would be required to pay all accumulated and unpaid Distributions. Apple South will give notice of its deferral of an interest payment to the Trust no later than ten business days prior to the related record date (unless the Institutional Trustee (as defined herein) shall be the sole holder of the Convertible Deben- tures, in which case notice will be given no later than one business day prior to the related record date). See "Risk Factors--Option to Extend Interest Payment Period," "Description of the TECONS-- Distributions" and "Description of the Convertible Debentures-- Option to Extend Interest Payment Period." If a deferral of an interest payment occurs, the holders of the TECONS will continue to accrue income for U.S. federal income tax purposes in advance of any corresponding cash distribution. See "Risk Factors--Option to Extend Interest Payment Period" and "Certain Federal Tax Consequences--Original Issue Discount." Rights Upon Deferral of Distribution.................. During any period in which interest payments on the Convertible Debentures are deferred, interest will accrue on the Convertible Debentures (compounded quarterly) and quarterly Distributions
7 will continue to accumulate with interest thereon at the Distribution rate, compounded quarterly. Apple South has agreed, among other things, not to declare or pay any dividend on its capital stock during any Extension Period. See "Risk Factors--Option to Extend Interest Payment Period" and "Description of the Convertible Debentures--Option to Extend Interest Payment Period." Conversion Rights............... Each TECONS is convertible at any time prior to the close of business on March 1, 2027 (or, in the case of TECONS called for redemption, prior to the close of business on the Business Day prior to the TECONS redemption date) at the option of the holder into shares of Apple South Common Stock, at the initial conversion rate of 3.3801 shares of Apple South Common Stock for each TECONS (equivalent to a conversion price of $14.793 per share of Apple South Common Stock), subject to adjustment in certain circumstances. The last reported bid price of Apple South Common Stock on the Nasdaq National Market on May , 1997, was $ per share. In connection with any conversion of a TECONS, the Conversion Agent (as defined herein) will exchange such TECONS for the appropriate principal amount of the Convertible Debentures held by the Trust and immediately convert such Convertible Debentures into Apple South Common Stock. No fractional shares of Apple South Common Stock will be issued as a result of conversion, but in lieu thereof such fractional interest will be paid by Apple South in cash. See "Description of the TECONS--Conversion Rights." Liquidation Preference.......... In the event of any liquidation of the Trust, holders will be entitled to receive $50 per TECONS plus an amount equal to any accumulated and unpaid Distributions thereon to the date of payment, unless Convertible Debentures are distributed to such holders. See "Description of the TECONS--Liquidation Distribution Upon Dissolution." Redemption...................... The Convertible Debentures will be redeemable for cash, at the option of Apple South, in whole or in part, from time to time on or after March 3, 2000, at the prices specified herein plus accrued and unpaid interest thereon to the date fixed for redemption, including Compound and Additional Interest. Upon any redemption of the Convertible Debentures and after notice to the holders, the Trust will redeem TECONS having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed. The TECONS will not have a stated maturity date, although they will be subject to mandatory redemption upon the repayment of the Convertible Debentures at their stated maturity, March 1, 2027, upon acceleration, earlier redemption or otherwise. See "Description of the TECONS--Mandatory Redemption" and "Description of the Convertible Debentures--Redemption at the Option of Apple South." Guarantee....................... Apple South will irrevocably and unconditionally guarantee, on a subordinated basis and to the extent set forth herein, the payment in full of (i) distributions on the TECONS to the extent the Trust
8 has funds available therefor, (ii) the amount payable upon redemption of the TECONS to the extent the Trust has funds available therefor and (iii) generally, the liquidation preference of the TECONS to the extent the Trust has assets available for distribution to holders of TECONS. The Guarantee will be unsecured and will be subordinate and junior in right of payment to all other liabilities of Apple South and will rank PARI PASSU in right of payment with the most senior preferred stock issued, from time to time, if any, by Apple South. Voting Rights................... Generally, holders of the TECONS will not have any voting rights. However, if an Indenture Event of Default (as defined herein) occurs and is continuing, the holders of 25% of the aggregate liquidation amount of the TECONS may direct the Institutional Trustee to declare the principal of and interest on the Convertible Debentures immediately due and payable. If (i) the Institutional Trustee fails to enforce its rights under the Convertible Debentures or (ii) Apple South defaults under the Guarantee with respect to the TECONS, a record holder of the TECONS may, to the fullest extent permitted by law, institute a legal proceeding directly against Apple South to enforce the Institutional Trustee's rights without first instituting any legal proceeding against the Institutional Trustee. See "Description of the TECONS--Voting Rights." Special Event Distribution; Tax Event Redemption.............. Upon the occurrence of a Special Event, except in certain limited circumstances, Apple South may cause the Trust to be dissolved and, after satisfaction of liabilities to creditors, cause the Convertible Debentures to be distributed to the holders of the TECONS. In the case of a Tax Event, Apple South may also elect to cause the TECONS to remain outstanding and pay Additional Interest, if any, on the Convertible Debentures. In certain circumstances upon the occurrence of a Tax Event, the Convertible Debentures may be redeemed by Apple South at 100% of the principal amount thereof plus accrued and unpaid interest thereon. See "Description of the TECONS--Special Event Distribution." Convertible Subordinated Debentures of Apple South..... The Convertible Debentures will mature on March 1, 2027, and will bear interest at the rate of 7% per annum, payable quarterly in arrears. So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right to defer payments of interest on the Convertible Debentures from time to time for successive periods not exceeding 20 consecutive quarters for each such period; PROVIDED, that no such period shall extend beyond the stated maturity date of the Convertible Debentures. Prior to the termination of any Extension Period of less than 20 consecutive quarters, Apple South may further defer interest payments provided the Extension Period, as further extended, does not exceed 20 consecutive quarters and does not extend beyond the stated maturity date of the Convertible Debentures. During any Extension Period no interest shall be due, but
9 such interest shall continue to accrue and compound quarterly. Upon the termination of the Extension Period, payment is due on all accrued and unpaid amounts. After the payment of all amounts then due, Apple South may commence a new Extension Period, subject to the conditions of this paragraph. During an Extension Period, Apple South will be prohibited from paying dividends on any of its capital stock and making certain other restricted pay- ments until quarterly interest payments are resumed and all amounts due on the Convertible Debentures are made current. The payment of the principal of and interest on the Convertible Debentures will be subordinated in right of payment to all Senior Indebtedness of Apple South and may not be made if an Event of Default has occurred and is continuing under the Senior Indenture (as defined in the Indenture). As of December 29, 1996, Apple South had $216 million of Senior Indebtedness (as defined in the Inden- ture) outstanding. The Indenture, under which the Convertible Debentures will be issued, does not limit the aggregate amount of Senior Indebtedness that may be issued by Apple South. The Convertible Debentures will have provisions with respect to interest, optional redemption and conversion into Apple South Common Stock and certain other terms substantially similar or analogous to those of the TECONS. See "Description of the Convertible Debentures" and "Risk Factors--Ranking of Subordinate Obligations Under the Guarantee and Convertible Debentures." Book-Entry; Delivery and Form... TECONS sold in reliance on Rule 144A are represented by a single permanent global TECONS certificate registered in the name of a nominee of DTC. TECONS sold in offshore transactions in reliance on Regulation S under the Securities Act will be represented by a single, permanent global TECONS in definitive, fully registered form deposited with the Institutional Trustee, as custodian for, and registered in the name of, DTC for the accounts of Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear"), and Cedel Bank, S.A. ("Cedel"). TECONS resold under this Prospectus will be represented by a single permanent global TECONS certificate registered in the name of a nominee of DTC. See "Description of the TECONS--Book-Entry; Delivery and Form." Institutional Accredited Investors who are not Qualified Institutional Buyers and who do not purchase TECONS under this Prospectus will receive certificates for the TECONS owned by them, which cannot thereby be traded through the facilities of DTC, except in connection with a transfer to a Qualified Institutional Buyer or a transfer pursuant to Regulation S. See "Description of the TECONS-- Book-Entry; Delivery and Form."
10 SAFE HARBOR STATEMENT The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. Apple South desires to take advantage of the "safe-harbor" provisions of the Act. Certain information, particularly information regarding future economic performance and finances and plans and objectives of management contained, or incorporated by reference, in this Prospectus, is forward-looking. In some cases, information regarding certain important factors that could cause actual results to differ materially from any such forward-looking statement appear together with such statement. Also, the following factors, in addition to other possible factors not listed, could affect Apple South's actual results and cause such results to differ from those expressed in forward-looking statements: RISKS ASSOCIATED WITH RECENT ACQUISITION As it has done in connection with Apple South's prior acquisitions, in connection with Apple South's recent acquisition of Hops Grill & Bar the Franchisor is currently reviewing information provided by Apple South addressing whether the menu and method of operations of Hops Grill & Bar in specific geographic areas are similar to Applebee's. If it were determined that the Hops Grill & Bar concept has a menu and method of operations similar to Applebee's, Apple South could be required to modify the Hops Grill & Bar menu or method of operations, or to take other actions which could adversely affect Apple South's operations. GROWTH STRATEGY The Company's Applebee's division operates its restaurants as a franchisee of Applebee's International, Inc. Based on its current development schedule, Apple South expects to substantially complete the development of its existing Applebee's restaurant territory within four to six years. Apple South's current strategy does not include obtaining additional development territory from the Franchisor or acquiring territory from another Applebee's franchisee. When the Applebee's territory is fully developed, Apple South's continued expansion will be solely dependent upon the success of its Don Pablo's concept, the McCormick & Schmick concept and the Hops Grill & Bar concept, and such other concepts as Apple South may acquire or develop. The successful growth of these concepts will be dependent, among other things, upon Apple South's ability to manage the development and growth of a multi-concept company. FRANCHISE MATTERS Apple South has entered into development agreements with the Franchisor which provide the Company's Applebee's division with the exclusive right to open Applebee's restaurants within a designated territory. In addition, each restaurant is operated pursuant to a franchise agreement with the Franchisor. These agreements contain a number of restrictions and obligations on the part of Apple South, including the obligation to develop a significant number of new restaurants over the next four years, and the failure to meet these requirements could result in the termination of one or more franchise or development agreements and financial penalties. The long-term success of the restaurants in the Applebee's division depends, in large part, on the overall success of the Applebee's restaurant system. Accordingly, Apple South's success will depend, in part, on the successful operation of the Applebee's restaurants owned by the Franchisor and other franchisees, as well as on the financial condition, management, marketing and innovative abilities of the Franchisor. Any event that creates adverse publicity involving Applebee's restaurants may adversely affect Apple South regardless of whether such event involves its restaurants. 11 NECESSITY OF ADDITIONAL FINANCING From the net proceeds from the sale of the Convertible Debentures, along with operating cash flow and existing credit facilities, Apple South has the capital required for its planned development of additional restaurants and the exercise of purchase options under existing leases through the third quarter of 1998. However, Apple South will require financing in addition to its existing credit facilities to carry out its expansion plans beyond that time. Although management believes that such financing will be available, Apple South does not have any commitment for additional financing. FACTORS AFFECTING THE RESTAURANT INDUSTRY The casual dining segment of the restaurant industry is expected to remain intensely competitive with respect to price, service, location and the type and quality of food. Each of Apple South's restaurants competes directly or indirectly with locally-owned restaurants as well as regional and national chains, and several of Apple South's significant competitors are larger or more diversified and have substantially greater resources than Apple South. It also is anticipated that growth in the industry will result in continuing competition for available restaurant sites as well as continued competition in attracting and retaining qualified management level operating personnel. The restaurant business often is affected by changes in consumer tastes, national, regional or local economic conditions, demographic trends, weather, traffic patterns, and the type, number and location of competing restaurants. In addition, factors such as inflation and increased food, labor and benefits costs may adversely affect the restaurant industry in general and Apple South's restaurants in particular. REGULATION Each of Apple South's restaurants is subject to extensive federal, state and local laws and regulations governing health, sanitation, minimum wage and minimum hour requirements, safety and the sale of alcoholic beverages. The selection of new restaurant sites is affected by federal, state and local laws and regulations regarding environmental matters, zoning and land use and the sale of alcoholic beverages. The failure to receive or retain, or a delay in obtaining, a liquor license in a particular location could adversely affect or cause Apple South to terminate its operations at that location. In the past, none of these laws and regulations has had a significant negative effect on operations, nor has Apple South had significant difficulty in obtaining necessary licenses and approvals. More stringent and varied requirements (particularly at the local level), however, may result in increases in the cost and time required for opening new restaurants, and difficulties in obtaining necessary licenses or permits could cause delays in or cancellations of new restaurant openings. 12 RISK FACTORS The following are factors relating to the TECONS offered hereby that prospective purchasers should consider in evaluating an investment. RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE DEBENTURES The obligations of Apple South under the Guarantee are subordinate and junior in right of payment to all liabilities of Apple South and PARI PASSU in right of payment with the most senior preferred stock issued, from time to time, if any, by Apple South. The obligations of Apple South under the Convertible Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of Apple South. No payment of principal (including redemption payments, if any), premium, if any, or interest on the Convertible Debentures may be made if (i) any Senior Indebtedness of Apple South is not paid when due and any applicable grace period with respect to such default has ended with such default not having been cured or waived or ceasing to exist, (ii) the maturity of any Senior Indebtedness has been accelerated because of a default or (iii) an Event of Default has occurred and is continuing under the Senior Indenture, permitting the holders of securities issued thereunder to accelerate the maturity thereof or demand payment in full. As of December 29, 1996, Apple South had $216 million of Senior Indebtedness outstanding. There are no terms in the TECONS, the Convertible Debentures or the Guarantee that limit the ability of Apple South to incur additional indebtedness, including indebtedness that ranks senior to the Convertible Debentures and the Guarantee, or to grant security interests to secure outstanding or new indebtedness. See "Description of the Guarantee" and "Description of the Convertible Debentures-- Subordination." RIGHTS UNDER THE GUARANTEE The Guarantee will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Institutional Trustee will act as indenture trustee under the Guarantee for the purposes of compliance with the provisions of the Trust Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the TECONS. Under the Guarantee, Apple South guarantees the holders of the TECONS the payment of (i) any accumulated and unpaid Distributions that are required to be paid on the TECONS, to the extent the Trust has funds available therefor; (ii) the Redemption Price, including all accumulated and unpaid distributions with respect to TECONS called for redemption by the Trust, to the extent the Trust has funds available therefor; and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Convertible Debentures to the holders of TECONS or the conversion of all the TECONS), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the TECONS to the date of the payment to the extent the Trust has funds available therefor or (b) the amount of assets of the Trust remaining available for distribution to holders of the TECONS in liquidation of the Trust. The holders of a majority in liquidation amount of the TECONS have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. In addition, any record holder of TECONS may institute a legal proceeding directly against Apple South to enforce the Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity if (i) the Institutional Trustee fails to enforce its rights under the Convertible Debentures, or (ii) Apple South defaults under the Guarantee with respect to the TECONS. If Apple South were to default on its obligation to pay amounts payable on the Convertible Debentures, the Trust would lack available funds for the payment of Distributions or amounts payable on redemption of the TECONS or otherwise, and, in such event, holders of the TECONS would not be able to rely upon the Guarantee for payment of such amounts. Instead, holders of the TECONS would rely on the enforcement (i) by the Institutional Trustee of its rights as registered holder of the Convertible Debentures against Apple South pursuant to the terms of the Convertible 13 Debentures or (ii) by a holder of its rights of direct action against Apple South to enforce payments on the Convertible Debentures. See "Description of the Guarantee" and "Description of the Convertible Debentures." The Declaration provides that each holder of TECONS, by acceptance thereof, agrees to the provisions of the Guarantee, including the subordination provisions thereof, and the Indenture. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TECONS If (i) Apple South Financing fails to pay Distributions in full on the TECONS (other than pursuant to a deferral) or (ii) a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of TECONS would rely on the enforcement by the Institutional Trustee of its rights as a holder of the Convertible Debentures against Apple South. In addition, the holders of a majority in liquidation amount of the TECONS will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee or to direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee to exercise the remedies available to it as a holder of the Convertible Debentures. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, a holder of TECONS, to the extent permitted by law, may institute a legal proceeding directly against Apple South to enforce the Institutional Trustee's rights under the Convertible Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Apple South to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then the registered holder of the TECONS may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Convertible Debentures having a principal amount equal to the aggregate liquidation amount of the TECONS of such holder (a "Direct Action") on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, Apple South will be subrogated to the rights of such holders of TECONS under the Declaration to the extent of any payment made by Apple South to such holder of TECONS in such Direct Action. The holders of TECONS will not be able to exercise any other remedy available to the holders of the Convertible Debentures. See "Description of the TECONS--Declaration Events of Default." OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right under the Indenture to defer payments of interest on the Convertible Debentures from time to time for successive periods not exceeding 20 consecutive quarters for each such period, PROVIDED that no such period shall extend beyond the stated maturity of the Convertible Debentures. As a consequence of such an extension, quarterly Distributions on the TECONS would be deferred (but despite such deferral would continue to accumulate with interest thereon at the distribution rate, compounded quarterly) by the Trust during any such Extension Period. During any Extension Period and until quarterly interest payments are resumed and all amounts due on the Convertible Debentures are made current, (a) Apple South shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of Apple South Common Stock in connection with the satisfaction by Apple South of its obligations under any employee benefit plans, (ii) as a result of a reclassification of Apple South capital stock or the exchange or conversion of one class or series of Apple South capital stock for another class or series of Apple South capital stock, (iii) the purchase of fractional interests in shares of Apple South capital stock pursuant to the conversion or exchange provisions of such Apple South capital stock or the security being converted or exchanged or (iv) purchases or acquisitions of shares of Apple South Common Stock to be used in connection with acquisitions of Apple South Common Stock by shareholders pursuant to Apple South's dividend reinvestment plan), (b) Apple South shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt 14 securities issued by Apple South that rank PARI PASSU with or junior to the Convertible Debentures and (c) Apple South shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Guarantee). Prior to the termination of any such Extension Period of less than 20 consecutive quarters, Apple South may further defer interest payments provided the Extension Period, as further extended, does not exceed 20 consecutive quarters and does not extend beyond the stated maturity date of the Convertible Debentures. During any Extension Period no interest shall be due, but such interest shall continue to accrue and compound quarterly. Upon the termination of any Extension Period, payment is due on all accrued and unpaid amounts. After the payment of all amounts then due, Apple South may commence a new Extension Period, subject to the conditions of this paragraph. See "Description of the TECONS--Distributions" and "Description of the Convertible Debentures--Option to Extend Interest Payment Period." Should Apple South exercise its right to defer payments of interest by extending the interest payment period, each holder of TECONS will continue to accrue income (as original issue discount ("OID")) in respect of the deferred and compounded interest allocable to its TECONS for U.S. federal income tax purposes, which interest will be allocated, but not distributed, to holders of record of TECONS. As a result, each such holder of TECONS will recognize income for U.S. federal income tax purposes in advance of the receipt of cash and will not receive the cash from Apple South Financing related to such income if such holder disposes of its TECONS prior to the record date for the date on which Distributions of such amounts are made. Apple South has no current intention of exercising its right to defer payments of interest by extending the interest payment period of the Convertible Debentures. However, should Apple South determine to exercise such right in the future, the market price of the TECONS is likely to be affected. A holder that disposes of its TECONS during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its TECONS. In addition, as a result of the existence of the right of Apple South to defer interest payments, the market price of the TECONS (which represent an undivided beneficial interest in the Convertible Debentures) may be more volatile than other securities on which OID accrues that do not have such rights. See "Certain Federal Tax Consequences--Original Issue Discount." PROPOSED TAX LEGISLATION On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget Proposal, the Treasury Department proposed legislation (the "Proposed Legislation") that, among other things, would (i) treat as equity for U.S. federal income tax purposes certain debt instruments with a maximum term of more than 15 years and (ii) disallow interest deductions on certain convertible debt instruments or defer interest deductions on certain debt instruments issued with original issue discount. The Proposed Legislation is proposed to be effective for debt instruments issued on or after the date on which the first Congressional committee action is taken. It is expected that if the Proposed Legislation were enacted, such legislation would not apply to the Convertible Debentures since they would be issued prior to the date of any "Congressional action." However, there can be no assurances that the effective date guidance contained in the Proposed Legislation will be incorporated in the legislation, if enacted, or that other legislation enacted after the date hereof will not otherwise adversely affect the tax treatment of the Convertible Debentures. If legislation were enacted that adversely affects the tax treatment of the Convertible Debentures, there could be a distribution of the Convertible Debentures to holders of the TECONS or, in certain circumstances, the redemption of the Convertible Debentures by Apple South and the distribution by the Trustee of the resulting cash in redemption of the TECONS. See "--Special Event Distribution; Tax Event Distribution" below and "Description of the TECONS--Special Event Distribution." 15 SPECIAL EVENT DISTRIBUTION; TAX EVENT DISTRIBUTION Upon the occurrence of a Special Event, Apple South Financing could be dissolved (with the consent of Apple South), except in the limited circumstance described below, with the result that the Convertible Debentures would be distributed to the holders of the Trust Securities in connection with the liquidation of the Trust. In certain circumstances, Apple South would have the right to redeem the Convertible Debentures, in whole or in part, in lieu of a distribution of the Convertible Debentures by the Trust; in which event the Trust would redeem the Trust Securities on a PRO RATA basis to the same extent as the Convertible Debentures are redeemed by Apple South. See "Description of the TECONS--Special Event Distribution." Under current U.S. federal income tax law, a distribution of Convertible Debentures upon the dissolution of Apple South Financing should not be a taxable event to holders of the TECONS. Upon occurrence of a Special Event, however, a dissolution of Apple South Financing in which holders of the TECONS receive cash would be a taxable event to such holders. See "Certain Federal Tax Consequences--Receipt of Convertible Debentures or Cash Upon Liquidation of Apple South Financing." There can be no assurance as to the market prices for the Convertible Debentures or the Convertible Debentures that may be distributed in exchange for TECONS if a dissolution or liquidation of the Trust were to occur. Accordingly, the TECONS that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Convertible Debentures that a holder of TECONS may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the TECONS offered hereby. Because holders of TECONS may receive Convertible Debentures upon the occurrence of a Special Event, prospective purchasers of TECONS are also making an investment decision with regard to the Convertible Debentures and should carefully review all the information regarding the Convertible Debentures contained herein. See "Description of the TECONS-- Special Event Distribution" and "Description of the Convertible Debentures--General." LIMITED VOTING RIGHTS Holders of TECONS will have limited voting rights and will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, Apple South Trustees, which voting rights are vested exclusively in the holder of the Trust Common Securities. See "Description of the TECONS--Voting Rights." TRADING PRICE The TECONS may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Convertible Debentures. A holder who disposes of TECONS between record dates for payments of Distributions thereon will be required to include accrued but unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income (i.e., OID), and to add such amount to the adjusted tax basis in the holder's PRO RATA share of the underlying Convertible Debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for U.S. federal income tax purposes. See "Certain Federal Tax Consequences--Original Issue Discount" and "--Sales of TECONS." LACK OF A PUBLIC MARKET FOR TECONS Apple South does not intend to list the TECONS on any securities exchange. If the TECONS are traded, they may trade at a discount from their initial offering price depending upon prevailing interest rates, the market for similar securities and other factors. The Initial Purchasers have informed Apple South that they currently intend to make a market in the TECONS. However, they are not obligated to do so, and any such market making may be discontinued at any time without notice. See "Plan of Distribution." 16 RECENT DEVELOPMENTS MCCORMICK & SCHMICK'S In keeping with its multi-concept strategy, on March 3, 1997 Apple South acquired McCormick & Schmick's, one of the nation's largest upper-end casual seafood restaurant groups. As of February 7, 1997, McCormick & Schmick's had 16 restaurants in Oregon, Washington, California, Colorado and the District of Columbia. Apple South paid $53 million for this acquisition, of which approximately $50 million was paid in cash and the remainder in Apple South Common Stock. Apple South assumed approximately $15 million in debt in connection with the acquisition. The first McCormick & Schmick's restaurant was acquired in 1972 by co-founders William McCormick and Doug Schmick. Both founders continue to manage the restaurant group and will remain as senior management following the acquisition by Apple South. McCormick & Schmick's restaurants offer fine, fresh seafood and outstanding service in an elegant yet informal setting. The restaurants' master chefs develop menu offerings which emphasize distinctive seafood and also feature meat, poultry, salads and pasta. Menus vary daily based on fresh product availability and price, and usually feature over 85 items. The restaurants serve both lunch and dinner, with the cost of a typical meal, including beverages, of $10.00 to $15.00 for lunch and $25.00 to $30.00 for dinner. The bar at each restaurant features selections of premium liquors and an extensive wine list. Sales of alcoholic beverages accounted for approximately 30% of McCormick & Schmick's total sales during the year ended January 4, 1997. The design of a McCormick & Schmick's restaurant varies from a traditional fish house design in a historic setting to a more contemporary dinner house and brew pub concept. The restaurants have an elegant ambiance created through the use of brass, rich wood, stained glass, linens and candlelight. McCormick & Schmick's restaurants range in size from 6,000 to 14,000 square feet with dining capacities for 130 to 290 customers. HOPS GRILL & BAR On March 13, 1997, Apple South acquired Hops Grill & Bar, which, as of February 7, 1997, operated 19 full-service, casual dining restaurants featuring an on-premise microbrewery. The purchase price for Hops Grill & Bar was $31.5 million, which was paid equally in cash and Apple South Common Stock. In addition, Apple South assumed approximately $26.5 million of debt. The first Hops Grill & Bar restaurant was opened in Clearwater, Florida in 1989. Each restaurant offers a diverse menu of popular foods, freshly prepared in a display kitchen with a strict commitment to quality. The restaurants seek to heighten customers' sense of value by offering generous portions at moderate prices. Hops Grill & Bar restaurants feature an American-style menu that includes top choice steaks and prime rib, smoked baby back ribs, fresh fish, chicken and pasta dishes, deluxe burgers and sandwiches, hand-tossed salads with homemade dressings, appetizers, soups and desserts. The menu offers separate selections for children. The cost of a typical meal, including beverages, currently ranges from $6.00 to $9.00 per person for lunch and $13.00 to $15.00 per person for dinner. As a complement to its menu, each Hops Grill & Bar restaurant offers lager-style beers and ales that are brewed on-premises. The restaurants utilize their original recipes to brew four distinctive lager-style beers and ales: Clearwater Light, Lightning Bold Gold, Hammerhead Red and A-1 Ale. An observation microbrewery at each restaurant allows customers to view the entire brewing process. The brewed beers are served in a frozen glass mug and, except for one non-alcoholic beer, are the only beers served. Full bar service is also available at each restaurant. Sales of alcoholic beverages accounted for approximately 18% of the total sales (with beer constituting 10% of total sales) during 1996. Clearwater Light, Lightning Bold Gold and Hammerhead Red are trademarks recently purchased by the Company from Hops Restaurants, Inc. 17 Hops Grill & Bar restaurants range in size from approximately 5,000 to 7,300 square feet. The on-premise brewing equipment is an integral aspect of the design, enhancing the ambiance of the restaurant and creating a dramatic visual effect. The observation microbreweries in the restaurants occupy from 450 to 750 square feet. The restaurant dining and bar areas seat from 160 to 240 customers. The cost of developing and opening a Hops Grill & Bar restaurant averaged approximately $1.4 million in 1996, excluding land costs and including approximately $160,000 in microbrewery equipment. An operating partner program is a key element of the Hops Grill & Bar development strategy. Under this program, each operating partner acquires a 10% interest in the restaurants developed within a specified geographic area. Each operating partner is an experienced restaurant operator who can provide local market knowledge and management. Five of the Hops Grill & Bar restaurants currently have an operating partner whose interest will remain in place after the acquisition by Apple South. Apple South expects that Hops Grill & Bar will continue this program following the acquisition. Hops Grill & Bar intends to open nine restaurants in 1997. USE OF PROCEEDS The Selling Holders will receive all of the proceeds from the sale of the Offered Securities. Neither Apple South nor the Trust will receive any proceeds from the sale of the Offered Securities. RATIO OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS. The following table sets forth the ratio of earnings to fixed charges for the company for the periods indicated. The Company did not have any preferred stock dividends in any of the periods indicated, and, therefore, the ratio of earnings to combined fixed charges and preferred stock dividends for each of the periods indicated was equal to the ratio of earnings to fixed charges for such period.
YEAR ENDED ----------------------------------------------------------------------------------- DECEMBER 29, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1994 1993 1992 --------------- --------------- --------------- --------------- --------------- Ratio of earnings to fixed charges(5)... 1.92x 3.83x 5.04x 4.53x 2.99x
The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges. Earnings represent income from continuing operations before income taxes and fixed charges, net of capitalized interest. Fixed charges consist of interest expense before reduction for capitalized interest, debt amortization costs and one-third (the portion deemed representative of the interest factor) of total restaurant lease payments. The ratio of earnings to fixed charges excluding the merger and asset revaluation charges would have been 3.44x and 4.67x for 1996 and 1995, respectively. 18 APPLE SOUTH FINANCING I Apple South Financing is a statutory business trust created under Delaware law pursuant to (i) an amended and restated declaration of trust dated as of March 11, 1997 (the "Declaration") executed by Apple South as sponsor (the "Sponsor"), and certain of the trustees of Apple South Financing (the "Apple South Trustees") and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on February 18, 1997. The Declaration will be qualified as an indenture under the Trust Indenture Act. Upon issuance of the TECONS, the purchasers thereof owned all of the TECONS. See "Description of the TECONS--Book-Entry; Delivery and Form" and "--The Global TECONS." Apple South acquired all of the Trust Common Securities which have an aggregate liquidation amount equal to 1% of the total capital of Apple South Financing. Apple South Financing exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Convertible Debentures and (iii) engaging in only those other activities necessary or incidental thereto. Pursuant to the Declaration, the number of Apple South Trustees is initially five. Three of the Apple South Trustees (the "Regular Trustees") are persons who are employees or officers of or who are affiliated with Apple South. The fourth trustee is a financial institution that maintains its principal place of business in the state of Delaware (the "Delaware Trustee"). Initially, First Union Bank of Delaware is acting as Delaware Trustee. The fifth trustee is a financial institution that is unaffiliated with Apple South and serves as institutional trustee under the Declaration and as indenture trustee for the purposes of compliance with the provisions of the Trust Indenture Act (the "Institutional Trustee"). First Union National Bank of Georgia is and will be the Institutional Trustee until removed or replaced by the holder of the Trust Common Securities. For the purposes of compliance with the provisions of the Trust Indenture Act, First Union National Bank of Georgia acts as trustee (the "Guarantee Trustee") under the Guarantee and as Indenture Trustee under the Indenture. See "Description of the Guarantee" and "Description of the TECONS--Voting Rights." The Institutional Trustee holds title to the Convertible Debentures for the benefit of the holders of the Trust Securities, and the Institutional Trustee has the power to exercise all rights, powers and privileges under the Indenture as the holder of the Convertible Debentures. The Institutional Trustee will make payments of Distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds received in payments of principal, premium, if any, and interest on the Convertible Debentures. The Guarantee Trustee holds the Guarantee for the benefit of the holders of the TECONS. Apple South, as the direct holder of all the Trust Common Securities, has the right to appoint, remove or replace any Apple South Trustee and to increase or decrease the number of Apple South Trustees. Apple South will pay all fees and expenses related to Apple South Financing and the offering of the Trust Securities. See "Description of the Convertible Debentures--Miscellaneous." The rights of the holders of the TECONS, including economic rights, rights to information and voting rights, are set forth in the Declaration and the Delaware Business Trust Act (the "Trust Act"). See "Description of the TECONS." The financial statements of the Trust will be consolidated with Apple South's financial statements, and in the event that the Trust obtains an exemption from the periodic reporting requirements of the Exchange Act pursuant to the Commission's Staff Accounting Bulletin 53, the Trust will not file separate financial statements under the Exchange Act and the Company's future filings under the Exchange Act will (i) present the Trust's securities as a separate line item on the balance sheet entitled "Apple South-- Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust holding solely Convertible Subordinated Debentures"; (ii) state in a footnote to the financial statements that the sole assets of the Trust are the Convertible Debentures with an aggregate principal amount of $116,161,500, which bear interest at the rate of 7% per annum and mature on March 1, 2027; (iii) include in an audited footnote to the financial statements disclosure that (A) the Trust is wholly-owned; (B) the sole assets of the Trust are 19 the Convertible Debentures with an aggregate principal amount of $116,161,500, which bear interest at the rate of 7% per annum and mature on March 1, 2027; and (C) the Guarantee, when taken together with the Company's obligations under the Convertible Debentures and the Indenture and its obligations under the Declaration, including its liabilities to pay costs, expenses, debts and obligations of the Trust, constitutes a full and unconditional guarantee by the Company of the Trust's obligations under the TECONS. The place of business and the telephone number of the Trust are the principal executive offices and telephone number of Apple South. See "Prospectus Summary--The Company." DESCRIPTION OF THE TECONS The TECONS were issued pursuant to the terms of the Declaration. The terms of the TECONS include those stated in the Declaration and those made part of the Declaration by the Trust Indenture Act. The following summary of the material terms and provisions of the TECONS is subject to, and qualified in its entirety by reference to, the Declaration, the Trust Act and the Trust Indenture Act. GENERAL The Declaration authorizes the Regular Trustees to issue on behalf of the Trust the Trust Securities, which represent undivided beneficial interests in the assets of the Trust. All of the Trust Common Securities are owned by Apple South. The Trust Common Securities rank PARI PASSU, and payments will be made thereon on a PRO RATA basis, with the TECONS, except that upon the occurrence and during the continuance of a Declaration Event of Default, the rights of the holders of the Trust Common Securities to receive payment of periodic Distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the TECONS. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the Institutional Trustee holds the Convertible Debentures purchased by the Trust for the benefit of the holders of the Trust Securities. The payment of Distributions out of money held by the Trust, and payments upon redemption of the TECONS or liquidation of the Trust, are guaranteed by Apple South to the extent described under "Description of the Guarantee." The Guarantee does not cover payment of Distributions when the Trust does not have sufficient available funds to pay such Distributions. In such event, the remedy of a holder of TECONS is to vote to direct the Institutional Trustee to enforce the Institutional Trustee's rights under the Convertible Debentures except in the limited circumstances in which the holder may take Direct Action or otherwise enforce the Institutional Trustee's rights. See "--Voting Rights" and "--Declaration Events of Default." DISTRIBUTIONS Distributions on the TECONS are fixed at an annual rate of $3.50. Distributions in arrears for more than one quarter will accrue interest thereon at the Distribution rate, compounded quarterly. The term "Distribution" as used herein includes any such interest payable unless otherwise stated. The amount of Distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months, and, for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Distributions on the TECONS will be cumulative, will accumulate from March 11, 1997, and will be payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing June 1, 1997, when, as and if available for payment. Distributions will be made by the Institutional Trustee, except as otherwise described below. If use of this registration statement for resales is suspended for any time during the two-year period after the effective date, then additional interest (in addition to amounts otherwise due on the TECONS) will accrue at an annual rate of 0.50% on the TECONS during the period use is so suspended. 20 So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right under the Indenture to defer payments of interest on the Convertible Debentures by extending the interest payment period from time to time on the Convertible Debentures, which, if exercised, would defer quarterly Distributions on the TECONS (though such distributions would continue to accumulate with interest thereon at the Distribution rate, compounded quarterly, since interest would continue to accrue on the Convertible Debentures) during any such Extension Period. Such right to extend the interest payment period for the Convertible Debentures is limited to a period not exceeding 20 consecutive quarters and such period may not extend beyond the maturity of the Convertible Debentures. In the event that Apple South exercises this right, then (a) Apple South shall not declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of Apple South Common Stock in connection with the satisfaction by Apple South of its obligations under any employee benefits plans, (ii) as a result of a reclassification of Apple South capital stock or the exchange or conversion of one class or series of Apple South capital stock for another class or series of Apple South capital stock or (iii) the purchase of fractional interests in shares of Apple South capital stock pursuant to the conversion or exchange provisions of such Apple South capital stock or the security being converted or exchanged or (iv) purchases or acquisitions of shares of Apple South Common Stock to be used in connection with acquisitions of Apple South Common Stock by shareholders pursuant to a dividend reinvestment plan), (b) Apple South shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem, any debt securities issued by Apple South that rank PARI PASSU with or junior to the Convertible Debentures and (c) Apple South shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Guarantee). Prior to the termination of any such Extension Period, Apple South may further extend the Extension Period; PROVIDED, that such Extension Period, together with all such previous and further extensions, may not exceed 20 consecutive quarters or extend beyond the maturity of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, Apple South may commence a new Extension Period, subject to the above requirements. See "Description of the Convertible Debentures--Interest" and "--Option to Extend Interest Payment Period." If Distributions are deferred, the deferred Distributions and accrued interest thereon shall be paid to holders of record of the TECONS as they appear on the books and records of the Trust on the record date next following the termination of such deferral period. Distributions on the TECONS must be paid on the dates payable to the extent that the Trust has funds available for the payment of such Distributions. The Trust's funds available for Distribution to the holders of TECONS will be limited to payments received from Apple South on the Convertible Debentures. See "Description of the Convertible Debentures." The payment of Distributions out of money held by the Trust is guaranteed by Apple South to the extent set forth under "Description of the Guarantee." Distributions on the TECONS will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which, as long as TECONS remain in book-entry form, will be one Business Day (as defined below) prior to the relevant payment dates. Such Distributions will be paid through the Institutional Trustee who will hold amounts received in respect of the Convertible Debentures for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "--The Global TECONS". In the event that the TECONS do not continue to remain in book-entry only form, the relevant record dates for the TECONS shall conform to the rules of any securities exchange on which the TECONS are listed and, if none, the Regular Trustees shall have the right to select relevant record dates, which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which Distributions are to be made on the TECONS is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such record date. A "Business 21 Day" shall mean any day other than Saturday, Sunday or any other day on which banking institutions in New York City, or Atlanta, Georgia are permitted or required by any applicable law to close. CONVERSION RIGHTS GENERAL The TECONS will be convertible at any time beginning prior to the close of business on March 1, 2027 (or in the case of TECONS called for redemption, prior to the close of business on the Business Day prior to the Redemption Date) (the "Conversion Expiration Date"), at the option of the holders thereof and in the manner described below, into shares of Apple South Common Stock at an initial conversion rate of 3.3801 shares of Apple South Common Stock for each TECONS (equivalent to a conversion price of $14.793 per share of Apple South Common Stock (the "Initial Conversion Price")), subject to adjustment as described under "--Conversion Price Adjustments--General" and "--Conversion Price Adjustments-- Fundamental Change." If a TECONS is surrendered for conversion after the close of business on any regular record date for payment of a Distribution and before the opening of business on the corresponding Distribution payment date, then, notwithstanding such conversion, the Distribution payable on such Distribution payment date will be paid in cash to the person in whose name the TECONS is registered at the close of business on such record date, and (other than a TECONS or a portion of a TECONS called for redemption on a date occurring after such record date and on or prior to such Distribution payment date) when so surrendered for conversion, the TECONS must be accompanied by payment of an amount equal to the Distribution payable on such Distribution payment date. The terms of the TECONS provide that a holder of a TECONS wishing to exercise its conversion right shall surrender such TECONS, together with an irrevocable conversion notice, to the Institutional Trustee, as conversion agent (the "Conversion Agent"), which shall, on behalf of such holder, exchange such TECONS for a portion of the Convertible Debentures and immediately convert an equivalent amount of Convertible Debentures into Apple South Common Stock. Holders may obtain copies of the required form of the conversion notice from the Conversion Agent. So long as a book-entry system for the TECONS is in effect, however, procedures for converting the TECONS in book-entry form into shares of Apple South Common Stock will differ, as described under "--The Global TECONS". No fractional shares of Apple South Common Stock will be issued as a result of conversion, but in lieu thereof such fractional interest will be paid by Apple South in cash based on the current market price per share of Apple South Common Stock on the date such TECONS are surrendered for conversion. CONVERSION PRICE ADJUSTMENTS--GENERAL The Initial Conversion Price is subject to adjustment (under formulae set forth in the Indenture) in certain events, including: (i) the issuance of Apple South Common Stock as a dividend or distribution on Apple South Common Stock; (ii) certain subdivisions and combinations of Apple South Common Stock; (iii) the issuance to all holders of Apple South Common Stock of certain rights or warrants to purchase Apple South Common Stock at less than the then current market price; (iv) the distribution to all holders of Apple South Common Stock of (A) equity securities of Apple South (other than Apple South Common Stock), (B) evidences of indebtedness of Apple South and/or (C) other assets (including securities, but excluding (1) any rights or warrants referred to in clause (iii) above, (2) any rights or warrants to acquire any capital stock of any entity other than Apple South, (3) any dividends or distributions in connection with the liquidation, dissolution or winding-up 22 of Apple South, (4) any dividends payable solely in cash that may from time to time be fixed by the Board of Directors of Apple South and (5) any dividends or distributions referred to in clause (i) above); (v) distributions to all holders of Apple South Common Stock, consisting of cash, excluding (a) any cash dividends on Apple South Common Stock to the extent that the aggregate cash dividends per share of Apple South Common Stock in any consecutive 12-month period do not exceed the greater of (x) the amount per share of Apple South Common Stock of the cash dividends paid on Apple South Common Stock in the immediately preceding 12-month period, to the extent that such dividends for the immediately preceding 12-month period did not require any adjustment of the conversion price pursuant to this clause (v) (as adjusted to reflect subdivisions or combinations of Apple South Common Stock), and (y) 15% of the average of the daily Closing Price (as defined in the Indenture) of Apple South Common Stock for the ten consecutive Trading Days (as defined in the Indenture) immediately prior to the date of declaration of such dividend, and (b) any dividend or distribution in connection with the liquidation, dissolution or winding up of Apple South or a redemption of any rights issued under a rights agreement; PROVIDED, HOWEVER, that no adjustment shall be made pursuant to this clause (v) if such distribution would otherwise constitute a Fundamental Change (as defined below) and be reflected in a resulting adjustment described below; and (vi) payment in respect of a tender or exchange offer by Apple South or any subsidiary of Apple South for Apple South Common Stock to the extent that the cash and value of any other consideration included in such payment per share of Apple South Common Stock exceed (by more than 10%, with any smaller excess being disregarded in computing the adjustment provided hereby) the first reported sale price per share of Apple South Common Stock on the Trading Day next succeeding the Expiration Time (as defined in the Indenture) for such tender or exchange offer. If any adjustment is required to be made as set forth in clause (v) above as a result of a distribution which is a dividend described in subclause (a) of clause (v) above, such adjustment would be based upon the amount by which such distribution exceeds the amount of the dividend permitted to be excluded pursuant to such subclause (a) of clause (v). If an adjustment is required to be made as set forth in clause (v) above as a result of a distribution which is not such a dividend, such adjustment would be based upon the full amount of such distribution. If an adjustment is required to be made as set forth in clause (vi) above, such adjustment would be calculated based upon the amount by which the aggregate consideration paid for the Apple South Common Stock acquired in the tender or exchange offer exceeds 110% of the value of such shares based on the first reported sale price of Apple South Common Stock on the Trading Day next succeeding the Expiration Time. In lieu of making such a conversion price adjustment in the case of certain dividends or distributions, Apple South may provide that upon the conversion of the TECONS the holder converting such TECONS will receive, in addition to the Apple South Common Stock to which such holder is entitled, the cash, securities or other property which such holder would have received if such holder had, immediately prior to the record date for such dividend or distribution, converted its TECONS into Apple South Common Stock. No adjustment in the conversion price will be required unless the adjustment would require a change of at least 1% in the conversion price then in effect; PROVIDED, HOWEVER, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. Apple South from time to time may, to the extent permitted by law, reduce the conversion price by any amount for any period of at least 20 Business Days (as defined in the Indenture), in which case Apple South shall give at least 15 days' notice of such reduction. In particular, Apple South may, at its option, make such reduction in the conversion price, in addition to those set forth above, as Apple South deems advisable to avoid or diminish any income tax to holder of Apple South Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for tax 23 purposes or for any other reasons. See "Certain Federal Tax Consequences--Adjustment of Conversion Price." CONVERSION PRICE ADJUSTMENTS--FUNDAMENTAL CHANGE In the event that Apple South shall be a party to any transaction or series of transactions constituting a Fundamental Change, including, without limitation, (i) any recapitalization or reclassification of Apple South Common Stock (other than a change in par value or as a result of a subdivision or combination of Apple South Common Stock); (ii) any consolidation or merger of Apple South with or into another corporation as a result of which holders of Apple South Common Stock shall be entitled to receive securities or other property or assets (including cash) with respect to or in exchange for Apple South Common Stock (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of the outstanding Apple South Common Stock); (iii) any sale or transfer of all or substantially all of the assets of Apple South; or (iv) any compulsory share exchange, pursuant to any of which holders of Apple South Common Stock shall be entitled to receive other securities, cash or other property, then appropriate provision shall be made so that the holder of each TECONS then outstanding shall have the right thereafter to convert such TECONS only into (x) if any such transaction does not constitute a Common Stock Fundamental Change (as defined below), the kind and amount of the securities, cash or other property that would have been receivable upon such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Apple South Common Stock issuable upon conversion of such TECON immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange, after, in the case of a Non-Stock Fundamental Change (as defined below), giving effect to any adjustment in the conversion price in accordance with clause (i) of the following paragraph, and (y) if any such transaction constitutes a Common Stock Fundamental Change, shares of common stock of the kind received by holders of Apple South Common Stock as a result of such Common Stock Fundamental Change in an amount determined in accordance with clause (ii) of the following paragraph. The company formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Apple South Common Stock, as the case may be, shall enter into a supplemental indenture with the Indenture Trustee, satisfactory in form to the Indenture Trustee and executed and delivered to the Indenture Trustee, the provisions of which shall establish such right. Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as practical to the relevant adjustments provided for in the preceding paragraphs and in this paragraph. Notwithstanding any other provision in the preceding paragraphs, if any Fundamental Change occurs, the conversion price in effect will be adjusted immediately after that Fundamental Change as follows: (i) in the case of a Non-Stock Fundamental Change, the conversion price per share of Apple South Common Stock immediately following such Non-Stock Fundamental Change will be the lower of (A) the conversion price in effect immediately prior to such Non-Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs, and (B) the result obtained by multiplying the greater of the Applicable Price (as defined below) or the then applicable Reference Market Price (as defined below) by a fraction of which the numerator will be 100 and the denominator of which will be an amount based on the date such Non-Stock Fundamental Change occurs. For the 12-month period beginning March 1, 1997, the denominator will be 107.00, and the denominator will decrease by 0.875 during each successive 12-month period; PROVIDED, that the denominator shall in no event be less than 100.0. (ii) in the case of a Common Stock Fundamental Change, the conversion price per share of Apple South Common Stock immediately following the Common Stock Fundamental Change will be the conversion price in effect immediately prior to the Common Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs, multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as defined below) and the 24 denominator of which is the Applicable Price; PROVIDED, HOWEVER, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of Apple South Common Stock (subject to certain limited exceptions) is shares of common stock of the successor, acquirer or other third party (and cash, if any, paid with respect to any fractional interests in the shares of common stock resulting from the Common Stock Fundamental Change) and (B) all of the Apple South Common Stock (subject to certain limited exceptions) shall have been exchanged for, converted into, or acquired for, shares of common stock (and cash, if any, with respect to fractional interests) of the successor, acquirer or other third party, the conversion price per share of Apple South Common Stock immediately following the Common Stock Fundamental Change shall be the conversion price in effect immediately prior to the Common Stock Fundamental Change divided by the number of shares of common stock of the successor, acquirer, or other third party received by a holder of one share of Apple South Common Stock as a result of the Common Stock Fundamental Change. The foregoing conversion price adjustments are designed, in "Fundamental Change" transactions where all or substantially all of the Apple South Common Stock is converted into securities, cash or property and not more than 50% of the value received by the holders of Apple South Common Stock consists of stock listed or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the Nasdaq National Market of the Nasdaq Stock Market, Inc. (a "Non-Stock Fundamental Change," as defined herein), to increase the securities, cash or property into which each TECONS is convertible. In a Non-Stock Fundamental Change transaction where the initial value received per share of Apple South Common Stock (measured as described in the definition of Applicable Price below) is lower than the then-applicable conversion price of the TECONS but greater than or equal to the Reference Market Price (as defined herein), the conversion price will be adjusted as described above with the effect that each TECONS will be convertible into securities, cash or property of the same type received by the holders of Apple South Common Stock in such transaction but in an amount per TECONS equal to the amount indicated as the denominator as of the date of such transaction as set forth in clause (i) above with respect to conversion prices for Non-Stock Fundamental Changes. In a Non-Stock Fundamental change transaction where the initial value received per share of Apple South Common Stock (measured as described in the definition of Applicable Price below) is lower than both the conversion price of a TECONS and the Reference Market Price, the conversion price will be adjusted as described above but calculated as though such initial value had been the Reference Market Price. In a Fundamental Change transaction where all or substantially all the Apple South Common Stock is converted into securities, cash or property and more than 50% of the value received by the holders of Apple South Common Stock (subject to certain limited exceptions) consists of listed or Nasdaq National Market traded common stock (a "Common Stock Fundamental Change," as defined herein), the foregoing adjustments are designed to provide in effect that (a) where Apple South Common Stock is converted partly into such common stock and partly into other securities, cash or property, each TECONS will be convertible solely into a number of shares of such common stock determined so that the initial value of such shares (measured as described in the definition of Purchaser Stock Price below) equals the value of the shares of Apple South Common Stock into which such TECONS was convertible immediately before the transaction (measured as aforesaid) and (b) where Apple South Common Stock is converted solely into such common stock, each TECONS will be convertible into the same number of shares of such common stock receivable by a holder of the number of shares of Apple South Common Stock into which such TECONS was convertible immediately before such transaction. 25 In determining the amount and type of consideration received by a holder of Apple South Common Stock in the event of a Fundamental Change, consideration received by a holder of Apple South Common Stock pursuant to a statutory right of appraisal will be disregarded. "Applicable Price" means (i) in the event of a Non-Stock Fundamental Change in which the holders of Apple South Common Stock receive only cash, the amount of cash receivable by a holder of one share of Apple South Common Stock and (ii) in the event of any other Fundamental Change, the average of the Closing Prices (as defined in the Indenture) for one share of Apple South Common Stock during the ten Trading Days immediately prior to the record date for the determination of the holders of Apple South Common Stock entitled to receive cash, securities, property or other assets in connection with such Fundamental Change or, if there is no such record date, prior to the date on which the holders of the Apple South Common Stock will have the right to receive such cash, securities, property or other assets. "Common Stock Fundamental Change" means any Fundamental Change in which more than 50% of the value (as determined in good faith by Apple South's Board of Directors) of the consideration received by holders of Apple South Common Stock (subject to certain limited exceptions) pursuant to such transaction consists of shares of common stock that, for the ten consecutive Trading Days immediately prior to such Fundamental Change has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the Nasdaq National Market, PROVIDED, HOWEVER, that a Fundamental Change will not be a Common Stock Fundamental Change unless either (i) Apple South continues to exist after the occurrence of such Fundamental Change and the outstanding TECONS continue to exist as outstanding TECONS, or (ii) the outstanding TECONS continue to exist as TECONS and are convertible into shares of common stock of the successor to Apple South. "Fundamental Change" means the occurrence of any transaction or event or series of transactions or events pursuant to which all or substantially all of the Apple South Common Stock is exchanged for, converted into, acquired for or constitutes solely the right to receive cash, securities, property or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidated, merger, combination, reclassification, recapitalization or otherwise); PROVIDED, HOWEVER, in the case of a plan involving more than one such transaction or event, for purposes of adjustment of the conversion price, such Fundamental Change will be deemed to have occurred when substantially all of the Apple South Common Stock has been exchanged for, converted into or acquired for or constitutes solely the right to receive cash, securities, property or other assets, but the adjustment shall be based upon the consideration that the holders of Apple South Common Stock received in the transaction or event as a result of which more than 50% of the Apple South Common Stock shall have been exchanged for, converted into or acquired for or shall constitute solely the right to receive such cash, securities, properties or other assets. "Non-Stock Fundamental Change" means any Fundamental Change other than a Common Stock Fundamental Change. "Purchaser Stock Price" means, with respect to any Common Stock Fundamental Change, the average of the closing prices for one share of common stock received by holders of Apple South Common Stock in such Common Stock Fundamental Change during the ten Trading Days immediately prior to the record date for the determination of the holders of Apple South Common Stock entitled to receive such shares of common stock or, if there is no such record date, prior to the date upon which the holders of Apple South Common Stock shall have the right to receive such shares of common stock. "Reference Market Price" will initially mean $8.08 (which unless otherwise specified in this Prospectus will be 66.67% of the last reported bid price per share of Apple South Common Stock on the Nasdaq National Market on March 5, 1997) and, in the event of any adjustment to the conversion price other than as a result of a Fundamental Change, the Reference Market Price will also be adjusted so that the ratio of the Reference Market Price to the conversion price after giving effect to any adjustment will always be the same as the ratio of the initial Reference Market Price to the Initial Conversion Price of the TECONS. 26 Conversions of the TECONS may be effected by delivering them to the office or agency of Apple South maintained for such purpose in the Borough of Manhattan, The City of New York. Conversion price adjustments may, in certain circumstances, result in constructive distributions that could be taxable as dividends under the Internal Revenue Code of 1986, as amended (the "Code"), to holders of TECONS or to holders of Apple South Common Stock issued upon conversion thereof. See "Certain Federal Tax Consequences--Adjustment of Conversion Price." No adjustment in the conversion price will be required unless the adjustment would require a change of at least 1% in the conversion price then in effect; PROVIDED, HOWEVER, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. MANDATORY REDEMPTION The Convertible Debentures will mature on March 1, 2027, and may be redeemed, in whole or in part, at any time on or after March 3, 2000, or at any time in certain circumstances upon the occurrence of a Special Event. Upon the repayment of the Convertible Debentures, whether at maturity or upon redemption, the proceeds from such repayment or payment shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so repaid or redeemed at the appropriate Redemption Price plus accrued interest to the date fixed for redemption (including Compound and Additional Interest); PROVIDED, that holders of Trust Securities shall be given not less than 30 nor more than 60 days notice of such redemption. See "Description of the Convertible Debentures--Redemption at the Option of Apple South." In the event that fewer than all of the outstanding TECONS are to be redeemed, the TECONS will be redeemed PRO RATA as described under "--The Global TECONS". SPECIAL EVENT DISTRIBUTION "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of this Prospectus, as a result of (a) any amendment to, clarification of, or change (including any announced prospective change) in the laws, or any regulations thereunder, of the U.S. or any political subdivision or taxing authority thereof or therein, (b) any judicial decision, official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action") or (c) any amendment to, clarification of, or change in the official position or the interpretation of such Administrative Action or judicial decision that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such amendment, clarification or change is made known, which amendment, clarification, or change is effective or such pronouncement or decision is announced, in each case, on or after, the date of this Prospectus, there is the creation by such change in tax law of more than an insubstantial risk that (i) the Trust is or will be subject to U.S. federal income tax with respect to income accrued or received on the Convertible Debentures, (ii) the Trust is, or will be, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest paid in cash by Apple South to the Trust on the Convertible Debentures is not, or will not be, deductible, in whole or in part, by Apple South for U.S. federal income tax purposes. Notwithstanding the foregoing, a Tax Event shall not include any change in tax law that requires Apple South for U.S. federal income tax purposes to defer taking a deduction for any original issue discount ("OID") that accrues with respect to the Convertible Debentures until the interest payment related to such OID is paid by Apple South in cash; PROVIDED, that such change in tax law does not create more than an insubstantial risk that Apple South will be prevented from taking a deduction for OID accruing with respect to the Convertible Debentures at a date that is no later than the date the interest payment related to such OID is actually paid by Apple South in cash. 27 "Investment Company Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent counsel to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority on or after the date of this Prospectus (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). If, at any time, a Tax Event or an Investment Company Event (each, as defined above, a "Special Event") shall occur and be continuing, the Trust may with the consent of Apple South, except in the limited circumstances described below, be dissolved with the result that, after satisfaction of liabilities to creditors, Convertible Debentures with an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, the Trust Securities, would be distributed to the holders of the Trust Securities in liquidation of such holders' interests in the Trust on a PRO RATA basis within 90 days following the occurrence of the Special Event; PROVIDED, that such dissolution and distribution shall be conditioned on (i) the Regular Trustees' receipt of an opinion of nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the holders of the Trust Securities will not recognize any gain or loss for U.S. federal income tax purposes as a result of such dissolution and distribution of Convertible Debentures, (ii) Apple South or the Trust being unable to avoid such Tax Event within such 90 day period by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the Trust, Apple South or the holders of the Trust Securities and (iii) Apple South's prior written consent to such dissolution and distribution. If Apple South declines to consent to the dissolution and distribution, Apple South may incur an obligation to pay Additional Interest. See "Description of the Convertible Debentures--Additional Interest." Furthermore, if after receipt of a Dissolution Tax Opinion by the Regular Trustees, the Regular Trustees shall have been informed by nationally recognized independent tax counsel experienced in such matters that it cannot deliver a No Recognition Opinion to the Trust, Apple South shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Convertible Debentures, in whole or in part, at 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date fixed for redemption, including Compound Interest, for cash within 90 days following the occurrence of such Tax Event. So long as the corresponding TECONS are outstanding, the proceeds from any such redemption of the Convertible Debenture will be used to redeem TECONS; PROVIDED, HOWEVER, that if at the time there is available to Apple South or the Trust the opportunity to eliminate, within such 90 day period, the Tax Event by taking some ministerial action, such as filing a form or making an election or pursuing some other reasonable measure that has no adverse effect on the Trust, Apple South or the holders of the Trust Securities, Apple South or the Trust will pursue such measure in lieu of redemption. After the date for any distribution of Convertible Debentures upon dissolution of the Trust, (i) the TECONS will no longer be deemed to be outstanding, (ii) the Depository (as defined herein) or its nominee, as the record holder of the TECONS, will receive a registered global certificate or certificates representing the Convertible Debentures to be delivered upon such distribution, and (iii) any certificates representing TECONS not held by the Depository or its nominee will be deemed to represent Convertible Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Distribution rate of, and accrued and unpaid interest (including Compound and Additional Interest) equal to accrued and unpaid Distributions on such TECONS until such certificates are presented to Apple South or its agent for transfer or reissuance. 28 REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST The Trust may not redeem fewer than all of the outstanding TECONS unless all accumulated and unpaid Distributions have been paid on all TECONS for all quarterly Distribution periods terminating on or prior to the date of redemption. If the Trust gives notice of redemption in respect of TECONS (which notice will be irrevocable), then, by 12:00 noon New York City time on the redemption date, PROVIDED, that Apple South has paid to the Institutional Trustee a sufficient amount of cash in connection with the related redemption of the Convertible Debentures, the Trust will (A), with respect to TECONS in book-entry form, irrevocably deposit with the Depository funds sufficient to pay the applicable Redemption Price plus accrued interest to the date fixed for redemption, including Compound and Additional Interest, and will give the Depository irrevocable instructions and authority to pay the Redemption Price and such interest to the holders of the TECONS and (B), with respect to TECONS issued in definitive form, pay the Redemption Price and such interest to the holders of such TECONS by check mailed to the address of the relevant holder appearing on the books and records of the Trust on the redemption date. If notice of redemption shall have been given and funds deposited as required, then, immediately prior to the close of business on the date of such deposit, Distributions will cease to accrue and all rights of holders of such TECONS so called for redemption will cease, except the right of the holders of such TECONS to receive the Redemption Price and such interest, but without additional interest on such Redemption Price. In the event that any date fixed for redemption of TECONS is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. In the event that payment of the Redemption Price in respect of TECONS is improperly withheld or refused and not paid either by the Trust or by Apple South pursuant to the Guarantee, distributions on such TECONS will continue to accrue at the then applicable rate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. In the event that fewer than all of the outstanding TECONS are to be redeemed, the TECONS will be redeemed as described under "--The Global TECONS." Subject to the foregoing and applicable law (including, without limitation, U.S. federal securities laws), Apple South or its subsidiaries may at any time, and from time to time, purchase outstanding TECONS by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Liquidation"), the then holders of the TECONS will be entitled to receive out of the assets of the Trust, after satisfaction of liabilities to creditors, distributions in an amount equal to the aggregate of the stated liquidation amount of $50 per TECONS plus accumulated and unpaid Distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such Liquidation, Convertible Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, the TECONS have been distributed on a PRO RATA basis to the holders of the TECONS. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the TECONS shall be paid on a PRO RATA basis. The holders of the Trust Common Securities will be entitled to receive distributions upon any such dissolution PRO RATA with the 29 holders of the TECONS, except that if a Declaration Event of Default has occurred and is continuing, the TECONS shall have a preference over the Trust Common Securities with regard to such distributions. Pursuant to the Declaration, the Trust shall dissolve (i) on March 1, 2027, the expiration of the term of the Trust, (ii) upon the bankruptcy of Apple South or the holder of the Trust Common Securities, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to the holder of the Trust Common Securities or Apple South, the filing of a certificate of cancellation with respect to the Trust after obtaining the consent of the holders of at least a majority in liquidation amount of the Trust Securities affected thereby voting together as a single class to file such certificate of cancellation, or the revocation of the charter of the holder of the Trust Common Securities or Apple South and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) upon the distribution of Convertible Debentures upon the occurrence of a Special Event, (v) upon the entry of a decree of a judicial dissolution of the holder of the Trust Common Securities, Apple South or the Trust, (vi) upon the redemption of all the Trust Securities or (vii) upon the distribution of Apple South Common Stock to all holders of TECONS upon conversion of all outstanding TECONS. DECLARATION EVENTS OF DEFAULT An event of default under the Indenture (an "Indenture Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"); PROVIDED, that pursuant to the Declaration, the holder of the Trust Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Trust Common Securities until all Declaration Events of Default with respect to the TECONS have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the TECONS have been so cured, waived, or otherwise eliminated, the Institutional Trustee will be deemed to be acting solely on behalf of the holders of the TECONS and only the holders of the TECONS will have the right to direct the Institutional Trustee with respect to certain matters under the Declaration, and therefore the Indenture. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, any holder of TECONS may, to the fullest extent permitted by law, institute a legal proceeding against Apple South to enforce the Institutional Trustee's rights under the Convertible Debentures. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Apple South to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), Apple South acknowledges that then a holder of TECONS may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, Apple South will be subrogated to the rights of such holders of TECONS under the Declaration to the extent of any payment made by Apple South to such holder of TECONS in such Direct Action. The holders of TECONS will not be able to exercise directly any other remedy available to the holders of the Convertible Debentures. Upon the occurrence of a Declaration Event of Default, the Institutional Trustee as the sole holder of the Convertible Debentures will have the right under the Indenture to declare the principal of and interest on the Convertible Debentures to be immediately due and payable. Apple South and the Trust are each required to file annually with the Institutional Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. VOTING RIGHTS Except as described herein, under the Trust Indenture Act and as otherwise required by law and the Declaration, the holders of the TECONS have no voting rights. Subject to the requirement of the Institutional Trustee obtaining a tax opinion in certain circumstances set forth in the last sentence of the next paragraph, the holders of a majority in aggregate 30 liquidation amount of the TECONS have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as a holder of the Convertible Debentures, to (i) exercise the remedies available under the Indenture with respect to the Convertible Debentures, (ii) waive any past Indenture Event of Default that is waivable under Section 4.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Convertible Debentures shall be due and payable; PROVIDED, HOWEVER, that if an Indenture Event of Default has occurred and is continuing then, the holders of 25% of the aggregate liquidation amount of the TECONS may direct the Institutional Trustee to declare the principal of and interest on the Convertible Debentures immediately due and payable; PROVIDED, FURTHER, that where a consent or action under the Indenture would require the consent or act of holders of more than a majority in principal amount of the Convertible Debentures (a "Super-Majority") affected thereby, only the holders of at least such Super-Majority in aggregate liquidation amount of the TECONS may direct the Institutional Trustee to give such consent or take such action. The Institutional Trustee shall notify all holders of the TECONS of any notice of default received from the Debt Trustee with respect to the Convertible Debentures. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for U.S. federal income tax purposes. In the event the consent of the Institutional Trustee, as the holder of the Convertible Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the Trust Securities voting together as a single class; PROVIDED, HOWEVER, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the holders of at least the proportion in liquidation amount of the Trust Securities which the relevant Super-Majority represents of the aggregate principal amount of the Convertible Debentures outstanding. The Institutional Trustee shall be under no obligation to take any such action in accordance with the directions of the holders of the Trust Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of U.S. federal income tax, the Trust will not be classified as other than a grantor trust. A waiver of an Indenture Event of Default by the Institutional Trustee at the direction of the holders of the TECONS will constitute a waiver of the corresponding Declaration Event of Default. Any required approval or direction of holders of TECONS may be given at a separate meeting of holders of TECONS convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of TECONS are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of TECONS. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of TECONS will be required for the Trust to redeem and cancel TECONS or distribute Convertible Debentures in accordance with the Declaration. Notwithstanding that holders of TECONS are entitled to vote or consent under any of the circumstances described above, any of the TECONS that are owned at such time by Apple South or any entity 31 directly or indirectly controlling or controlled by, or under direct common control with, Apple South, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such TECONS were not outstanding. The procedures by which holders of TECONS in book entry form may exercise their voting rights are described in "--The Global TECONS." Holders of the TECONS have no rights to appoint or remove the Apple South Trustees, who may be appointed, removed or replaced solely by Apple South as the holder of all of the Trust Common Securities. MODIFICATION OF THE DECLARATION The Declaration may be modified and amended if approved by the Regular Trustees (and in certain circumstances the Institutional Trustee), PROVIDED, that if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; PROVIDED, that if any amendment or proposal referred to in clause (i) above would adversely affect only the TECONS or the Trust Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of U.S. federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an "investment company" which is required to be registered under the 1940 Act. PROPOSED TAX LEGISLATION On February 6, 1997, as a part of President Clinton's Fiscal 1998 Budget Proposal, the Treasury Department proposed legislation (the "Proposed Legislation") that, among other things, would (i) treat as equity for U.S. federal income tax purposes certain debt instruments with a maximum term of more than 15 years and (ii) disallow interest deductions on certain convertible debt instruments or defer interest deductions on certain debt instruments issued with OID. The Proposed Legislation is proposed to be effective for debt instruments issued on or after the date on which the first Congressional committee action is taken. It is expected that if the Proposed Legislation were enacted, such legislation would not apply to the Convertible Debentures since they would be issued prior to the date of any "Congressional action." However, there can be no assurances that the effective date guidance contained in the Proposed Legislation will be incorporated in the legislation, if enacted, or that other legislation enacted after the date hereof will not otherwise adversely affect the tax treatment of the Convertible Debentures. If the Proposed Legislation or any similar legislation changed the tax treatment of the Convertible Debentures and the TECONS, the U.S. federal income tax consequences of the purchase, ownership and disposition of the TECONS would differ from those described herein. If legislation were enacted that would constitute a Tax Event, there could be a distribution of the Convertible Debentures to holders of the TECONS or, in certain circumstances, at Apple South's option, redemption of the Convertible Debentures by Apple South. There can be no assurances as to whether or in what form the Proposed Legislation may be enacted into law or whether other legislation will be enacted that otherwise adversely affects the tax 32 treatment of the Convertible Debentures and the TECONS. The discussion herein assumes that the Proposed Legislation, if enacted, will not apply to the Convertible Debentures or the TECONS. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other body, except as described below or as otherwise described in the Declaration. The Trust may, with the consent of the Regular Trustees and without the consent of the holders of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; PROVIDED, that (i) such successor entity either (x) expressly assumes all of the obligations of the Trust under the Trust Securities or (y) substitutes for the TECONS other securities having substantially the same terms as the TECONS (the "Successor Securities"), so long as the Successor Securities rank the same as the TECONS rank with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) Apple South expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Institutional Trustee as the holder of the Convertible Debentures, (iii) the TECONS or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the TECONS are then listed or quoted, (iv) such merger, consolidation, amalgamation or replacement does not cause the TECONS (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose substantially identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, Apple South has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that, (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for U.S. federal income tax purposes, and (viii) Apple South guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and the Trust Common Securities Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into or replace it, if such consolidation, amalgamation, merger or replacement would cause the Trust or the Successor Entity to be classified as other than a grantor trust for U.S. federal income tax purposes. BOOK-ENTRY; DELIVERY AND FORM RESALES UNDER REGULATION S AND RULE 144A The following describes the delivery and form of TECONS in connection with the Original Offering and transactions in TECONS which are not being or have not been resold under this Prospectus. The certificates representing the TECONS are issued in fully registered form. TECONS resold in offshore transactions in reliance on Regulation S under the Securities Act are initially represented by a single, temporary global TECONS in definitive, fully registered form (the "Temporary Regulation S Global TECONS") which is deposited with the Institutional Trustee as custodian for DTC and registered in the name of a nominee of DTC for the accounts of Euroclear and Cedel. The Temporary Regulation S Global 33 TECONS is exchangeable for a single, permanent global TECONS (the "Permanent Regulation S Global TECONS", and, together with the Temporary Regulation S Global TECONS, the "Regulation S Global TECONS") on or after April 20, 1997. Prior to April 20 1997, beneficial interests in the Temporary Regulation S Global TECONS may only be held through Euroclear or Cedel, and any resale or other transfer of such interests to U.S. persons shall not be permitted during such period unless such resale or transfer is made pursuant to Rule 144A or Regulation S and in accordance with the certification requirements described below. TECONS resold in reliance on Rule 144A are represented by a single, permanent global TECONS in definitive, fully registered form (the "Restricted Global TECONS") which is deposited with the Institutional Trustee as custodian for DTC and registered in the name of a nominee of DTC. The Restricted Global TECONS and the Temporary Regulation S Global TECONS (and any TECONS issued in exchange therefor) are subject to certain restrictions on transfer set forth therein and bear a restrictive legend. Prior to April 20, 1997, a beneficial interest in the Temporary Regulation S Global TECONS may be transferred to a person who takes delivery in the form of an interest in the Restricted Global TECONS only upon receipt by the Trustee of a written certification from the transferor to the effect that such transfer is being made to a person who the transferor reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Restricted Global TECONS may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global TECONS whether before, on or after April 20, 1997, only upon receipt by the Trustee of a written certification to the effect that such transfer is being made in accordance with Regulation S under the Securities Act. After the TECONS have been registered and resold under the Securities Act, all certification requirements with respect to the TECONS will cease. RESALES UNDER THIS PROSPECTUS TECONS resold under the Registration Statement of which this Prospectus forms a part will be represented by a single, permanent global TECONS in definitive, fully registered form (the "Unrestricted Global TECONS" and with the Regulation S Global TECONS and the Restricted Global TECONS, the "Global TECONS") which is deposited with the Institutional Trustee as custodian for DTC and registered in the name of a nominee of DTC. Upon each sale by a Selling Holder of TECONS (or the Convertible Debentures or shares of Apple South Common Stock into which the TECONS or Convertible Debentures, as the case may be, may be converted) offered hereby, such Selling Holder will be required to deliver a notice (the "Notice") of such sale to the Institutional Trustee and the Company. The Notice will, among other things, identify the sale as a sale pursuant to the Registration Statement of which this Prospectus forms a part, certify that the prospectus delivery requirements, if any, of the Securities Act have been satisfied, and certify that the Selling Holder and the number of TECONS (or Convertible Debentures or shares of Apple South Common Stock, as the case may be) are identified in the Prospectus in accordance with the applicable rules and gegulations under the Securities Act. A copy of the Notice is included herein in Appendix A. Additional copies may be requested from the Company, Attention: Erich J. Booth, Hancock at Washington, Madison, Georgia 30650, telephone number (706) 342-4552. Upon receipt by the Institutional Trustee of the Notice relating to a sale of TECONS, an appropriate adjustment will be made to reflect a decrease in the principal amount of the Restricted Global TECONS or the Regulation S Global TECONS, as the case may be, or the cancellation of a TECONS in certificated form upon the transfer thereof, and a corresponding increase in the principal amount of the Unrestricted Global TECONS. 34 The TECONS resold in reliance on Rule 144A are currently eligible for trading in the PORTAL market of the National Association of Securities Dealers, Inc. TECONS resold pursuant to the Registration Statement of which this Prospectus forms a part are not expected to remain eligible for trading through the PORTAL System. Apple South does not intend to apply for listing of the TECONS on any securities exchange or for inclusion of the TECONS on any automated quotation system. TRANSFERS BETWEEN GLOBAL SECURITIES Any beneficial interest in one of the Global TECONS that is transferred to a person who takes delivery in the form of an interest in one of the other Global TECONS, will, upon transfer, cease to be an interest in such Global TECONS and become an interest in another Global TECONS, and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global TECONS for as long as it remains such an interest. Except in the limited circumstances described under "The Global TECONS," owners of beneficial interests in Global TECONS will not be entitled to receive physical delivery of certificated TECONS. The TECONS are not issuable in bearer form. RESALES TO INSTITUTIONAL ACCREDITED INVESTORS TECONS which are not resold under the Registration Statement of which this Prospectus is a part, but which are transferred to Institutional Accredited Investors who are not qualified institutional buyers ("Non-Global Purchasers") will be issued in registered certificated form ("Regulation D TECONS"). Upon the transfer of Regulation D TECONS held by a Non-Global Purchaser either to a qualified institutional buyer, in accordance with Regulation S or as a Selling Holder under this Prospectus, such Regulation D TECONS will, unless the relevant Global TECONS has previously been exchanged in whole for certificated TECONS, be exchanged for an interest in a Global TECONS. THE GLOBAL TECONS Upon the issuance of the Global TECONS, DTC or its custodian credited, on its internal system, the respective principal amount of the individual beneficial interests represented by such Global TECONS to the accounts of persons who have accounts with such depository. Such accounts initially were designated by or on behalf of the Initial Purchasers. Ownership of beneficial interests in the Global TECONS is limited to persons who have accounts with DTC ("Participants") or person who hold interests through Participants. Ownership of beneficial interests in the Global TECONS is shown on, and the transfer of that ownership is effected only through, records maintained by DTC or its nominee (with respect to interests of Participants) and the records of Participants (with respect to interests of persons other than Participants). Qualified institutional buyers may hold their interests in the Global TECONS directly through DTC if they are Participants in such system, or indirectly through organizations which are Participants in such system. Investors may hold their interests in the Regulation S Global TECONS directly through Cedel or Euroclear, if they are Participants in such systems, or indirectly through organizations that are Participants in such systems. Beginning April 20, 1997 (but not earlier), investors may also hold such interests through organizations other than Cedel or Euroclear that are Participants in the DTC system. Cedel and Euroclear hold interests in the Regulation S Global TECONS on behalf of their Participants through DTC. So long as DTC, or its nominee, is the registered owner or holder of the Global TECONS, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the TECONS represented by such Global TECONS for all purposes under the Trust Agreement and the TECONS. No beneficial owner of an interest in the Global TECONS will be able to transfer that interest except in accordance with DTC's applicable procedures and, if applicable, those of Euroclear and Cedel. Payments of the principal of, and interest on, the Global TECONS will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trust or any 35 paying agent have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global TECONS or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of the Global TECONS will credit Participants' accounts with payments in accounts proportionate to their respective beneficial interests in the principal amount of the Global TECONS as shown on the records of DTC or its nominee. The Company also expects that payments by Participants to owners of beneficial interests in the Global TECONS held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the name of nominees for such customers. Such payments will be the responsibility of such Participants. Transfers between Participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. If a holder requires physical delivery of a certificated TECONS for any reason, including to sell TECONS to persons in states which require such delivery of such TECONS or to pledge such TECONS, such holder must transfer its interest in the Global TECONS in accordance with the normal procedures of DTC. Transfers between Participants in Euroclear and Cedel will be effected in the ordinary way in accordance with their respective rules and operating procedures. DTC has advised the Company that it will take any action permitted to be taken by a holder of TECONS (including the presentation of TECONS for exchange as described below) only at the direction of one or more Participants to whose accounts the DTC interests in the Global TECONS is credited and only in respect of such portion of the aggregate liquidation amount of TECONS as to which such participant or Participants has or have given such direction. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the Global TECONS as represented by a global certificate. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities that Participants deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the Nasdaq National Market, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Conversion and redemption notices shall be sent to DTC or its nominee. If less than all of the TECONS of a Direct Participant are being converted or redeemed, DTC or such nominee will reduce the amount of the interest of each Direct Participant in such TECONS in accordance with its normal procedures. Although voting with respect to the TECONS is limited, in those cases where a vote is required, neither DTC nor its nominee will itself consent or vote with respect to TECONS. Under its usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible after the record date. The 36 Omnibus Proxy assigns consenting or voting rights to those Direct Participants to whose accounts the TECONS are credited on the record date (identified in a listing attached to the Omnibus Proxy). Apple South and the Trust believe that the arrangements among DTC, Direct and Indirect Participants, and beneficial owners of TECONS will enable the beneficial owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the Trust. Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in order to facilitate transfers of interests in the Global TECONS among Participants of DTC, Euroclear and Cedel, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Institutional Trustee will have any responsibility for the performance by DTC, Euroclear or Cedel or their respective Participants or indirect Participants of their respective obligations under the rules and procedures governing their operations. If DTC discontinues being the Depository and a successor Depository is not obtained, certificates for the TECONS are required to be printed and delivered. Additionally, the Regular Trustees (with the consent of Apple South) may decide to discontinue use of the system of book-entry transfers through DTC (or any successor Depository) with respect to the TECONS. In that event, certificates for the TECONS will be printed and delivered. The information in this section concerning DTC, Euroclear and Cedel and DTC's book-entry system has been obtained from sources that Apple South and the Trust believe to be reliable, but neither Apple South nor the Trust takes responsibility for the accuracy thereof. INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE The Institutional Trustee, prior to the occurrence of a default with respect to the Trust Securities and after the curing of any defaults that may have occurred, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Institutional Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of TECONS, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of TECONS will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Institutional Trustee to take any action it is empowered to take under the Declaration following a Declaration Event of Default. The Institutional Trustee also serves as trustee under the Guarantee and the Indenture. CONVERSION AGENT AND PAYING AGENT The Institutional Trustee shall act as Conversion Agent. In addition, for TECONS in certificated form and TECONS that do not remain in book-entry form, the following provisions would apply: The Institutional Trustee will act as paying agent and may designate an additional or substitute paying agent at any time. Registration of transfers of TECONS will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or Apple South may require) in respect of any tax or other government charges that may be imposed in relation to it. The Trust will not be required to register or cause to be registered the transfer of TECONS after such TECONS have been called for redemption. INSTITUTIONAL TRUSTEE Apple South may maintain banking and other commercial relationships with the Institutional Trustee and its affiliates in the ordinary course of business, and the Institutional Trustee may own TECONS. GOVERNING LAW The Declaration and the TECONS are governed by, and construed in accordance with, the internal laws of the State of Delaware. 37 MISCELLANEOUS The Regular Trustees are authorized and directed to operate the Trust in such a way so that the Trust will not be required to register as an "investment company" under the 1940 Act or characterized as other than a grantor trust for U.S. federal income tax purposes. Apple South is authorized and directed to conduct its affairs so that the Convertible Debentures will be treated as indebtedness of Apple South for U.S. federal income tax purposes. In this connection, Apple South and the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the certificate of incorporation of Apple South, that each of Apple South and the Regular Trustees determine in their discretion to be necessary or desirable to achieve such end, as long as such action does not adversely affect the interests of the holders of the TECONS or vary the terms thereof. Holders of the TECONS have no preemptive or similar rights. DESCRIPTION OF THE GUARANTEE Pursuant to the Guarantee, Apple South irrevocably and unconditionally agrees, to the extent set forth therein, to pay in full, to the holders of the TECONS issued by the Trust, the Guarantee Payments (as defined below) (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim which the Trust may have or assert. The following payments with respect to TECONS to the extent not paid by the Trust (the "Guarantee Payments"), will be subject to the TECONS Guarantee thereon (without duplication): (i) any accrued and unpaid distributions which are required to be paid on such TECONS, to the extent the Trust shall have funds available therefor; (ii) the Redemption Price, which will not be lower than the liquidation amount, and all accrued and unpaid Distributions, to the extent the Trust has funds available therefor with respect to any TECONS called for redemption by the Trust and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Convertible Debentures to the holders of TECONS or the conversion of all of the TECONS), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on such TECONS to the date of payment, to the extent the Trust has funds available therefor and (b) the amount of assets of the Trust remaining available for distribution to holders of such TECONS in liquidation of the Trust. Apple South's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by Apple South to the holders of TECONS or by causing the Trust to pay such amounts to such holders. The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Institutional Trustee will act as indenture trustee under the Guarantee (the "Guarantee Trustee"). The terms of the Guarantee are those set forth in such Guarantee and those made part of such Guarantee by the Trust Indenture Act. The Guarantee is held by the Guarantee Trustee for the benefit of the holders of the TECONS. Apple South has also agreed separately to irrevocably and unconditionally guarantee the obligations of the Trust with respect to the Trust Common Securities (the "Trust Common Securities Guarantee") to the same extent as under the Guarantee, except that upon an event of default under the Indenture, holders of TECONS shall have priority over holders of Trust Common Securities with respect to distributions and payments on liquidation, redemption or otherwise. 38 DESCRIPTION OF THE CONVERTIBLE DEBENTURES Set forth below is a description of the specific terms of the Convertible Debentures in which the Trust invested the proceeds from the issuance and sale of the Trust Securities. The following description is subject to, and is qualified in its entirety by reference to, the description in the Indenture, dated as of March 6, 1997 (the "Indenture"), between Apple South and First Union National Bank of Georgia, as Trustee (the "Debt Trustee"). Certain capitalized terms used herein are defined in the Indenture. Under certain circumstances involving the dissolution of the Trust following the occurrence of a Special Event, Convertible Debentures may be distributed to the holders of the Trust Securities in liquidation of the Trust. See "Description of the TECONS--Special Event Distribution." GENERAL The Convertible Debentures are issued as unsecured debt under the Indenture. The Convertible Debentures are limited in aggregate principal amount to approximately $116,161,500, such amount being the sum of the aggregate stated liquidation of the TECONS and the capital contributed by Apple South in exchange for the Trust Common Securities (the "Apple South Payment"). The Convertible Debentures are not subject to a sinking fund provision. The entire principal amount of the Convertible Debentures will mature and become due and payable, together with any accrued and unpaid interest thereon, including Compound and Additional Interest, if any, on March 1, 2027. If Convertible Debentures are distributed to holders of TECONS in liquidation of such holders' interests in the Trust, such Convertible Debentures will initially be issued as a Global Security (as defined herein). As described herein, under certain limited circumstances, Convertible Debentures may be issued in certificated form in exchange for a Global Security. See "Book-Entry and Settlement" below. In the event that Convertible Debentures are issued in certificated form, such Convertible Debentures will be in denominations of $50 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Convertible Debentures issued as a Global Security will be made to DTC, a successor Depository or, in the event that no depository is used, to a paying agent for the Convertible Debentures. In the event Convertible Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Convertible Debentures will be registrable and Convertible Debentures will be exchangeable for Convertible Debentures of other denominations of a like aggregate principal amount at the corporate trust office of the Institutional Trustee in New York, New York; PROVIDED, that payment of interest may be made at the option of Apple South by check mailed to the address of the holder entitled thereto or by wire transfer to an account appropriately designated by the holder entitled thereto. Notwithstanding the foregoing, so long as the holder of any Convertible Debentures is the Institutional Trustee, the payment of principal and interest on the Convertible Debentures held by the Institutional Trustee will be made at such place and to such account as may be designated by the Institutional Trustee. SUBORDINATION The Indenture provides that the Convertible Debentures are subordinated and junior in right of payment to all Senior Indebtedness of Apple South. No payment of principal (including redemption payments), premium, if any, or interest on the Convertible Debentures may be made (i) if any Senior Indebtedness of Apple South is not paid when due and any applicable grace period with respect to such default has ended and such default has not been cured or waived or ceased to exist or (ii) if the maturity of any Senior Indebtedness of Apple South has been accelerated because of a default. Upon any distribution of assets of Apple South to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due on all Senior Indebtedness of Apple South must be paid in full before the holders of Convertible Debentures are entitled to receive or retain any payment. Until satisfaction of all claims of all Senior Indebtedness then outstanding, the rights of the 39 holders of the Convertible Debentures will be subrogated to the rights of the holders of such Senior Indebtedness of Apple South to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Convertible Debentures are paid in full. The Indenture does not limit the aggregate amount of Senior Indebtedness that may be issued by Apple South. REDEMPTION AT THE OPTION OF APPLE SOUTH Apple South has the right to redeem the Convertible Debentures, in whole or in part, from time to time, on or after March 3, 2000, upon not less than 30 nor more than 60 days notice, at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) together with accrued and unpaid interest, including Compound and Additional Interest to, but excluding, the redemption date, if redeemed during the 12-month period beginning March 1:
REDEMPTION YEAR PRICE - --------------------------------------------------------------------------------- ----------- 2000............................................................................. 104.375% 2001............................................................................. 103.500 2002............................................................................. 102.625 2003............................................................................. 101.750 2004............................................................................. 100.875
and 100% if redeemed on or after March 1, 2005. If Convertible Debentures are redeemed on any March 1, June 1, September 1, or December 1, accrued and unpaid interest shall be payable to holders of record on the relevant record date. Apple South also has the right to redeem the Convertible Debentures in certain circumstances upon the occurrence of a Special Event as described under "Description of the TECONS--Special Event Distribution; Tax Event Redemption," and, depending on the specific circumstances, any such redemption may be at 100% of the principal amount thereof together with accrued and unpaid interest (including Compound and Additional Interest) to the redemption date. So long as the corresponding TECONS are outstanding, the proceeds from the redemption of any of the Convertible Debentures will be used to redeem TECONS. INTEREST Each Convertible Debenture bears interest at the rate of 7% per annum from the first date of original issuance, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each an "Interest Payment Date"), commencing June 1, 1997, to the person in whose name such Convertible Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. In the event that the Convertible Debentures are not in book-entry only form, Apple South shall have the right to select record dates, which shall be more than one Business Day prior to the Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Convertible Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, then such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. 40 PROPOSED TAX LEGISLATION Please refer to the discussion above under the heading "Description of the TECONS--Proposed Tax Legislation." OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as Apple South shall not be in default in the payment of interest on the Convertible Debentures, Apple South has the right at any time and from time to time, during the term of the Convertible Debentures to defer payments of interest for successive periods not exceeding 20 consecutive quarters for each such Extension Period, at the end of which Extension Period, Apple South shall pay all interest then accrued and unpaid (including any Additional Interest) together with interest thereon compounded quarterly at the rate specified for the Convertible Debentures to the extent permitted by applicable law ("Compound Interest"); PROVIDED, that during any such Extension Period, (a) Apple South shall not declare or pay dividends on, make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to any of its capital stock (other than (i) purchases or acquisitions of shares of Apple South Common Stock in connection with the satisfaction by Apple South of its obligations under any employee benefit plans, (ii) as a result of a reclassification of Apple South capital stock or the exchange or conversion of one class or series of Apple South capital stock for another class or series of Apple South capital stock, (iii) the purchase of fractional interests in shares of Apple South capital stock pursuant to the conversion or exchange provisions of such Apple South capital stock or the security being converted or exchanged or (iv) purchases or acquisitions of shares of Apple South Common Stock to be used in connection with acquisitions of Apple South Common Stock by shareholders pursuant to Apple South's dividend reinvestment plan), (b) Apple South shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by Apple South that rank PARI PASSU with or junior to the Convertible Debentures and (c) Apple South shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Guarantee). Prior to the termination of any such Extension Period, Apple South may further defer payments of interest by extending the interest payment period; PROVIDED, HOWEVER, that such Extension Period, including all such previous and further extensions, may not exceed 20 consecutive quarters or extend beyond the maturity of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, Apple South may commence a new Extension Period, subject to the terms set forth in this section. No interest during an Extension Period, except at the end thereof, shall be due and payable. Apple South has no present intention of exercising its right to defer payments of interest by extending the interest payment period on the Convertible Debentures. If the Institutional Trustee shall be the sole holder of the Convertible Debentures, Apple South shall give the Regular Trustees, the Institutional Trustee and the Indenture Trustee notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the TECONS are payable or (ii) the date the Regular Trustees are required to give notice to the Nasdaq National Market (or other applicable self-regulatory organization) or to holders of the TECONS of the record date or the date such distribution is payable. The Regular Trustees shall give notice of Apple South's selection of such Extension Period to the holders of the TECONS. If the Institutional Trustee shall not be the sole holder of the Convertible Debentures, Apple South shall give the holders of the TECONS notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date upon which Apple South is required to give notice to the Nasdaq National Market (or other applicable self-regulatory organization) or to holders of the Convertible Debentures of the record or payment date of such related interest payment. CONVERSION OF THE CONVERTIBLE DEBENTURES The Convertible Debentures are convertible into Apple South Common Stock at the option of the holders of the Convertible Debentures at any time prior to the close of business on March 1, 2027 (or, in the case of Convertible Debentures called for redemption, the close of business on the Business Day prior 41 to the Redemption Date) at the Initial Conversion Price subject to the conversion price adjustments described under "Description of the TECONS--Conversion Rights." The Trust has agreed not to convert Convertible Debentures held by it except pursuant to a notice of conversion delivered to the Conversion Agent by a holder of TECONS. Upon surrender of a TECONS to the Conversion Agent for conversion, the Trust will distribute Convertible Debentures to the Conversion Agent on behalf of the holder of the TECONS so converted, whereupon the Conversion Agent will convert such Convertible Debentures to Apple South Common Stock on behalf of such holder. Apple South's delivery to the holders of the Convertible Debentures (through the Conversion Agent) of the fixed number of shares of Apple South Common Stock into which the Convertible Debentures are convertible (together with the cash payment, if any, in lieu of fractional shares) will be deemed to satisfy the obligation of Apple South to pay the principal amount of the Convertible Debentures so converted, and the accrued and unpaid interest thereon attributable to the period from the last date to which interest has been paid or duly provided for; PROVIDED, HOWEVER, that if any Convertible Debenture is converted after a record date for payment of interest, the interest payable on the related interest payment date with respect to such Convertible Debenture shall be paid to the Trust (which will distribute such interest to the converting holder) or other holder of Convertible Debentures, as the case may be, despite such conversion. ADDITIONAL INTEREST If at any time the Trust shall be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the U.S., or any other taxing authority, then, in any such case, Apple South will pay as additional interest ("Additional Interest") such additional amounts as shall be required so that the net amounts received and retained by the Trust or the Institutional Trustee after paying any such taxes, duties, assessments or other governmental charges will be not less than the amounts the Trust or the Institutional Trustee would have received had no such taxes, duties, assessments or other governmental charges been imposed. INDENTURE EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default" with respect to the Convertible Debentures: (a) failure to pay principal of (or premium, if any, on) any Convertible Debenture when due; (b) failure to pay interest on any Convertible Debenture when due, continued for 30 days; (c) failure to perform any other covenant or agreement of Apple South under the Indenture (other than a covenant the performance of which is dealt with specifically elsewhere in the Indenture), continued for 90 days after written notice as provided in the Indenture; (d) certain events of bankruptcy, insolvency or reorganization; and (e) the voluntary or involuntary dissolution, winding-up or termination of the Trust, except in connection with the distribution of Convertible Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities. If any Indenture Event of Default shall occur and be continuing, the Institutional Trustee, as the holder of the Convertible Debentures, will have the right to declare the principal of and the interest on the Convertible Debentures (including any Compound Interest and Additional Interest, if any) and any other amounts payable under the Indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Convertible Debentures. An Indenture Event of Default also constitutes a Declaration Event of Default. The holders of TECONS in certain circumstances have the right to direct the Institutional Trustee to exercise its rights as the holder of the Convertible Debentures. See "Description of the TECONS--Declaration Events of Default" and "--Voting Rights." Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of Apple South to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), Apple South 42 acknowledges that then a holder of TECONS may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. Notwithstanding any payments made to such holder of TECONS by Apple South in connection with a Direct Action, Apple South shall remain obligated to pay the principal of or interest on the Convertible Debentures held by the Trust or the Institutional Trustee, and Apple South shall be subrogated to the rights of the holder of such TECONS with respect to payments on the TECONS to the extent of any payments made by Apple South to such holder in any Direct Action. The holders of TECONS will not be able to exercise directly any other remedy available to the holders of the Convertible Debentures. BOOK-ENTRY AND SETTLEMENT If distributed to holders of TECONS in connection with the involuntary or voluntary dissolution, winding-up or liquidation of the Trust as a result of the occurrence of a Special Event, the Convertible Debentures will be issued (i) if to owners of beneficial interests in the Global TECONS, in the form of one or more global certificates (each, a "Global Security") registered in the name of the Depository or its nominee or (ii) if to holders of certificated TECONS, in registered form (each, a "Certificated Security"). Except under the limited circumstances described below, Convertible Debentures represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Convertible Debentures in definitive form. The Global Securities described above may not be transferred except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or to a successor Depository or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided herein, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Convertible Debentures in definitive form and will not be considered the holders (as defined in the Indenture) thereof for any purpose under the Indenture and no Global Security representing Convertible Debentures shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the Depository or its nominee or to a successor Depository or its nominee. Accordingly, each beneficial owner of an interest in a Global Security must rely on the procedures of the Depository, or, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a holder under the Indenture. THE DEPOSITORY If Convertible Debentures are distributed to holders of TECONS in liquidation of such holders' interests in the Trust, DTC will act as Depository for the Convertible Debentures. For a description of DTC and the specific terms of the Depository arrangements, see "Description of the TECONS--The Global TECONS." As of the date of this Prospectus, the description therein of DTC's book-entry system and DTC's and Euroclear's and Cedel's practices as they relate to purchases, transfers, notices and payments with respect to the TECONS apply in all material respects to any debt obligations represented by one or more Global Securities held by Apple South. Apple South may appoint a successor to DTC or any successor Depository in the event DTC or such successor Depository is unable or unwilling to continue as a Depository for the Global Securities. None of Apple South, the Trust, the Institutional Trustee, any paying agent and any other agent of Apple South or the Indenture Trustee has any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Convertible Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 43 DISCONTINUANCE OF THE DEPOSITORY'S SERVICES A Global Security shall be exchangeable for Convertible Debentures registered in the names of persons other than the Depository or its nominee only if (i) the Depository notifies Apple South that it is unwilling or unable to continue as a depository for such Global Security and no successor depository shall have been appointed, (ii) the Depository, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the Depository is required to be so registered to act as such depository and no successor depository shall have been appointed, (iii) Apple South, in its sole discretion, determines that such Global Security shall be so exchangeable or (iv) there shall have occurred an Event of Default with respect to such Convertible Debentures. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Convertible Debentures registered in such names as the Depository shall direct. It is expected that such instructions will be based upon directions received by the Depository from its Participants with respect to ownership of beneficial interests in such Global Security. GOVERNING LAW The Indenture and the Convertible Debentures are governed by, and construed in accordance with, the internal laws of the State of New York. MISCELLANEOUS The Indenture provides that Apple South will pay all fees and expenses related to (i) the offering of the Trust Securities and the Convertible Debentures, (ii) the organization, maintenance and dissolution of the Trust, (iii) the retention of the Apple South Trustees and (iv) the enforcement by the Institutional Trustee of the rights of the holders of the TECONS. The payment of such fees and expenses is fully and unconditionally guaranteed by Apple South. Apple South has the right at all times to assign any of its respective rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of Apple South; PROVIDED, that in the event of any such assignment, Apple South remains liable for all of their respective obligations. Subject to the foregoing, the Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. 44 EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE DEBENTURES AND THE GUARANTEE As set forth in the Declaration, the sole purpose of the Trust is to issue the Trust Securities evidencing undivided beneficial interests in the assets of the Trust, and to invest the proceeds from such issuance and sale in the Convertible Debentures. As long as payments of interest and other payments are made when due on the Convertible Debentures, such payments will be sufficient to cover distributions and payments due on the Trust Securities because of the following factors: (i) the aggregate principal amount of Convertible Debentures will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and the interest and other payment dates on the Convertible Debentures will match the Distribution rate and Distribution and other payment dates for the TECONS; (iii) Apple South shall pay, and the Trust shall not be obligated to pay, directly or indirectly, all costs, expenses, debt and obligations of the Trust (other than with respect to the Trust Securities); and (iv) the Declaration further provides that the Apple South Trustees shall not take or cause or permit the Trust to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of Distributions (to the extent funds therefor are available) and other payments due on the TECONS (to the extent funds therefor are available) are guaranteed by Apple South as and to the extent set forth under "Description of the Guarantee." If Apple South does not make interest payments on the Convertible Debentures purchased by the Trust, it is expected that the Trust will not have sufficient funds to pay Distributions on the TECONS. The Guarantee is a full guarantee on a subordinated basis with respect to the TECONS issued by the Trust from the time of its issuance, but does not apply to any payment of Distributions unless and until the Trust has sufficient funds for the payment of such Distributions. The Guarantee covers the payment of Distributions and other payments on the TECONS only if and to the extent that Apple South has made a payment of interest or principal on the Convertible Debentures held by the Trust as its sole asset. The Guarantee, when taken together with Apple South's obligations under the Convertible Debentures, the Indenture and the Declaration, including its obligations to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities), provides a full and unconditional guarantee of amounts on the TECONS. If Apple South fails to make interest or other payments on the Convertible Debentures when due (taking account of any Extension Period), the Declaration provides a mechanism whereby a holder of the TECONS, using the procedures described in "Description of the TECONS--Voting Rights," may direct the Institutional Trustee to enforce its rights under the Convertible Debentures. Notwithstanding the foregoing, in such circumstances a holder of TECONS may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, Apple South will be subrogated to the rights of such holder of TECONS under the Declaration to the extent of any payment made by Apple South to such holder of TECONS in such Direct Action. Apple South, under the Guarantee, acknowledges that the Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the TECONS. If Apple South fails to make payments under the Guarantee, the Guarantee provides a mechanism whereby the holders of the TECONS may direct the Guarantee Trustee to enforce its rights thereunder. Any holder of TECONS may institute a legal proceeding directly against Apple South to enforce such holder's right to receive payment under the Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other person or entity. 45 CERTAIN FEDERAL TAX CONSEQUENCES GENERAL The following is a summary of certain of the material U.S. federal income tax consequences of the purchase, ownership and disposition of TECONS. Unless otherwise stated, this summary deals only with TECONS held as capital assets by holders who purchase the TECONS upon original issuance ("Initial Holders") in the Original Offering. It does not deal with special classes of holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors or persons that will hold the TECONS as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. Dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of TECONS. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the TECONS. This summary is based on the Code, Treasury regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. CLASSIFICATION OF THE CONVERTIBLE DEBENTURES Apple South intends to treat the Convertible Debentures as indebtedness of Apple South under current law, and, by acceptance of a TECONS, each holder covenants to treat the Convertible Debentures as indebtedness and the TECONS as evidence of an indirect beneficial ownership interest in the Convertible Debentures. No assurance can be given, however, that such position of Apple South will not be challenged by the Internal Revenue Service (the "IRS"). The remainder of this discussion assumes that the Convertible Debentures will be classified for U.S. income tax purposes as indebtedness of Apple South. CLASSIFICATION OF APPLE SOUTH FINANCING In connection with the issuance of the TECONS in the Original Offering, Kilpatrick Stockton LLP, tax counsel to Apple South and the Trust, rendered its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Declaration and the Indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, the Trust will be classified for U.S. federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for U.S. federal income tax purposes, each holder of TECONS generally will be considered the owner of an undivided interest in the Convertible Debentures, and pursuant to its agreement to treat the Convertible Debentures as indebtedness, each holder will be required to include in its gross income any OID accrued with respect to its allocable share of those Convertible Debentures. ORIGINAL ISSUE DISCOUNT Corporate holders of TECONS will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the TECONS. The Convertible Debentures are considered to have been issued with "original issue discount" ("OID") and each holder of TECONS, including a taxpayer who otherwise uses the cash method of accounting, is required to include its PRO RATA share of original issue discount on the Convertible Debentures in income as it accrues, in accordance with a constant yield method based on a compounding of interest, before the receipt of cash distributions on the TECONS. Generally, all of a TECONS holder's taxable interest income with respect to the Convertible Debentures will be accounted for as OID and actual distributions of stated interest will not be separately reported as taxable income. So long as the interest payment period is not extended, cash distributions received by an Initial Holder for any quarterly 46 interest period will approximately equal the sum of the daily accruals of income for such quarterly interest period. The total amount of OID on the Convertible Debentures will equal the difference between the "issue price" of the Convertible Debentures and their "stated redemption price at maturity." Because Apple South has the right to extend the interest payment period of the Convertible Debentures, all of the stated interest payments on the Convertible Debentures will be includable in determining their "stated redemption price at maturity." The "issue price" of each $50.00 principal amount of Convertible Debentures will be equal to the first price to the purchasers at which a substantial amount of the TECONS is sold for cash, which is expected to be $50.00. A TECONS holder's initial tax basis for its PRO RATA share of the Convertible Debentures is equal to its PRO RATA share of their "issue price," as defined above, and will be increased by OID accrued with respect to its PRO RATA share of the Convertible Debentures, and reduced by the amount of cash distributions with respect thereto. A holder who disposes of the TECONS during an extended interest period may suffer a loss because the market value of the TECONS will likely fall if Apple South exercises its option to defer payments of interest on the Convertible Debentures. Furthermore, the market value of the TECONS may not reflect the accumulated distributions that will be paid at the end of the extended interest period, and a holder who sells the TECONS during the extended interest period will not receive from Apple South any cash related to the interest income the holder accrued and included in its taxable income under the OID rules (because that cash will be paid to the holder of record at the end of the extended interest period). RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF APPLE SOUTH FINANCING Under certain circumstances, as described under the caption "Description of the TECONS--Special Event Distribution; Tax Event Redemption," Convertible Debentures may be distributed to holders in exchange for the TECONS and in liquidation of the Trust. Under current law, such a distribution, for U.S. federal income tax purposes, would be treated as a non-taxable event to each holder, and each holder would receive an aggregate tax basis in the Convertible Debentures equal to such holder's aggregate tax basis in its TECONS. A holder's holding period in the Convertible Debentures so received in liquidation of the Trust would include the period during which the TECONS were held by such holder. If, however, the related special event is a Tax Event which results in the Trust's being treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to holders of the TECONS. Under certain circumstances described herein (see "Description of the TECONS"), the Convertible Debentures may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their TECONS. Under current law, such a redemption would, for U.S. federal income tax purposes, constitute a taxable disposition of the redeemed TECONS, and a holder could recognize gain or loss as if it sold such redeemed TECONS for cash. See "--Sales of TECONS." SALES OF TECONS A holder that sells TECONS will recognize gain or loss equal to the difference between its adjusted tax basis in the TECONS and the amount realized on the sale of such TECONS. A holder's adjusted tax basis in the TECONS generally will be its initial purchase price increased by OID previously includable in such holder's gross income to the date of disposition, and decreased by payments received on such TECONS. Subject to the discussion below regarding accrued and unpaid interest, such gain or loss will be long-term capital gain or loss if the TECONS have been held for more than one year. The TECONS may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying Convertible Debentures. A holder who disposes of his TECONS between record dates for payments of Distributions thereon will be required to include as OID accrued but 47 unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income, and to add such amount to his adjusted tax basis in his PRO RATA share of the underlying Convertible Debentures of which he is deemed to have disposed. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest) a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for U.S. federal income tax purposes. In the case of a holder of a TECONS who does not acquire the TECONS in the Original Offering, the TECONS might have market discount, defined as the excess, if any, of the original issue price of the TECONS (plus the sum of all accrued OID with respect to the TECONS exceeding the sum of all distributions on the TECONS) over the holder's initial tax basis in the TECONS. Gain on the sale of a TECONS will constitute ordinary income to the holder to the extent that it does not exceed accrued market discount on the TECONS. The market discount will accrue ratably based on the number of days that the holder owns the TECONS divided by the number of days from the holder's acquisition of the TECONS to the maturity date of the TECONS. For purposes of these rules, certain DE MINIMIS market discount will be disregarded. CONVERSION OF TECONS TO APPLE SOUTH COMMON STOCK A holder of TECONS will not recognize income, gain or loss upon the conversion through the Conversion Agent, of Convertible Debentures into Apple South Common Stock except to the extent of ordinary income recognized with respect to accrued and unpaid interest on the Convertible Debentures at that time. A holder of TECONS will, however, recognize gain upon the receipt of cash in lieu of a fractional share of Apple South Common Stock equal to the amount of cash received less such holder's tax basis in such fractional share. Such holder's tax basis in the Apple South Common Stock received upon conversion should generally be equal to such holder's tax basis in the TECONS delivered to the Conversion Agent for exchange, plus the amount of interest income recognized on the exchange, less the basis allocated to any fractional share for which cash is received and such holder's holding period in the Apple South Common Stock received upon conversion should generally begin on the date such holder acquired the TECONS delivered to the Conversion Agent for exchange (except that the holding period of the Common Stock deemed issued for accrued interest will begin on the day following the date of conversion). ADJUSTMENT OF CONVERSION PRICE Treasury Regulations promulgated under section 305 of the Code would treat holders of TECONS as having received a constructive distribution from Apple South in the event the conversion ratio of the Convertible Debentures were adjusted if (i) as a result of such adjustment, the proportionate interest (measured by the quantum of Apple South Common Stock into or for which the Convertible Debentures are convertible or exchangeable) of the holders of the TECONS in the assets or earnings and profits of Apple South were increased, and (ii) the adjustment was not made pursuant to a bona fide, reasonable anti-dilution formula. An adjustment in the conversion ratio would not be considered made pursuant to such a formula if the adjustment was made to compensate for certain taxable distributions with respect to the Apple South Common Stock. Thus, under certain circumstances, a reduction in the conversion price for the holders may result in deemed dividend income to holders to the extent of the current or accumulated earnings and profits of Apple South. Holders of the Convertible Debentures would be required to include their allocable share of such deemed dividend in gross income, but will not receive any cash related thereto. PROPOSED TAX LEGISLATION Please refer to the discussion above under the heading "Description of the TECONS--Proposed Tax Legislation." 48 UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the U.S., a foreign corporation, a non-resident alien individual, a foreign partnership, or a non-resident fiduciary of a foreign estate or trust. As discussed above, the Company intends to take the position that the Convertible Debentures will be classified for U.S. federal income tax purposes as indebtedness of Apple South under current law; no assurance can be given, however, that such position of the Company will not be challenged by the Internal Revenue Service. See "--Classification of the Convertible Debentures." Assuming that the Convertible Debentures are classified for U.S. federal income tax purposes as indebtedness of Apple South, under present U.S. federal income tax law: (i) payments by the Trust or any of its paying agents to any holder of a TECONS who or which is a United States Alien Holder would not be subject to U.S. federal withholding tax; PROVIDED, that, (a) the beneficial owner of the TECONS does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of Apple South entitled to vote, (b) the beneficial owner of the TECONS is not a controlled foreign corporation that is related to Apple South through stock ownership, and (c) either (A) the beneficial owner of the TECONS certifies to the Trust or its agent, under penalties of perjury, that it is not a U.S. holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the TECONS in such capacity, certifies to the Trust or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes the Trust or its agent with a copy thereof; and (ii) a United States Alien Holder of a TECONS generally would not be subject to U.S. federal withholding tax on any gain realized upon the sale or other disposition of a TECONS. However, a United States Alien Holder of a TECONS would be subject to U.S. federal income tax on gain realized on the sale, exchange or other disposition of the security if (i) the United States Alien Holder is an individual who is present in the U.S. for 183 days or more in the taxable year of disposition, and certain other conditions are satisfied; (ii) the gain is effectively connected with the conduct by the United States Alien Holder of a trade or business in the U.S. (in which case the branch profits tax may also apply if the United States Alien Holder is a foreign corporation); or (iii) Apple South is or has been a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code within the shorter of the United States Alien Holder's holding period or the five year period ending on the date of the sale, exchange or other disposition and certain other conditions are satisfied. Apple South believes that it currently is and may continue to be treated as a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code. Should it be so treated, gain realized on a disposition of TECONS by a United States Alien Holder that is deemed to have beneficially owned an amount of TECONS which, on the day such TECONS were acquired by the United States Alien Holder, had a fair market value greater than the fair market value on that date of 5 percent of the Apple South Common Stock, will be subject to U.S. federal income tax upon a disposition (including possibly upon conversion) of such TECONS. Such a United States Alien Holder is, therefore, urged to consult its tax advisor. A United States Alien Holder who is not deemed to have beneficially owned an amount of TECONS which, on the day such TECONS were acquired by the United States Alien Holder, had a fair market value greater than the fair market value on that date of 5 percent of the Apple South Common Stock, will not be subject to U.S. federal income tax subject to the discussion in the following paragraph. The preceding discussion with respect to the tax consequences to a United States Alien Holder where Apple South is a United States real property holding corporation assumes that Apple South Common Stock is and always will be "regularly traded" on an established securities market (within the meaning of Section 897(c)(3) of the Code and the temporary treasury regulations (the "Temporary Regulations") 49 issued pursuant thereto) at the time of disposition. However, it may be possible to read the Temporary Regulations that define "regularly traded" for this purpose as providing that Apple South Common Stock will not be "regularly traded" for any calendar quarter during which 100 or fewer persons (treating related persons as one person) in the aggregate own 50% or more of the Common Stock. In the event that this interpretation is determined to be correct and if Apple South is a United States real property holding corporation during the relevant time period described in the preceding paragraph, a United States Alien Holder (without regard to its ownership percentage of the TECONS) will be subject to U.S. federal income tax with respect to gain realized on any sale or other disposition of the TECONS that occurs within a calendar quarter during which 50% or more of Apple South Common Stock is so owned as well as to a withholding tax (generally at a rate of 10% of the cash proceeds). Any amount withheld pursuant to such withholding tax will be creditable against such holder's U.S. federal income tax liability. If the Convertible Debentures were not classified for U.S. federal income tax purposes as indebtedness of Apple South, payments by the Trust or any of its paying agents to any holder of a TECONS who or which is a United States Alien Holder could be subject to U.S. withholding tax at a 30% rate (or a lower rate prescribed by an applicable tax treaty) unless certain exemptions were applicable. Prospective investors that would be United States Alien Holders should consult their tax advisors concerning the possible application of these rules. On April 15, 1996, the Internal Revenue Service proposed regulations (the "Proposed Regulations") that could affect the procedures to be followed by a United States Alien Holder in establishing such United States Alien Holder's non-U.S. person status. The Proposed Regulations would generally be effective for payments made after December 31, 1997. United States Alien Holders should consult their tax advisors regarding the effect, if any, of the Proposed Regulations on their purchase, ownership, and disposition of the TECONS. INFORMATION REPORTING TO HOLDERS Subject to the qualifications discussed below, income on the TECONS will be reported to holders on Forms 1099, which forms should be mailed to holders of TECONS by January 31 following each calendar year. The Trust will be obligated to report annually to Cede & Co., as holder of record of the TECONS, the OID related to the Convertible Debentures that accrued during the year. The Trust currently intends to report such information on Form 1099 prior to January 31 following each calendar year even though the Trust is not legally required to report to record holders until April 15 following each calendar year. The Initial Purchasers have indicated to the Trust that, to the extent that they hold TECONS as nominees for beneficial holders, they currently expect to report to such beneficial holders on Forms 1099 by January 31 following each calendar year. Under current law, holders of TECONS who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to the Trust. The Trust, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, beneficial holders of TECONS who hold their TECONS through the Initial Purchasers will receive Forms 1099 reflecting the income on their TECONS from such nominee holders rather than the Trust. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of, the TECONS or the Convertible Debentures distributed to holders of the TECONS may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a refund or a credit against the holder's U.S. federal income tax; PROVIDED, that the required information is provided to the IRS. 50 THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TECONS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS (WITH POSSIBLE RETROACTIVE EFFECT). ERISA CONSIDERATIONS GENERAL A fiduciary of an employee benefit plan subject to Title I of ERISA should consider fiduciary standards under ERISA in the context of the particular circumstances of such plan before authorizing an investment in the TECONS. Such fiduciary should consider whether the investment satisfies ERISA's diversification and prudence requirements, whether the investment constitutes unauthorized delegation of fiduciary authority and whether the investment is in accordance with the documents and instruments governing the plan. In addition, ERISA and the Code prohibit a wide range of transactions ("Prohibited Transactions") involving the assets of a plan subject to ERISA or the assets of an individual retirement account or plan subject to Section 4975 of the Code (hereinafter an "ERISA Plan") and persons who have certain specified relationships to the ERISA Plan ("parties in interest," within the meaning of ERISA, and "disqualified persons," within the meaning of the Code). Such transactions may require "correction" and may cause the ERISA Plan fiduciary to incur certain liabilities and the parties in interest or disqualified persons to be subject to excise taxes. The acquisition of TECONS by any person who is using for such acquisition the assets of an ERISA Plan shall constitute a representation by such person to Apple South that (i) Apple South is a "party in interest" or a "disqualified person" with respect to such ERISA Plan, then such security is being acquired pursuant to an exemption from the Prohibited Transaction rules under ERISA and the Code, and (ii) Apple South is not a "fiduciary," within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such person's interest in the TECONS or the Convertible Debentures. Governmental plans and certain church plans (each as defined under ERISA) are not subject to the Prohibited Transaction rules. Such plans may, however, be subject to federal, state or local laws or regulations which may affect their investment in the TECONS. Any fiduciary of such a governmental or church plan considering an investment in the TECONS should determine the need for, and the availability, if necessary, of any exemptive relief under such laws or regulations. The discussion herein of ERISA is general in nature and is not intended to be all inclusive. Any fiduciary of an ERISA Plan, governmental plan or church plan considering an investment in the TECONS should consult with its legal advisors regarding the consequences of such investment. PROHIBITED TRANSACTIONS Apple South may be a party in interest or a disqualified person with respect to an ERISA Plan investing in the TECONS, and, therefore, such investments by an ERISA Plan may give rise to a Prohibited Transaction. Consequently, before investing in the TECONS, any person who is, or who in acquiring such securities is using the assets of, an ERISA Plan should determine that either a statutory or an administrative exemption from the Prohibited Transaction rules discussed below or otherwise available is applicable to such person's investment in the TECONS, or that its investment in such securities will no result in a Prohibited Transaction. Certain statutory or administrative exemptions from the Prohibited Transaction rules under ERISA and the Code may be available to an ERISA Plan which is investing in the TECONS. Included among 51 these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled separate accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 84-14, regarding transactions effected by qualified professional asset managers; PTCE 96-23, regarding transactions effected by in-house asset managers; or PTCE 95-60, regarding investments by insurance company general accounts. TRUST ASSETS AS "PLAN ASSETS" The Department of Labor has issued final regulations (the "Labor Regulations") as to what constitutes assets of an employee benefit plan ("plan asset") under ERISA. The Labor Regulations provide that, as a general rule, when an ERISA Plan acquires an equity interest in an entity and such interest does not represent a "publicly offered security" nor a security issued by an investment company registered under the Investment Company Act of 1940, the ERISA Plan's assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established either that the entity in an operating company or that equity participation in the entity by "benefit plan investors" is not "significant." For purposes of the Labor Regulations, the Trust will not be an investment company nor an operating company and the TECONS will not constitute a "publicly offered security." As discussed below, after resales pursuant to the shelf registration statement, the TECONS may qualify as "publicly offered securities" for purposes of the Labor Regulations, but such result cannot be assured. Under the Labor Regulations, equity participation by benefit plan investors will not be considered "significant" on any date only if, immediately after the most recent acquisition of TECONS, the aggregate interest in the TECONS held by benefit plan investors will be less than 25% of the value of the TECONS. Although it is possible that the equity participation by benefit plan investors on any date will not be "significant" for purposes of the Labor Regulations, such result cannot be assured. Consequently, if ERISA Plans or investors using plan assets of ERISA plans purchase the TECONS, the Trust's assets could be deemed to be "plan assets" of such ERISA Plans for purposes of the fiduciary responsibility provisions of ERISA and the Code. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of an ERISA Plan is considered to be a fiduciary of such ERISA Plan. For example, the Institutional Trustee could therefore become a fiduciary of the ERISA Plans that invest in the TECONS and be subject to the general fiduciary requirements of ERISA in exercising its authority with respect to the management of the assets of the Trust. However, the Institutional Trustee will have only limited discretionary authority with respect to the Trust's assets and the remaining functions and the responsibilities performed by the Institutional Trustee will be for the most part custodial and ministerial in nature. Inasmuch as the Institutional Trustee or another person with authority or control respecting the management or disposition of the Trust assets may become a fiduciary with respect to the ERISA Plans that will purchase the TECONS, there may be an improper delegation by such ERISA Plans of the responsibility to manage plan assets. It is expected that TECONS will be distributed pursuant to an effective registration statement under the Securities Act and they may subsequently be registered under the Exchange Act. TECONS may qualify as "publicly offered securities" under the Labor Regulations if, in addition to such distribution and registration, they are also "widely held" and "freely transferable." Under the Labor Regulations, a class of securities is "widely held" only if it is a class of securities that is owned by 100 or more investors independent of the issuer and of one another. Although it is possible that after distribution pursuant to the shelf registration statement the TECONS will be "widely held," such result cannot be assured. Whether a security is "freely transferable" for purposes of the Labor Regulations is a factual question to be determined on the basis of all relevant facts and circumstances. If after the distribution pursuant to the shelf registration statement, the TECONS do not qualify as "publicly offered securities," the "plan asset" considerations discussed in the immediately preceding paragraph could continue to be applicable in connection with the investment by ERISA Plans or investors' using plan assets of ERISA Plans. 52 SELLING HOLDERS The holders listed below and the beneficial owners of the TECONS and their transferees, pledgees, donees or other successors, if not identified hereunder then so identified in supplements to this Prospectus, are the Selling Holders under this Prospectus. The following table sets forth, as of a recent practicable date prior to the effectiveness of the Registration Statement of which this Prospectus forms a part, certain information with respect to the Selling Holders named below and the respective number of TECONS owned by each Selling Holder that may be offered pursuant to this Prospectus. Such information has been obtained from the Selling Holders, DTC and/or the Institutional Trustee.
NUMBER OF SELLING HOLDER TECONS - ------------------------------------------------------------------------------------------- ---------- Alpine Associates.......................................................................... 130,000 Bank of New York (The)..................................................................... 151,400 Bankers Trust.............................................................................. 175,160 Bear Stearns............................................................................... 165,000 Bankers Trust Company/Paloma............................................................... 134,500 Boatmen's Trust Company.................................................................... 16,000 Boston Safe Deposit & Trust Company........................................................ 282,475 Chase Manhattan Bank....................................................................... 9,400 Chase Manhattan Bank/Chemical.............................................................. 2,600 Credit Suisse First Boston Corporation..................................................... 35,000 Custodial Trust Company.................................................................... 61,000 Donaldson, Lufkin & Jenrette Securities Corporation........................................ 30,000 Fleet Bank of Massachusetts, N.A........................................................... 400 First National Bank of Maryland (The)...................................................... 3,600 First Marathon Securities Limited.......................................................... 10,000 Investors Bank & Trust/M.F. Custody........................................................ 12,500 Lehman Brothers International (Europe)--Prime Broker (LBI)................................. 155,000 Mercantile, Safe Deposit and Trust Company................................................. 38,850 Merrill Lynch Professional Clearing Corporation............................................ 5,000 Merrill Lynch, Pierce, Fenner & Smith Safekeeping.......................................... 105,000 Morgan (J.P.) Securities, Inc.............................................................. 187,100 Morgan Stanley & Company, Incorporated..................................................... 35,000 Norwest Bank Minnesota National Association................................................ 4,370 Northern Trust Company..................................................................... 52,500 PNC National Association................................................................... 10,845 Raymond, James & Associates, Inc........................................................... 10,000 Robertson, Stephens & Company, L.P......................................................... 14,000 Sanwa Bank California...................................................................... 23,300 SBC Warburg, Inc........................................................................... 49,500 SSB-Custodian.............................................................................. 366,400 SunTrust Bank.............................................................................. 900 Wachovia Bank North Carolina............................................................... 2,200 Chase Manhattan Bank/Chemical.............................................................. 21,000 ---------- Total.................................................................................. 2,300,000 ---------- ----------
None of the Selling Holders has, or within the past three years has had, any position, office or other material relationship with the Trust or the Company or any of their predecessors or affiliates, except as noted above. Because the Selling Holders may, pursuant to this Prospectus, offer all or some portion of the TECONS, the Convertible Debentures or the Apple South Common Stock issuable upon conversion of the TECONS, no estimate can be given as to the amount of the TECONS, the Convertible Debentures or the 53 Apple South Common Stock issuable upon conversion of the TECONS that will be held by the Selling Holders upon termination of any such sales. In addition, the Selling Holders identified above may have sold, transferred or otherwise disposed of all or a portion of their TECONS, since the date on which they provided the information regarding their TECONS, in transactions exempt from the registration requirements of the Securities Act. See "Plan of Distribution." Only Selling Holders identified above who beneficially own the Offered Securities set forth opposite each such Selling Holder's name in the foregoing table on the effective date of the Registration Statement of which this Prospectus forms a part may sell such Offered Securities pursuant to the Registration Statement. The Company may from time to time, in accordance with the Registration Rights Agreement, include additional Selling Holders in supplements to this Prospectus. PLAN OF DISTRIBUTION The Offered Securities may be sold from time to time to purchasers directly by the Selling Holders. Alternatively, the Selling Holders may from time to time offer the Offered Securities to or through underwriters, broker/dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Holders or the purchasers of such securities for whom they may act as agents. The Selling Holders and any underwriters, broker/dealers or agents that participate in the distribution of Offered Securities may be deemed to be "underwriters" within the meaning of the Securities Act any profit on the sale of such securities and any discounts, commissions, concessions or other compensation received by any such underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. The Offered Securities may be sold from time to time in one or more transactions at fixed prices, at the prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The sale of Offered Securities may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Offered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or in the over-the-counter market or (iv) through the writing of options. At the time a particular offering of the Offered Securities is made, a Prospectus Supplement, if required, will be distributed which will set forth the aggregate amount and type of Offered Securities being offered and the terms of the offering, including the name or names of any underwriters, broker/dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Holders and any discounts, commissions or concessions allowed or reallowed or paid to broker/ dealers. To comply with the securities laws of certain jurisdictions, if applicable, the Offered Securities will be offered or sold in such jurisdictions only through registered or licenses brokers or dealers. In addition, in certain jurisdictions the Offered Securities may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or any exemption from registration or qualification is available and is complied with. The Selling Holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the Offered Securities by the Selling Holders. The foregoing may affect the marketability of such securities. The costs of the registration of the Offered Securities will be paid by the Company, including, without limitation, Commission filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, that the Selling Holders will pay all underwriting discounts and selling commissions, if any. The Selling Holders will be indemnified by the Company and the Trust, jointly and severally against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection therewith. The Company and the Trust will be indemnified by the Selling Holders 54 severally against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection therewith. The Trust, Apple South, Apple South's directors and certain of Apple South's executive officers have agreed not to (i) offer, pledge to sell, file a registration statement relating to, announce the intention to sell or otherwise transfer or dispose of any TECONS, any shares of Apple South's Common Stock or any securities convertible into or exchangeable for any shares of Apple South Common Stock (except for the TECONS offered hereby and Apple South Common Stock issuable upon conversion of the Convertible Debentures or pursuant to Apple South's existing employee benefit plans as in effect on the Original Offering Date), or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of Apple South Common Stock for a period of 90 days after the Original Offering Date, without the prior written consent of J.P. Morgan Securities Inc.; PROVIDED, that, notwithstanding the foregoing, such executive officers and directors may transfer, pledge or otherwise dispose of shares of Apple South Common Stock to certain permitted transferees who agree to be similarly bound; and PROVIDED FURTHER that Apple South may make issuances of options or shares of Common Stock, or securities convertible into, or exercisable or exchangeable therefor, pursuant to employee benefit plans registered on Form S-8 or, subject to certain limitations, as consideration for acquisitions. The Trust does not intend to list the TECONS on any securities exchange or any automated quotation system. The Trust has been advised by the Initial Purchasers that they intend to make a market in them as permitted by applicable laws and regulations. The Initial Purchasers are not obligated, however, to make a market in the TECONS and any such market-making may be discontinued at any time at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the TECONS. LEGAL MATTERS The validity of the Convertible Debentures, the Apple South Common Stock issuable upon conversion, the Guarantee and certain matters relating thereto, and certain U.S. federal income taxation matters will be passed upon for Apple South and the Trust by Kilpatrick Stockton LLP, Atlanta, Georgia, and the validity of the TECONS will be passed upon for Apple South and the Trust by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to Apple South and the Trust. Attorneys at Kilpatrick Stockton LLP who participated in the preparation of this Prospectus own a total of 3,030 shares of Apple South Common Stock as of April 15, 1997. EXPERTS The consolidated financial statements of Apple South, Inc., as of December 29, 1996 and December 31, 1995, and for each of the years in the three-year period ended December 29, 1996, incorporated by reference in this registration statement have been incorporated by reference in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants and upon the authority of that firm as experts in accounting and auditing. 55 APPENDIX A NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT First Union National Bank of Georgia Corporate Trust Administration 999 Peachtree Street, N.E., Suite 1100 Atlanta, Georgia 30309 Apple South, Inc. Hancock at Washington Madison, Georgia 30650 Re: Apple South Financing I (the "Trust") TECONS Apple South, Inc. (the "Company") Dear Sirs: Please be advised that has transferred TECONS, (or 7% Convertible Subordinated Debentures due March 1, 2027 or shares of Common Stock of the Company, issued in exchange for or upon conversion of the TECONS) pursuant to an effective Registration Statement on Form S-3 (File No. ) filed by the Company and the Trust. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the transferred securities is named as a "Selling Holder" in the Prospectus dated , 1997 or in supplements thereto, and that the aggregate amount of the securities transferred are (or are included in) the securities listed in such Prospectus opposite such owner's name. Dated: Very truly yours, -------------------------------------- (Name) By: -------------------------------------- (Authorized Signature) APP A-1 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE --------- Available Information....................... 3 Incorporation of Certain Documents by Reference.................................. 4 Prospectus Summary.......................... 5 Safe Harbor Statement....................... 11 Risk Factors................................ 13 Recent Developments......................... 17 Use of Proceeds............................. 18 Ratio of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Stock Dividends.................. 18 Apple South Financing I..................... 19 Description of the TECONS................... 20 Description of the Guarantee................ 38 Description of the Convertible Debentures... 39 Effect of Obligations Under the Convertible Debentures and the Guarantee............... 45 Certain Federal Tax Consequences............ 46 ERISA Considerations........................ 51 Selling Holders............................. 53 Plan of Distribution........................ 54 Legal Matters............................... 55 Independent Auditors........................ 55 Notice of Transfer Pursuant to Registration Statement.................................. App A
APPLE SOUTH FINANCING I 2,300,000 $3.50 TERM CONVERTIBLE SECURITIES, SERIES A (TECONS-SM-) FULLY AND UNCONDITIONALLY GUARANTEED BY APPLE SOUTH, INC. 7% CONVERTIBLE SUBORDINATED DEBENTURES DUE MARCH 1, 2027 COMMON STOCK ------------- PROSPECTUS -------------- MAY , 1997 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Estimated expenses (other than underwriting commissions) of the sale of the TECONS are as follows: Registration Filing Fee......................................... $37,811.00 Printing and Engraving Expenses................................. Fees and Expenses of Trustee.................................... Legal Fees and Expenses......................................... Accounting Fees and Expenses.................................... Miscellaneous Expenses.......................................... --------- Total....................................................... $ --------- ---------
None of the expenses of registering the securities are to be borne by the selling security holders. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY Section 14-2-851, et. seq., of the Georgia Business Corporation Code (the "Code") authorizes the Company to indemnify its directors, officers, employees, and agents in certain circumstances. Section 14-2-856 expressly allows the Company to provide, with shareholder approval, indemnification rights that are broader than otherwise provided under the Code. Article Eight of the Company's Bylaws provides for broader indemnification rights than expressly provided under the Code. The following is a summary of the material provisions of Article Eight. Article Eight requires the Company to indemnify persons who are parties to any civil, criminal, administrative, or investigative action, suit, or proceeding by reason of the fact that such person was or is a director of the Company. Except as noted in the next paragraph, directors are entitled to be indemnified against expenses (including but not limited to attorney's fees and court costs), and against any judgments, fines and amounts paid in settlement actually and reasonably incurred by them. Directors are also entitled to have the Company advance any such expenses prior to final disposition of the proceeding, upon an undertaking to repay the Company if it is ultimately determined that they are not entitled to indemnification. Under Article Eight, indemnification will be disallowed under the following four exceptions to limitation of directors' liability under Section 14-2-202 of the Code: (i) any appropriation, in violation of the director's duties, of any business opportunity of the Company, (ii) acts or omissions which involve intentional misconduct or a knowing violation of law, (iii) liability under Section 14-2-832 of the Code (dealing with unlawful distributions), and (iv) any transaction from which the director received an improper personal benefit. The Board of Directors also has the authority to extend to officers, employees, and agents the same indemnification rights held by directors, subject to all of the accompanying conditions and obligations. The Board of Directors has extended indemnification rights to all of its executive officers. The Company, upon authorization of the Board of Directors, has the power to enter into an agreement or agreements providing to any person who was or is a director, officer, employee, or agent of the Company indemnification rights substantially the same as those provided to directors under Article Eight. The Company has entered into indemnity agreements with its directors and executive officers. II-1 The Company will be indemnified by the Selling Holders pursuant to the Registration Rights Agreement severally against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection therewith. The Company has the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Company against any liability asserted against him or incurred by him in any such capacity, whether or not the Company now has the power to indemnify him against such liability under Article Eight. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE TRUST The Declaration provides that no Institutional Trustee, affiliate of the Institutional Trustee, Delaware Trustee, affiliate of the Delaware trustee, paying agent, or conversion agent, or any officer, director, shareholder, member, partner, employee, representative, custodian, nominee, or agent of the Institutional Trustee, Delaware Trustee, paying agent, or conversion agent (each a "Fiduciary Indemnified Person"), nor any Regular Trustee, any affiliate of a Regular Trustee, any officer, director, shareholder, member, partner, employee, representative, or agent of any Regular Trustee, or any officer, employee, or agent of the Trust or its affiliates (each a "Company Indemnified Person") (the Fiduciary Indemnified Persons and the Company Indemnified Persons collectively constituting the "Indemnified Persons"), shall be liable, responsible, or accountable for any loss, damage, or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by the Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage, or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. The Declaration also provides that, to the full extent permitted by law, the Company shall indemnify any Fiduciary Indemnified Person for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the Trust, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties under the Declaration. The Declaration further provides that, to the full extent permitted by law, the Company shall indemnify any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was a Company Indemnified Person, against any expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, and with respect to any action or suit by or in the right of the Trust he is not adjudged to be liable to the Trust unless otherwise determined by the deciding court or the Court of Chancery of Delaware, and to the extent the Company Indemnified Person is successful on the merits on any such action, suit, or proceeding, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith. II-2 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as exhibits to this Registration Statement:
EXHIBIT NO. EXHIBIT DESCRIPTION - ----------- --------------------------------------------------------------------------------------------------- 4.1 Trust Agreement of Apple South Financing I, dated as of February 18, 1997, among Apple South, Inc., First Union National Bank of Georgia, First Union Bank of Delaware and Lansing S. Patterson 4.2 Amended and Restated Declaration of Trust of Apple South Financing I, dated as of March 11, 1997, among Apple South, Inc., as Sponsor, First Union National Bank of Georgia, as Institutional Trustee, First Union Bank of Delaware, as Delaware Trustee, and the Regular Trustees named therein 4.3 Indenture for the 7% Convertible Subordinated Debentures, dated as of March 6, 1997, between Apple South, Inc. and First Union National Bank of Georgia, as Trustee 4.4 Form of $3.50 Term Convertible Security, Series A (included in Exhibit 4.2) 4.5 Form of 7% Convertible Subordinated Debenture (included in Exhibit 4.3) 4.6* Preferred Securities Guarantee Agreement, dated as of March 11, 1997, between Apple South, Inc., as Guarantor, and First Union National Bank of Georgia, as Preferred Guarantee Trustee 4.7 Registration Rights Agreement, dated as of March 11, 1997, among Apple South, Inc., Apple South Financing I, J.P. Morgan Securities Inc., and Smith Barney Inc. 5.1* Opinion of Richards, Layton & Finger as to the legality of the $3.50 Term Convertible Securities, Series A, being registered 5.2* Opinion of Kilpatrick Stockton LLP as to the legality of the 7% Convertible Subordinated Debentures, the Common Stock and the Guarantee being registered 8.1* Opinion of Kilpatrick Stockton LLP relating to certain tax matters 12.1* Calculation of Ratio of Earnings to Fixed Charges 23.1* Consent of Richards, Layton & Finger (contained in Exhibit 5.1) 23.2* Consent of Kilpatrick Stockton LLP (contained in Exhibit 5.2) 23.3 Consent of KPMG Peat Marwick LLP 24.1 Power of Attorney (set forth on signature page to the Registration Statement) 25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Institutional Trustee under the Amended and Restated Declaration of Trust 25.2 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Trustee under the Indenture for the 7% Convertible Subordinated Debentures 25.3 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Preferred Guarantee Trustee under the Preferred Securities Guarantee Agreement 27.1 Financial Data Schedule
- ------------------------ * To be filed by amendment II-3 ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution nor previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Trust certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison, State of Georgia, on April 14, 1997. APPLE SOUTH FINANCING I By: /s/ JOHN G. MCLEOD, JR. -------------------------------------- John G. McLeod, Jr., Regular Trustee By: /s/ ERICH J. BOOTH -------------------------------------- Erich J. Booth, Regular Trustee By: /s/ LANSING S. PATTERSON -------------------------------------- Lansing S. Patterson, Regular Trustee Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison, State of Georgia, on April 14, 1997. APPLE SOUTH, INC. By: /s/ TOM E. DUPREE, JR. -------------------------------------- Tom E. DuPree, Jr. Chief Executive Officer and Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Tom E. DuPree, Jr. and Erich J. Booth, and each of them, his or her true and lawful attorneys-in-fact and agents with full power and substitution and resubstitution, for and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-3 relating to the resale of trust preferred securities of Apple South Financing I, which Registration Statement also covers the Company's Convertible Subordinated Debentures, underlying shares of Common Stock and Preferred Securities Guarantee and related undertakings, and any and all amendments (or post-effective amendments) thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with such state commissions and other agencies as necessary, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes may lawfully do or cause to be done by virtue hereof. II-5 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------------- ---------------------------------------- ---------------- /s/ TOM E. DUPREE, JR. Chairman of the Board of Directors and April 14, 1997 ---------------------------------------- Chief Executive Officer (principal Tom E. DuPree, Jr. executive officer) /s/ JOHN G. MCLEOD, JR. Director April 14, 1997 ---------------------------------------- John G. McLeod, Jr. /s/ DAVID P. FRAZIER Director April 14, 1997 ---------------------------------------- David P. Frazier /s/ MARC D. REDUS Director April 14, 1997 ---------------------------------------- Marc D. Redus /s/ THOMAS R. WILLIAMS Director April 14, 1997 ---------------------------------------- Thomas R. Williams /s/ JAMES W. ROWE Director April 14, 1997 ---------------------------------------- James W. Rowe /s/ RUTH G. SHAW Director April 14, 1997 ---------------------------------------- Ruth G. Shaw /s/ JOHN L. MOORHEAD Director April 14, 1997 ---------------------------------------- John L. Moorhead /s/ ERICH J. BOOTH Chief Financial Officer and Treasurer April 14, 1997 ---------------------------------------- (Principal Financial Officer and Erich J. Booth Principal Accounting Officer)
II-6 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE - ------------- ------------------------------------------------------------------------------------------ ----- 4.1 Trust Agreement of Apple South Financing I, dated as of February 18, 1997, among Apple South, Inc., First Union National Bank of Georgia, First Union Bank of Delaware and Lansing S. Patterson 4.2 Amended and Restated Declaration of Trust of Apple South Financing I, dated as of March 11, 1997, among Apple South, Inc., as Sponsor, First Union National Bank of Georgia, as Institutional Trustee, First Union Bank of Delaware, as Delaware Trustee, and the Regular Trustees named therein 4.3 Indenture for the 7% Convertible Subordinated Debentures, dated as of March 6, 1997, between Apple South, Inc. and First Union National Bank of Georgia, as Trustee 4.4 Form of $3.50 Term Convertible Security, Series A (included in Exhibit 4.2) 4.5 Form of 7% Convertible Subordinated Debenture (included in Exhibit 4.3) 4.6* Preferred Securities Guarantee Agreement, dated as of March 11, 1997, between Apple South, Inc., as Guarantor, and First Union National Bank of Georgia, as Preferred Guarantee Trustee 4.7 Registration Rights Agreement, dated as of March 11, 1997, among Apple South, Inc., Apple South Financing I, J.P. Morgan Securities Inc., and Smith Barney Inc. 5.1* Opinion of Richards, Layton & Finger as to the legality of the $3.50 Term Convertible Securities, Series A, being registered 5.2* Opinion of Kilpatrick Stockton LLP as to the legality of the 7% Convertible Subordinated Debentures, the Common Stock and the Guarantee being registered 8.1* Opinion of Kilpatrick Stockton LLP relating to certain tax matters 12.1* Calculation of Ratio of Earnings to Fixed Charges 23.1* Consent of Richards, Layton & Finger (contained in Exhibit 5.1) 23.2* Consent of Kilpatrick Stockton LLP (contained in Exhibit 5.2) 23.3* Consent of KPMG Peat Marwick LLP 24.1 Power of Attorney (set forth on signature page to the Registration Statement) 25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Institutional Trustee under the Amended and Restated Declaration of Trust 25.2 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Trustee under the Indenture for the 7% Convertible Subordinated Debentures 25.3 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Union National Bank of Georgia, as Preferred Guarantee Trustee under the Preferred Securities Guarantee Agreement 27.1 Financial Data Schedule
- ------------------------ * To be filed by amendment EX-4.2 2 EX 4.2 / AMENDED & RESTATED DECLARATION OF TRUST -------------------------------- AMENDED AND RESTATED DECLARATION OF TRUST Apple South Financing I Dated as of March 11, 1997 -------------------------------- CROSS REFERENCE TABLE * Certain Sections of the Declaration Relating to Sections 310 Through 318(a), Inclusive, of the Trust Indenture Act of 1939 SECTION OF TRUST INDENTURE ACT SECTION OF DECLARATION - ------------------------------ ---------------------- 310(a) 5.03 310(b) 5.03 310(c) Not Applicable 311(a) 2.01 311(b) 2.01 311(c) Not Applicable 312(a) 2.02 312(b) 2.01 312(c) Not Applicable 313 2.03 314(a) 2.04 314(b) Not Applicable 314(c) 2.05 314(d) Not Applicable 314(e) 2.04 314(f) Not Applicable 315(a) 3.09 315(b) 2.07 315(c) 3.09 315(d) 10.02 315(e) 2.01 316(a) 2.06 316(b) 2.01 316(c) 2.02 3.06 317(a) 3.08 317(b) 3.08 318(a) 2.01 * This Cross Reference Table does not, for any purpose, constitute part of the Declaration and shall not effect the interpretation of any of its terms or provisions. TABLE OF CONTENTS PAGE ---- ARTICLE 1 INTERPRETATION AND DEFINITION . . . . . . . . . . . . . . . . 1 SECTION 1.1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . 9 SECTION 2.1. TRUST INDENTURE ACT; APPLICATION. . . . . . . . . . . 9 SECTION 2.2. LIST OF HOLDERS OF SECURITIES . . . . . . . . . . . . 9 SECTION 2.3. REPORTS BY THE INSTITUTIONAL TRUSTEE. . . . . . . . . 10 SECTION 2.4. PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE . . . . . . 10 SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. . . 11 SECTION 2.6. EVENTS OF DEFAULT; WAIVER . . . . . . . . . . . . . . 11 SECTION 2.7. EVENT OF DEFAULT; NOTICE. . . . . . . . . . . . . . . 13 ARTICLE 3 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.1. NAME. . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.2. OFFICE. . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 3.3. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 3.4. AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 3.5. TITLE TO PROPERTY OF THE TRUST. . . . . . . . . . . . 14 SECTION 3.6. POWERS AND DUTIES OF THE REGULAR TRUSTEES . . . . . . 15 SECTION 3.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES. 18 SECTION 3.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE. . . . 19 SECTION 3.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE . . . . . . . . . . . . . . . . 22 SECTION 3.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE . . . . . . . 24 SECTION 3.11. DELAWARE TRUSTEE. . . . . . . . . . . . . . . . . . . 26 SECTION 3.12. EXECUTION OF DOCUMENTS. . . . . . . . . . . . . . . . 27 SECTION 3.13. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . 27 SECTION 3.14. DURATION OF TRUST . . . . . . . . . . . . . . . . . . 27 SECTION 3.15. MERGERS . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 4 SPONSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 4.1. SPONSOR'S PURCHASE OF COMMON SECURITIES . . . . . . . 29 SECTION 4.2. RESPONSIBILITIES OF THE SPONSOR . . . . . . . . . . . 29 ARTICLE 5 TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5.1. NUMBER OF TRUSTEES. . . . . . . . . . . . . . . . . . 31 SECTION 5.2. DELAWARE TRUSTEE. . . . . . . . . . . . . . . . . . . 31 SECTION 5.3. INSTITUTIONAL TRUSTEE; ELIGIBILITY. . . . . . . . . . 31 SECTION 5.4. CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY. . . . . . . . . . . . . . 32 SECTION 5.5. REGULAR TRUSTEES. . . . . . . . . . . . . . . . . . . 33 SECTION 5.6. DELAWARE TRUSTEE. . . . . . . . . . . . . . . . . . . 33 SECTION 5.7. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES. . . 33 SECTION 5.8. VACANCIES AMONG TRUSTEES. . . . . . . . . . . . . . . 35 SECTION 5.9. EFFECT OF VACANCIES . . . . . . . . . . . . . . . . . 35 SECTION 5.10. MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 5.11. DELEGATION OF POWER . . . . . . . . . . . . . . . . . 36 SECTION 5.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 6 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 6.1. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 7 ISSUANCE OF SECURITIES. . . . . . . . . . . . . . . . . . . . 37 SECTION 7.1. GENERAL PROVISIONS REGARDING SECURITIES . . . . . . . 37 SECTION 7.2. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . 38 SECTION 7.3. FORM AND DATING . . . . . . . . . . . . . . . . . . . 39 SECTION 7.4. PAYING AGENT AND CONVERSION AGENT . . . . . . . . . . 39 i ARTICLE 8 DISSOLUTION OF TRUST. . . . . . . . . . . . . . . . . . . . . 40 SECTION 8.1. DISSOLUTION OF TRUST. . . . . . . . . . . . . . . . . 40 ARTICLE 9 TRANSFER OF INTERESTS . . . . . . . . . . . . . . . . . . . . 41 SECTION 9.1. TRANSFER OF SECURITIES. . . . . . . . . . . . . . . . 41 SECTION 9.2. TRANSFER OF CERTIFICATES. . . . . . . . . . . . . . . 44 SECTION 9.3. DEEMED SECURITY HOLDERS . . . . . . . . . . . . . . . 45 SECTION 9.4. BOOK ENTRY INTERESTS. . . . . . . . . . . . . . . . . 45 SECTION 9.5. NOTICES TO CLEARING AGENCY. . . . . . . . . . . . . . 48 SECTION 9.6. APPOINTMENT OF SUCCESSOR CLEARING AGENCY. . . . . . . 48 SECTION 9.7. DEFINITIVE TRUST PREFERRED SECURITY CERTIFICATES. . . 48 SECTION 9.8. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES . . 49 ARTICLE 10 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS. . . . . . . . . . . . . . . . . . 50 SECTION 10.1. LIABILITY . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 10.2. EXCULPATION . . . . . . . . . . . . . . . . . . . . . 51 SECTION 10.3. FIDUCIARY DUTY. . . . . . . . . . . . . . . . . . . . 51 SECTION 10.4. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 52 SECTION 10.5. OUTSIDE BUSINESS. . . . . . . . . . . . . . . . . . . 56 ARTICLE 11 ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.1. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.2. CERTAIN ACCOUNTING MATTERS. . . . . . . . . . . . . . 57 SECTION 11.3. BANKING . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 11.4. WITHHOLDING . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE 12 AMENDMENTS AND MEETINGS. . . . . . . . . . . . . . . . . . . 58 SECTION 12.1. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . 58 SECTION 12.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT . . . . . . . . . . . . . . . . . . . 61 ARTICLE 13 REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 13.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 13.2. REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE. . 63 ARTICLE 14 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 14.1. NOTICES . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 14.2. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 65 SECTION 14.3. INTENTION OF THE PARTIES. . . . . . . . . . . . . . . 65 SECTION 14.4. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 14.5. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . 66 SECTION 14.6. PARTIAL ENFORCEABILITY. . . . . . . . . . . . . . . . 66 SECTION 14.7. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . 66 ANNEX I TERMS OF SECURITIES . . . . . . . . . . . . . . . . . I-1 EXHIBIT A-1 FORM OF TRUST PREFERRED SECURITY CERTIFICATE. . . . . . . . . . . . . . . . . A1-1 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE . . . . . . . . . . . . . . . . . . . . . A2-1 EXHIBIT B SPECIMEN OF DEBENTURE . . . . . . . . . . . . . . . . B-1 EXHIBIT C PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . C-1 ii AMENDED AND RESTATED DECLARATION OF TRUST OF APPLE SOUTH FINANCING I March 11, 1997 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of March 11, 1997, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, certain of the Trustees and the Sponsor established Apple South Financing I (the "Trust"), a trust under the Business Trust Act (as defined herein) pursuant to a Trust Agreement, dated as of February 18, 1997 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on February 18, 1997, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures of the Sponsor; WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE 1 INTERPRETATION AND DEFINITION SECTION 1.1. DEFINITIONS. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.01; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "AFFILIATE" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "AGENT" means any Paying Agent or Conversion Agent. "AUTHORIZED OFFICER" of a Person means any Person that is authorized to bind such Person. "BOOK ENTRY INTEREST" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.04. "BUSINESS DAY" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York or Atlanta, Georgia are permitted or required by any applicable law to close. "BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code, 12 DEL. C. Section 3801 ET SEQ., as it may be amended from time to time, or any successor legislation. "CERTIFICATE" means a Common Security Certificate or a Trust Preferred Security Certificate. 2 "CLEARING AGENCY" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Trust Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Trust Preferred Securities. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means March 11, 1997. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "COMMISSION" means the Securities and Exchange Commission. "COMMON SECURITY" has the meaning specified in Section 7.01. "COMMON SECURITIES GUARANTEE" means the guarantee agreement to be dated as of March 11, 1997 of the Sponsor in respect of the Common Securities. "COMMON SECURITY CERTIFICATE" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "COMPANY INDEMNIFIED PERSON" means (a) any Regular Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "CONVERSION AGENT" has the meaning specified in Section 7.04. "CORPORATE TRUST OFFICE" means the office of the Institutional Trustee at which the corporate trust business of the Preferred Guarantee Trustee (as defined in the Preferred Securities Guarantee Agreement dated as of March 11, 1997 between the Sponsor and First Union National Bank of Georgia) shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 999 Peachtree Street, N.E., Suite 1100, Atlanta, Georgia, 30309. 3 "COVERED PERSON" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "DEBENTURE TRUSTEE" means First Union National Bank of Georgia, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "DEBENTURES" means the Debentures to be issued by the Sponsor under the Indenture to be held by the Institutional Trustee, a specimen certificate for such series of Debentures being Exhibit B. "DELAWARE TRUSTEE" has the meaning set forth in Section 5.02. "DEFINITIVE TRUST PREFERRED SECURITY CERTIFICATES" has the meaning set forth in Section 9.04. "DISTRIBUTION" means a distribution payable to Holders of Securities in accordance with Section 6.01. "DTC" means The Depository Trust Company, the initial Clearing Agency. "EVENT OF DEFAULT" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in Section 10.04(b). "FISCAL YEAR" has the meaning set forth in Section 11.01. "GLOBAL CERTIFICATE" has the meaning set forth in Section 9.04. "HOLDER" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "INDEMNIFIED PERSON" means a Company Indemnified Person or a Fiduciary Indemnified Person. 4 "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INDENTURE" means the Indenture dated as of March 6, 1997, between the Sponsor and the Debenture Trustee. "INSTITUTIONAL TRUSTEE" means the Trustee (other than the Delaware Trustee) meeting the eligibility requirements set forth in Section 5.03. "INSTITUTIONAL TRUSTEE ACCOUNT" has the meaning set forth in Section 3.08(c). "INVESTMENT COMPANY" means an investment company as defined in the Investment Company Act. "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "INVESTMENT COMPANY EVENT" has the meaning set forth in Annex I hereto. "LEGAL ACTION" has the meaning set forth in Section 3.06(g). "MAJORITY IN LIQUIDATION AMOUNT" of the Securities means, except as provided in the terms of the Trust Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Trust Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "MINISTERIAL ACTION" has the meaning set forth in the terms of the Securities as set forth in Annex I. "OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; 5 (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "PAYING AGENT" has the meaning specified in Sections 3.08(h) and 7.04. "PERMANENT REGULATION S GLOBAL SECURITY" has the meaning set forth in Section 2.04(b). "PERSON" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "PORTAL MARKET" means the Private Offerings, Resales and Trading through Automated Linkages Market operated by the National Association of Securities Dealers, Inc. (or any successor thereto). "PURCHASE AGREEMENT" means the Purchase Agreement for the offering and sale of Trust Preferred Securities substantially in the form of Exhibit C. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "QUORUM" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement dated as of March 11, 1997 among the Sponsor, the Trust and the Initial Purchasers named in Schedule I of the Purchase Agreement. "REGULAR TRUSTEE" has the meaning set forth in Section 5.01(b). "REGULATION S" means Regulation S under the Securities Act. "REGULATION S GLOBAL SECURITY" has the meaning specified in Section 9.04(b). 6 "REGULATION S SECURITIES EXCHANGE DATE" has the meaning set forth in Section 9.04(b). "RELATED PARTY" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "RESPONSIBLE OFFICER" means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "RESTRICTED SECURITY" has the meaning specified in Section 9.01(d). "RULE 144" means Rule 144 as promulgated under the Securities Act. "RULE 144A" means Rule 144A as promulgated under the Securities Act. "RULE 144(k)" means Rule 144(k) as promulgated under the Securities Act. "RULE 3a-5" means Rule 3a-5 under the Investment Company Act. "SECURITIES" means the Common Securities and the Trust Preferred Securities. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time or any successor legislation. "SECURITIES GUARANTEES" means the Common Securities Guarantee and the Trust Preferred Securities Guarantee. "SPECIAL EVENT" has the meaning set forth in Annex I hereto. "SPONSOR" means Apple South, Inc. ("Apple South"), a Georgia corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "SUCCESSOR INSTITUTIONAL TRUSTEE" has the meaning set forth in Section 5.07. "SUPER MAJORITY" has the meaning set forth in Section 2.06(a)(ii). 7 "TAX EVENT" has the meaning set forth in Annex I hereto. "TEMPORARY REGULATION S GLOBAL SECURITY" has the meaning set forth in Section 9.04(b). "TRANSFER RESTRICTION TERMINATION DATE" means the first date on which the Securities and any Common Stock issued or issuable upon the conversion or exchange thereof (other than (i) Securities acquired by the Trust or any Affiliate thereof and (ii) Common Stock issued upon the conversion or exchange of any Security described in clause (i) above) may be sold pursuant to Rule 144(k). "10% IN LIQUIDATION AMOUNT OF THE SECURITIES" means, except as provided in the terms of the Trust Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Trust Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "TREASURY REGULATIONS" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "TRUST PREFERRED SECURITIES GUARANTEE" means the guarantee agreement to be dated as of March 11, 1997, of the Sponsor in respect of the Trust Preferred Securities. "TRUST PREFERRED SECURITY" has the meaning specified in Section 7.01. "TRUST PREFERRED SECURITY BENEFICIAL OWNER" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). 8 "TRUST PREFERRED SECURITY CERTIFICATE" means a certificate representing a Trust Preferred Security substantially in the form of Exhibit A-1. "TRUSTEE" or "TRUSTEES" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "144A GLOBAL SECURITY" has the meaning specified in Section 9.04(b). ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1. TRUST INDENTURE ACT; APPLICATION. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Institutional Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2. LIST OF HOLDERS OF SECURITIES. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Institutional Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Institutional Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, PROVIDED that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List 9 of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Institutional Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Institutional Trustee. The Institutional Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) PROVIDED that the Institutional Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Institutional Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3. REPORTS BY THE INSTITUTIONAL TRUSTEE. Within 60 days after May 15 of each year, the Institutional Trustee shall provide to the Holders of the Trust Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Institutional Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Institutional Trustee is for informational purposes only and the Institutional Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Sponsor's compliance with any of its covenants hereunder (as to which the Institutional Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or 10 opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. EVENTS OF DEFAULT; WAIVER. (a) The Holders of a Majority in liquidation amount of Trust Preferred Securities may, by vote, on behalf of the Holders of all of the Trust Preferred Securities, waive any past Event of Default in respect of the Trust Preferred Securities and its consequences, PROVIDED that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Trust Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.06(a) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Trust Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Trust Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Trust Preferred Securities of an Event of Default with respect to the Trust Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, PROVIDED that, if the underlying Event of Default under the Indenture: 11 (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.06(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.06(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; PROVIDED further, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Institutional Trustee will be deemed to be acting solely on behalf of the Holders of the Trust Preferred Securities and only the Holders of the Trust Preferred Securities will have the right to direct the Institutional Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.06(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Institutional Trustee at the direction of the Holders of the Trust Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.06(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7. EVENT OF DEFAULT; NOTICE. 12 (a) The Institutional Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities actually known to a Responsible Officer of the Institutional Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.07(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); PROVIDED that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures, the Institutional Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Institutional Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Institutional Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 501(1) and 501(2) of the Indenture; or (ii) any default as to which the Institutional Trustee shall have received written notice or of which a Responsible Officer of the Institutional Trustee charged with the administration of the Declaration shall have actual knowledge. ARTICLE 3 ORGANIZATION SECTION 3.1. NAME. The Trust is named "Apple South Financing I" as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities and the other Trustees. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2. OFFICE. The address of the principal office of the Trust is c/o Apple South, Inc., Hancock at Washington, Madison, Georgia 30650-1304. On ten Business Days 13 written notice to the Holders of Securities and the other Trustees, the Regular Trustees may designate another principal office. SECTION 3.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 3.4. AUTHORITY. Subject to the limitations provided in this Declaration and to the specific duties of the Institutional Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Institutional Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 3.08 with respect to the Debentures and the Institutional Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6. POWERS AND DUTIES OF THE REGULAR TRUSTEES. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Trust Preferred Securities and the Common Securities in accordance with this Declaration; PROVIDED, however, that the Trust may issue no more than one series of Trust Preferred Securities and no more than one series of Common Securities, and, PROVIDED further, that there shall be no 14 interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a simultaneous issuance of both Trust Preferred Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Trust Preferred Securities, at the direction of the Sponsor, to: (i) prepare and execute, if necessary, an offering memorandum (the "Offering Memorandum") in preliminary and final form prepared by the Sponsor, in relation to the offering and sale of Trust Preferred Securities to qualified institutional buyers in reliance on Rule 144A under the Securities Act, to Institutional Accredited Investors and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act; (ii) execute and file an application, prepared by the Sponsor, to the PORTAL Market; (iii) execute and deliver letters, documents, or instruments with DTC relating to the Trust Preferred Securities; (iv) execute and file with the Commission, at such time as determined by the Sponsor, a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Trust Preferred Securities under Section 12(b) of the Exchange Act; (v) execute and file with the Commission a registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the resale from time to time of the Trust Preferred Securities; and (vi) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Trust Preferred Securities in any State in which the Sponsor has determined to qualify or register such Trust Preferred Securities for sale or resale, as the case may be; (c) to acquire the Debentures with the proceeds of the sale of the Trust Preferred Securities and the Common Securities; PROVIDED, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in 15 the name of the Institutional Trustee for the benefit of the Holders of the Trust Preferred Securities and the Holders of Common Securities; (d) to give the Sponsor and the Institutional Trustee prompt written notice of the occurrence of a Special Event; PROVIDED that the Regular Trustees shall consult with the Sponsor and the Institutional Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) subject to Section 2(c) of Annex I hereto, to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316 (c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Trust Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.08(e), the Institutional Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Sponsor of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; 16 (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Trust Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.06, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (iii) cooperating with the Sponsor to ensure that the Debentures will be treated as indebtedness of the Sponsor for United States federal income tax purposes, PROVIDED that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.06 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.03, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.03. Subject to this Section 3.06, the Regular Trustees shall have none of the powers or the authority of the Institutional Trustee set forth in Section 3.08. Any expenses incurred by the Regular Trustees pursuant to this Section 3.06 shall be reimbursed by the Sponsor. 17 SECTION 3.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES. (a) The Trust shall not, and the Regular Trustees and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Regular Trustees and the Institutional Trustee shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as provided in this Declaration or Annex I, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will not be classified as a grantor trust. SECTION 3.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be 18 appointed as Institutional Trustee in accordance with Section 5.07. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Institutional Trustee does not also act as Delaware Trustee). (c) The Institutional Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Institutional Trustee Account") in the name of and under the exclusive control of the Institutional Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Institutional Trustee Account and make payments to the Holders of the Trust Preferred Securities and Holders of the Common Securities from the Institutional Trustee Account in accordance with Section 6.01. Funds in the Institutional Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Institutional Trustee Account shall be an account that is maintained with a banking institution (which may be with the Institutional Trustee) the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the Trust Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Trust Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of Distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the Distribution of the Debentures to Holders of Securities upon the occurrence of a Special Event (as defined in Annex I) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. 19 (d) The Institutional Trustee shall take all actions and perform such duties as may be specifically required of the Institutional Trustee pursuant to the terms of the Securities. (e) The Institutional Trustee shall take any Legal Action which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or the Institutional Trustee's duties and obligations under this Declaration or the Trust Indenture Act; PROVIDED however, that the Holders of a majority in liquidation amount of the Trust Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or to direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee to exercise the remedies available to it as a holder of the Convertible Debentures. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, a Holder of Trust Preferred Securities, to the fullest extent permitted by law, may institute a legal proceeding directly against the Sponsor to enforce the Institutional Trustee's rights under the Convertible Debentures without first instituting any legal proceeding against the Institutional Trustee or any other Person; PROVIDED further, that, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Sponsor to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Trust Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of Trust Securities to the extent of any payment made by the Sponsor to such Holder of Trust Preferred Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Trust Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. (f) The Institutional Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or 20 (ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 5.07. (g) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer of the Institutional Trustee occurs and is continuing, the Institutional Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Institutional Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Institutional Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Institutional Trustee. (i) Subject to this Section 3.08(i), the Institutional Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.06. The Institutional Trustee must exercise the powers set forth in this Section 3.08 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.03, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.03. SECTION 3.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE. (a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants or obligations shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06(c)) of which a Responsible Officer of the Institutional Trustee has actual knowledge, the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 21 (b) No provision of this Declaration shall be construed to relieve the Institutional Trustee from liability for its own action or its own failure to act in accordance with its obligations under the Trust Indenture Act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Institutional Trustee shall be determined solely by the express provisions of this Declaration and the Institutional Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Institutional Trustee; and (B) in the absence of bad faith on the part of the Institutional Trustee, the Institutional Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Institutional Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Institutional Trustee, the Institutional Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Institutional Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee failed to perform in accordance with its obligations under the Trust Indenture Act in ascertaining the pertinent facts; (iii) the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration; 22 (iv) no provision of this Declaration shall require the Institutional Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Institutional Trustee against such risk or liability is not reasonably assured to it; (v) the Institutional Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Institutional Trustee Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration and the Trust Indenture Act; (vi) the Institutional Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Institutional Trustee Account maintained by the Institutional Trustee pursuant to Section 3.08(c)(i) and except to the extent otherwise required by law; and (viii) the Institutional Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. (a) Subject to the provisions of Section 3.09: (i) the Institutional Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, 23 direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; (v) the Institutional Trustee may consult with counsel of its selection or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Institutional Trustee security and indemnity, reasonably satisfactory to the Institutional Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Institutional Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Institutional Trustee, PROVIDED that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the 24 Institutional Trustee, upon the occurrence of an Event of Default, of its obligation to act in accordance with the requirements of the Trust Indenture Act; (vii) the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Institutional Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive written instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Institutional Trustee (i) may request written instructions from the Holders of the Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Institutional Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; (xi) except as otherwise expressly provided by this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and 25 (xii) the Institutional Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty. SECTION 3.11. DELAWARE TRUSTEE. Notwithstanding any other provision of this Declaration other than Section 5.02, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties or liabilities of the Regular Trustees or the Institutional Trustee described in this Declaration. Except as set forth in Section 5.02, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12. EXECUTION OF DOCUMENTS. Except as otherwise required by the Business Trust Act or any applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.06. SECTION 3.13. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14. DURATION OF TRUST. The Trust, unless dissolved pursuant to the provisions of Article 8 hereof, shall have existence for thirty (30) years from the Closing Date. 26 SECTION 3.15. MERGERS. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described in Section 3.15(b) and (c) and in Annex I hereto. (b) The Trust may, with the consent of the Regular Trustees and without the consent of the Holders of the Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; PROVIDED that: (i) such successor entity ( the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Trust Preferred Securities other securities having substantially the same terms as the Trust Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Trust Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Sponsor expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Institutional Trustee as the holder of the Debentures; (iii) the Trust Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Trust Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of such Holders' 27 interests in the Trust Preferred Securities as a result of such merger consolidation, amalgamation or replacement); (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Securities Guarantees. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. (d) The Regular Trustees shall furnish to the Delaware Trustee at least five Business Days prior notice of the consummation of any merger, consolidation, amalgamation, or replacement; provided, however, that failure to provide such notice shall not affect the validity of any such transaction. 28 ARTICLE 4 SPONSOR SECTION 4.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date the Sponsor will purchase all of the Common Securities issued by the Trust, in an amount at least equal to 1% of the capital of the Trust, at the same time as the Trust Preferred Securities are sold. SECTION 4.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Trust Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) prepare and execute, if necessary, the Offering Memorandum in preliminary and final form, in relation to the offering and sale by the Trust of Trust Preferred Securities to qualified institutional buyers in reliance on Rule 144A under the Securities Act, to Institutional Accredited Investors and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act; (b) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Trust Preferred Securities and the Trust Preferred Securities Guarantees, including any amendments thereto; (c) prepare for execution and filing by the Trust of an application, prepared by the Sponsor, to the PORTAL Market; (d) prepare for execution and filing by the Trust of documents, or instruments to be delivered to DTC relating to the Trust Preferred Securities; (e) prepare for execution and filing by the Trust of a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Trust Preferred Securities under Section 12(b) of the Exchange Act; (f) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Trust Preferred Securities and the Trust Preferred Securities Guarantees and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and 29 prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (g) to negotiate, and execute, the terms of the Purchase Agreement providing for the sale of the Trust Preferred Securities; and (h) to negotiate, and execute, the terms of the Registration Rights Agreement providing for, among other things, the registration under the Securities Act of resales from time to time of the Trust Preferred Securities. ARTICLE 5 TRUSTEES SECTION 5.1. NUMBER OF TRUSTEES. The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; PROVIDED however, that the number of Trustees shall in no event be less than two (2); PROVIDED further that (1) one Trustee shall be the Delaware Trustee (as defined below); (2) there shall be at least one Trustee who is an employee or officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (3) one Trustee shall be the Institutional Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. SECTION 5.2. DELAWARE TRUSTEE. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or 30 (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law; PROVIDED that, if the Institutional Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Institutional Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3. INSTITUTIONAL TRUSTEE; ELIGIBILITY. (a) There shall at all times be one Person which shall act as Institutional Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a Person organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.03(a)(ii), the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Institutional Trustee shall cease to be eligible to so act under Section 5.03(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 5.07(c). (c) If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Institutional Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Trust Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. 31 (e) The initial Institutional Trustee shall be: First Union National Bank of Georgia. SECTION 5.4. CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY. Each Regular Trustee and the Delaware Trustee (unless the Institutional Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5. REGULAR TRUSTEES. The initial Regular Trustees shall be: Eric J. Booth, Lansing S. Patterson and Benjamin A. Waites. (a) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (b) Except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.06. (c) a Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 3.06. SECTION 5.6. DELAWARE TRUSTEE. The initial Delaware Trustee shall be: First Union Bank of Delaware. SECTION 5.7. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES. (a) Subject to Section 5.07(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and 32 (ii) after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities. (b) (i) the Trustee that acts as Institutional Trustee shall not be removed in accordance with Section 5.07(a) until a successor Institutional Trustee (a "Successor Institutional Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Institutional Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.07(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.02 and 5.04 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; PROVIDED, however, that: (i) No such resignation of the Trustee that acts as the Institutional Trustee shall be effective: (A) until a Successor Institutional Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Institutional Trustee and delivered to the Trust, the Sponsor and the resigning Institutional Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by 33 such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Institutional Trustee as the case may be if the Institutional Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.07. (e) If no Successor Institutional Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.07 within 30 days after delivery of an instrument of resignation or removal, the Institutional Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Institutional Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. (f) No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.8. VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.01, or if the number of Trustees is increased pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.07. SECTION 5.9. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.07, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. 34 SECTION 5.10. MEETINGS. If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustee or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, PROVIDED that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. SECTION 5.11. DELEGATION OF POWER. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.06; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 5.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. 35 Any corporation, bank or Person into which the Institutional Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation, bank or Person resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation, bank or Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional Trustee or the Delaware Trustee, as the case may be, hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, PROVIDED such corporation, bank or Person shall be otherwise qualified and eligible under this Article. ARTICLE 6 DISTRIBUTIONS SECTION 6.1. DISTRIBUTIONS. Holders shall receive Distributions (as defined herein) in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Trust Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Sponsor makes a payment of interest (including Compound Interest (as defined in the Indenture) and Additional Interest (as defined in the Indenture)), premium and/or principal on the Debentures held by the Institutional Trustee (the amount of any such payment being a "Payment Amount"), the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE 7 ISSUANCE OF SECURITIES SECTION 7.1. GENERAL PROVISIONS REGARDING SECURITIES. (a) The Regular Trustees shall on behalf of the Trust issue one class of convertible preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Trust 36 Preferred Securities") and one class of convertible common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities"). The Trust shall issue no securities or other interests in the assets of the Trust other than the Trust Preferred Securities and the Common Securities. (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Trust Preferred Securities as provided in this Declaration, the Trust Preferred Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (d) Every Person, by virtue of having become a Holder or a Trust Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 7.2. EXECUTION AND AUTHENTICATION. (a) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. (b) One Regular Trustee shall sign the Trust Preferred Securities for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Securities, be a manual signature. A Trust Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Institutional Trustee. The signature shall be conclusive evidence that the Trust Preferred Security has been authenticated under this Declaration. Upon a written order of the Trust signed by one Regular Trustee, the Institutional Trustee shall authenticate the Trust Preferred Securities for original issue. 37 The Institutional Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Trust Preferred Securities. An authenticating agent may authenticate Trust Preferred Securities whenever the Institutional Trustee may do so. Each reference in this Declaration to authentication by the Institutional Trustee includes authentication by such agent. An authenticating agent has the same rights as the Institutional Trustee to deal with the Company or an Affiliate of the Company. SECTION 7.3. FORM AND DATING. The Trust Preferred Securities and the Institutional Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage (PROVIDED that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Trust Preferred Security Certificate shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. SECTION 7.4. PAYING AGENT AND CONVERSION AGENT. In the event that the Trust Preferred Securities are not in book-entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where the Trust Preferred Securities may be presented for payment ("Paying Agent"). The Trust shall maintain an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and the Conversion Agent and may appoint one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Trust may change any Paying Agent or Conversion Agent without prior notice to any Holder. The Trust shall notify 38 the Institutional Trustee in writing of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent or Conversion Agent, the Institutional Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent or Conversion Agent. The Trust shall act as Paying Agent and Conversion Agent for the Common Securities. The Paying Agent and Conversion Agent shall be entitled to the rights and protections extended to the Institutional Trustee when acting in such capacity. The Institutional Trustee is hereby initially appointed as Conversion Agent for the Trust Preferred Securities. ARTICLE 8 DISSOLUTION OF TRUST SECTION 8.1. DISSOLUTION OF TRUST. (a) The Trust shall dissolve: (i) upon the bankruptcy of the Sponsor or the holder of the Common Securities; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the Holder of the Common Securities; the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of at least a majority in liquidation amount of the Securities affected thereby voting together as a single class to file such certificate of cancellation, or the revocation of the charter of the Sponsor or the Holder of the Common Securities and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and, after satisfaction of liabilities of creditors (whether by payment or reasonable provision for payment), all of the 39 Debentures held by the Institutional Trustee shall have been distributed to the Holders of Securities in exchange for all of the Securities; (vi) upon the distribution of the Sponsor's common stock to all Securities Holders upon conversion of all outstanding Trust Preferred Securities; (vii) the expiration of the term of the Trust on March 1, 2027; or (viii) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.01(a), after satisfaction of liabilities of creditors (whether by payment or reasonable provision for payment), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Sections 3.09 and 3.10 and Article 10 shall survive the dissolution and termination of the Trust. ARTICLE 9 TRANSFER OF INTERESTS SECTION 9.1. TRANSFER OF SECURITIES. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article 9, Trust Preferred Securities shall be freely transferable. (c) Subject to this Article 9, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; PROVIDED that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would not be classified for United States federal income tax purposes as a grantor trust; and 40 (ii) the Trust would be an Investment Company required to register under the Investment Company Act or the transferee would become an Investment Company required to register under the Investment Company Act. (d) Each Security that bears or is required to bear the legend set forth in this Section 9.01(d) (a "Restricted Security") shall be subject to the restrictions on transfer provided in the legend set forth in this Section 9.01(d), unless such restrictions on transfer shall be waived by the written consent of the Regular Trustees, and the Holder of each Restricted Security, by such securityholder's acceptance thereof, agrees to be bound by such restrictions on transfer. As used in this Section 9.01(d) and in Section 9.01(e), the term "transfer" encompasses any sale, pledge, transfer or other disposition of any Restricted Security. Prior to the Transfer Restriction Termination Date, the 144A Global Security, Temporary Regulation S Global Security, each Definitive Trust Preferred Security and any certificate evidencing Common Stock issued upon conversion thereof shall bear a legend in substantially the following form, unless otherwise agreed by the Regular Trustees (with written notice thereof to the Indenture Trustee): THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS TECONS IN AN OFFSHORE TRANSACTION (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO APPLE SOUTH OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN 41 INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, THE TRANSFEROR MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE INSTITUTIONAL TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE TRANSFEROR MUST, BEFORE SUCH TRANSFER, FURNISH TO THE INSTITUTIONAL TRUSTEE AND THE TRUST, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE INSTITUTIONAL TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" 42 AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Following the Transfer Restriction Termination Date or the sale of a Security or Common Stock for which a Security has been exchanged pursuant to an effective registration statement or Rule 144, any Security or security issued in exchange or substitution therefor (other than (i) Securities acquired by the Sponsor or any Affiliate and (ii) Common Stock issued upon the conversion or exchange of any Security described in clause (i) above) may upon surrender of such Security for exchange to any Regular Trustee on behalf of the Trust in accordance with the provisions of this Section 9.01(d), be exchanged for a new Security or Securities, of like tenor and aggregate liquidation amount, which shall not bear the restrictive legend required by this Section 9.01(d). Any Trust Preferred Security or Common Stock issued upon the conversion or exchange of a Trust Preferred Security that, prior to the Transfer Restriction Termination Date, is purchased or owned by the Sponsor or any Affiliate thereof may not be resold by the Sponsor or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Trust Preferred Securities or Common Stock, as the case may be, no longer being "restricted securities" (as defined under Rule 144). SECTION 9.2. TRANSFER OF CERTIFICATES. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.3. DEEMED SECURITY HOLDERS. 43 The Regular Trustees and the Institutional Trustee may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4. BOOK ENTRY INTERESTS. (a) So long as Trust Preferred Securities are eligible for book-entry settlement with the Clearing Agency or unless otherwise required by law, all Trust Preferred Securities that are so eligible may be represented by one or more fully registered Trust Preferred Security Certificates (each a "Global Certificate") in global form to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Trust Preferred Security Beneficial Owner will receive a definitive Trust Preferred Security Certificate representing such Trust Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.07 below. The transfer and exchange of beneficial interests in any such Security in global form shall be effected through the Clearing Agency in accordance with this Declaration and the procedures of the Clearing Agency therefor. (b) Trust Preferred Securities that upon initial issuance are beneficially owned by QIBs may, at the option of the Trust, be represented by a Global Certificate (a "144A Global Security"), and Trust Preferred Securities that upon initial issuance are beneficially owned by Non-U.S. Persons may, at the option of the Trust, be represented by another Global Certificate (a "Temporary Regulation S Global Security"). At any time on or after April 20, 1997 (the "Regulation S Securities Exchange Date"), a single permanent Global Certificate without the legend set forth in Section 9.01(d) (the "Permanent Regulation S Global Security", and together with the Temporary Regulation S Global Security, the "Regulation S Global Securities") shall be deposited with the Clearing Agency, and the Institutional Trustee shall make endorsements reflecting a decrease in the principal amount of the Temporary Regulation S Global Security in an amount equal to the principal amount of the beneficial interest in the Temporary Regulation S Global Security transferred. Transfers of interests in the Trust Preferred Securities between any 144A Global Security and any Regulation S Global Security will be made in accordance with the standing instructions and procedures of the Clearing Agency and its participants. The Institutional Trustee shall make appropriate 44 endorsements to reflect increases or decreases in the amount of such Trust Preferred Securities in global form to reflect any such transfers. Except as provided below, beneficial owners of a Trust Preferred Security in global form shall not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered Holders of such Trust Preferred Security in global form. (c) So long as the Trust Preferred Securities are eligible for book-entry settlement and to the extent Trust Preferred Securities held by QIBs or Non-U.S. Persons, as the case may be, are held in a global form, or unless otherwise required by law, upon any transfer of a Definitive Trust Preferred Security to a QIB in accordance with Rule 144A or to a Non-U.S. Person in accordance with Regulation S, unless otherwise requested by the transferor, and upon receipt of the Definitive Trust Preferred Security being so transferred, together with a certification from the transferor that the transfer is being made in compliance with Rule 144A or Regulation S, as the case may be (or other evidence satisfactory to the Institutional Trustee on behalf of the Trust), the Institutional Trustee on behalf of the Trust shall make an endorsement on any 144A Global Security or any Regulation S Global Security, as the case may be, to reflect an increase in the number of Trust Preferred Securities represented by such Global Certificate, and the Institutional Trustee on behalf of the Trust shall cancel such Definitive Trust Preferred Security in accordance with the standing instructions and procedures of the Clearing Agency, the number of Trust Preferred Securities represented by such Trust Preferred Security in global form to be increased accordingly; PROVIDED that no Definitive Trust Preferred Security, or portion thereof, in respect of which the Trust or an Affiliate of the Trust held any beneficial interest shall be included in such Trust Preferred Security in global form until such Definitive Trust Preferred Security is freely tradable in accordance with Rule 144(k); PROVIDED FURTHER that the Trust shall issue Trust Preferred Securities in definitive form upon any transfer of a beneficial interest in the Trust Preferred Security in global form to the Company or any Affiliate of the Company. (d) Any Global Certificate may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Declaration as may be required by the Clearing Agency, by any national securities exchange or by the National Association of Securities Dealers, Inc. in order for the Trust Preferred Securities to be tradeable on the PORTAL Market or as may be required for the Trust Preferred Securities to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with 45 the rules and regulations of any securities exchange upon which the Trust Preferred Securities may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Trust Preferred Securities are subject. (e) Unless and until definitive, fully registered Trust Preferred Security Certificates (the "Definitive Trust Preferred Security Certificates") have been issued to the Trust Preferred Security Beneficial Owners of a Trust Preferred Security in global form pursuant to Section 9.07: (i) the provisions of this Section 9.04 shall be in full force and effect with respect to such Trust Preferred Securities; (ii) the Regular Trustees and the Institutional Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of such Trust Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Trust Preferred Security Beneficial Owners of such Trust Preferred Securities; (iii) to the extent that the provisions of this Section 9.04 conflict with any other provisions of this Declaration, the provisions of this Section 9.04 shall control; and (iv) the rights of the Trust Preferred Security Beneficial Owners of Trust Preferred Securities in global form shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Trust Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants. The Clearing Agency will make book-entry transfers among Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. (f) Notwithstanding any other provisions of this Declaration (other than the provisions set forth in this Section 9.04(f)), a Trust Preferred Security in global form may not be transferred as a whole except by the Clearing Agency to a nominee of the Clearing Agency or by a nominee of the Clearing Agency to the Clearing Agency or another nominee to a successor Clearing Agency or a nominee of such successor Clearing Agency. SECTION 9.5. NOTICES TO CLEARING AGENCY. 46 Whenever a notice or other communication to the Trust Preferred Security Holders is required under this Declaration, unless and until Definitive Trust Preferred Security Certificates shall have been issued, to the Trust Preferred Security Beneficial Owners of a Trust Preferred Security in global form pursuant to Section 9.07, the Regular Trustees shall give all such notices and communications specified herein to be given to the Trust Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Trust Preferred Security Beneficial Owners of a Trust Preferred Security in global form. Notices or other communications to Institutional Accredited Investors holding Definitive Trust Preferred Security Certificates shall be sent to such Institutional Accredited Investors at its address on the records of the Regular Trustees. SECTION 9.6. APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Trust Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Trust Preferred Securities. SECTION 9.7. DEFINITIVE TRUST PREFERRED SECURITY CERTIFICATES. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Trust Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.06; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Trust Preferred Securities, then: (c) Definitive Trust Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Trust Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Trust Preferred Security Certificates to be delivered to Trust Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery 47 of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The Definitive Trust Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Trust Preferred Securities may be listed, or to conform to usage. At such time as all interests in a Trust Preferred Security in global form have been redeemed, converted, exchanged, repurchased or canceled, such Trust Preferred Security in global form shall be, upon receipt thereof, canceled by the Trust in accordance with standing procedures and instructions of the Clearing Agency. (e) Trust Preferred Securities that upon initial issuance are beneficially owned by, or are subsequently transferred to, Institutional Accredited Investors that are neither QIBs nor Non-U.S. Persons will be issued as Definitive Trust Preferred Security Certificates and may not be represented by a Global Certificate. Trust Preferred Securities that upon initial issuance are beneficially owned by Persons that are Non-U.S. Persons may, at the option of the Trust, be issued as Definitive Trust Preferred Security Certificates. In the case of transfers to Institutional Accredited Investors, the Institutional Trustee shall make appropriate endorsements to reflect decreases in the amount of the applicable Global Certificate. SECTION 9.8. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Institutional Trustee or the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, the Institutional Trustee or any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for, or in lieu of, any such 48 mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.08, the Institutional Trustee or the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE 10 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1. LIABILITY. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) be required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Trust Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2. EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by 49 reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3. FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Persons and any Indemnified Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement 50 contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4. INDEMNIFICATION. (a) (i) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed 51 action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.04(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 10.04(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (v) To the fullest extent permitted by law, expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.04(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such 52 Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 10.04(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Regular Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or Common Security Holder reasonably determine that such Person deliberately breached his duty to the Trust or its Common or Trust Preferred Security Holders. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.04(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Trust Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 10.04(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 10.04(a) is in effect. Any repeal or modification of this Section 10.04(a) shall not affect any rights or obligations then existing. (vii) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 10.04(a) (viii) For purposes of this Section 10.04(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a 53 consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.04(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.04(a) shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person. (b) The Sponsor agrees to indemnify, to the fullest extent permitted by law, (i) the Institutional Trustee, (ii) the Delaware Trustee, (iii) the Paying Agent, (iv) the Conversion Agent, (v) any Affiliate of the Institutional Trustee, and the Delaware Trustee, and (vi) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee, the Paying Agent, the Conversion Agent and the Delaware Trustee (each of the Persons in (i) through (vi) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. To the fullest extent permitted by law, the Sponsor also agrees to advance expenses (including legal fees) incurred by a Fiduciary Indemnified Person in defending any claim, demand, action, suit or proceeding, from time to time, prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Fiduciary Indemnified Person to repay such amount if it shall be determined that the Fiduciary Indemnified Person is not entitled to be indemnified as authorized in the preceding subsection. The obligation to indemnify as set forth in this Section 10.04(b) shall survive the satisfaction and discharge of this Declaration. The Institutional Trustee agrees to use its best efforts to provide the Sponsor prompt, written notification of any of the aforementioned losses, liabilities or expenses (hereinafter "Claims") and to cooperate with the Sponsor in the investigation, defense and settlement of any such Claim. The Sponsor shall have the right to assume the investigation, defense and settlement of any such Claim and to employ such legal counsel as the Sponsor deems acceptable, unless the Institutional 54 Trustee in its best judgment determines that a conflicting interest would be created and that the Sponsor's assumption of the investigation, defense and settlement of any such Claim would not be in the best interests of the Holders. In the event that the Institutional Trustee has not determined that a conflict has been created and the Sponsor has assumed the investigation and defense of such Claim, the indemnity obligations set forth in this Section 10.04(b) shall be void as to any Claim for which settlement or offer of settlement is made without the prior, written consent of the Sponsor. SECTION 10.5. OUTSIDE BUSINESS. Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor of its Affiliates. ARTICLE 11 ACCOUNTING SECTION 11.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2. CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books, records and supporting documents, 55 which shall reflect in detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting in compliance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for the United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities and the other Trustees, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related income or loss. (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3. BANKING. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; PROVIDED, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Institutional Trustee Account and no other funds of the Trust shall be deposited in the Institutional Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; PROVIDED, however, that the Institutional Trustee shall designate the signatories for the Institutional Trustee Account. SECTION 11.4. WITHHOLDING. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall 56 request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over-withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE 12 AMENDMENTS AND MEETINGS SECTION 12.1. AMENDMENTS. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee; (b) no amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Institutional Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, 57 and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B) reduce or otherwise adversely affect the powers of the Institutional Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act; (c) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 9.01(c) and this Section 12.01 shall not be amended without the consent of all of the Holders of the Securities; (e) Article 4 shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; (f) the rights of the Holders of the Common Securities under Article 5 to increase or decrease the number of and appoint and remove Trustees shall not be 58 amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (g) notwithstanding Section 12.01(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Trust Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: 59 (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Trust Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Trust Preferred Securities are then listed or trading, otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any 60 matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE 13 REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The Trustee that acts as initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants, as applicable, to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee that: (a) the Institutional Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the execution, delivery and performance by the Institutional Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. The Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of the Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any federal banking authority is required for the execution, delivery or performance by the Institutional Trustee, of the Declaration. SECTION 13.2. REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE. 61 The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a Delaware banking corporation, duly organized, validly existing and in good standing or is a national banking association, with full power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) No consent, approval or authorization of, or registration with or notice to, any Delaware or federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of the Declaration. (d) The Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. The Delaware Trustee satisfies for the Trust the requirements set forth in Section 3807(a) of the Business Trust Act. ARTICLE 14 MISCELLANEOUS SECTION 14.1. NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): 62 Apple South Financing I c/o Apple South, Inc. Hancock at Washington Madison, Georgia 30650-1304 Attention: (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders of the Securities): First Union Bank of Delaware One Rodney Square, 1st Floor 920 King Street Wilmington, Delaware 19801 Attention: Corporate Trust (c) if given to the Institutional Trustee, at its Corporate Trust Office to the attention of Corporate Trust Administration (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities). First Union National Bank of Georgia 999 Peachtree Street, N.E., Suite 1100 Atlanta, Georgia 30309 Attention: Corporate Trust (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Apple South, Inc. Hancock at Washington Madison, Georgia 30650-1304 Attention: (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice 63 or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2. GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4. HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6. PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7. COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the 64 same force and effect as though all of the signers had signed a single signature page. 65 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. -------------------------------------------- Eric J. Booth, as Regular Trustee -------------------------------------------- Lansing S. Patterson, as Regular Trustee -------------------------------------------- Benjamin A. Waites, as Regular Trustee First Union Bank of Delaware, as Delaware Trustee By: --------------------------------------- Name: Title: First Union National Bank of Georgia, as Institutional Trustee By: --------------------------------------- Name: Title: Apple South, Inc., as Sponsor By: --------------------------------------- Name: Title: ANNEX I TERMS OF $3.50 TRUST PREFERRED SECURITIES $3.50 COMMON SECURITIES Pursuant to Section 7.01 of the Amended and Restated Declaration of Trust, dated as of March 11, 1997 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Trust Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Offering Memorandum referred to below): 1. DESIGNATION AND NUMBER. (a) TRUST PREFERRED SECURITIES. 2,000,000 (2,300,000 if the Initial Purchasers' (as defined in the Purchase Agreement) over-allotment option is exercised in full) Trust Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of ($100,000,000)($115,000,000 if such over-allotment option is exercised in full), and a liquidation amount with respect to the assets of $50 per trust preferred security, are hereby designated for the purposes of identification only as "$3.50 Term Convertible Securities, Series A" (the "Trust Preferred Securities"). The Trust Preferred Security Certificates evidencing the Trust Preferred Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Trust Preferred Securities are listed. (b) COMMON SECURITIES. 20,200 (23,230 if such over-allotment option is exercised in full) Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $1,010,000 ($1,161,500 if such over-allotment option is exercised in full), and a liquidation amount with respect to the assets of the Trust of $50 per common security, are hereby designated for the purposes of identification only as "$3.50 Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. I-1 (a) Distributions payable on each Security will be fixed at a rate per annum of $3.50 (the "Distribution Rate") of the stated liquidation amount of $50 per Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. (b) Distributions on the Securities will be cumulative, will accumulate from March 11, 1997, and will be payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 1997, when, as and if available for payment. So long as an Event of Default shall not have occurred and be continuing, the Sponsor shall not be in default in the payment of interest on the Debentures, the Sponsor has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, PROVIDED that no Extension Period shall last beyond the date of maturity or any redemption date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law) at the Distribution Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Sponsor may further extend such Extension Period; PROVIDED that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date next following the termination of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Sponsor may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates, I-2 which, with respect to the Trust Preferred Securities that are in book-entry form, will be one Business Day prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under the heading "Description of the Trust Preferred Securities -- The Global TECONS" in the Offering Memorandum dated March 6, 1997 (the "Offering Memorandum") of the Trust. The relevant record dates for the Common Securities shall be the same record date as for the Trust Preferred Securities. With respect to the Trust Preferred Securities that are not in book-entry form, the relevant record dates for the Trust Preferred Securities shall conform to the rules of any securities exchange on which the securities are listed and, if none, the Regular Trustees shall have the right to select relevant record dates, which shall be more than one Business Day prior to the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Sponsor having failed to make a payment under the Debentures, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. In the event that any date on which Distributions are to be made on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such record date. (d) In the event of an election by the Holder to convert its Securities through the Conversion Agent into Apple South Common Stock pursuant to the terms of the Securities as set forth in this Annex I to the Declaration, no payment, allowance or adjustment shall be made with respect to accumulated and unpaid Distributions on such Securities, or be required to be made; PROVIDED, however, that if a Security is surrendered for conversion after the close of business on any regular record date for payment of a Distribution and before the opening of business on the corresponding Distribution payment date, then, notwithstanding such conversion, the Distribution payable on such Distribution payment date will be paid in cash to the Person in whose name the Security is registered at the close of business on such record date, and (other than a Security or a portion of a Security called for redemption on a redemption date occurring after such record date and on or prior to such Distribution payment date) when so surrendered for conversion, the Security must be accompanied by payment of an amount equal to the Distribution payable on such Distribution payment date. I-3 (e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust (each a "Liquidation"), the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities, after satisfaction of liabilities of creditors, distributions in an amount equal to the aggregate of the stated liquidation amount of $50 per Security plus accumulated and unpaid Distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such Liquidation, Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest rate equal to the Distribution Rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, the Securities, have been distributed on a Pro Rata basis to the Holders of the Securities. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. REDEMPTION AND DISTRIBUTION. (a) Upon the repayment of the Debentures, whether at maturity or upon redemption (either at the option of the Sponsor or pursuant to a Special Event as described below), the proceeds from such repayment or payment shall simultaneously be applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at the Redemption Price (as defined in the Indenture) of the Debentures, plus accrued interest to the date fixed for redemption (including Compound Interest and Additional Interest), payable in cash. Holders will be given not less than 30 nor more than 60 days' notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Trust Preferred Securities will be redeemed Pro Rata and the Trust Preferred Securities to be redeemed will be as described in Section 4(g) below. I-4 (c) If, at any time, a Tax Event or an Investment Company Event (each, as defined below, a "Special Event") shall occur and be continuing, the Trust may with the consent of the Sponsor, except in certain limited circumstances in relation to a Tax Event described in this Section 4(c), dissolve the Trust with the result that, after satisfaction of creditors, Debentures held by the Institutional Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Distribution Rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, the Securities, be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90 Day Period"); PROVIDED, however, that such dissolution and distribution shall be conditioned on (i) the Regular Trustees' receipt of an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of such dissolution of the Trust and distribution of Debentures, (ii) in the case of a Tax Event, the Sponsor or the Trust being unable to eliminate, within the 90 Day Period, the Tax Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other reasonable measure that has no adverse effect on the Trust, the Sponsor or the Holders of the Securities ("Ministerial Action") and (iii) the Sponsor's prior written consent to such dissolution and distribution. If in the event of a Tax Event (i) after receipt of a Dissolution Tax Opinion (as defined hereinafter) by of the Regular Trustees, the Regular Trustees shall have been informed by nationally recognized independent tax counsel experienced in such matters that it cannot deliver a No Recognition Opinion to the Trust, the Sponsor shall have the right, upon not less than 30 nor more than 60 days' notice, to redeem the Debentures in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date fixed for redemption, including Compounded Interest, for cash within 90 days following the occurrence of such Tax Event. So long as the corresponding Securities are outstanding, the proceeds from any such redemption of the Debentures shall be used to redeem the Trust Securities; PROVIDED, however, that, if at any time there is available to the Sponsor or the Trust the opportunity to eliminate, within such 90 Day Period, the Tax Event by taking some Ministerial Action, the Trust or the Sponsor will pursue such Ministerial Action in lieu of redemption. I-5 "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after March 6, 1997, as a result of (a) any amendment to, clarification of, or change (including any announced prospective change) in the laws, or any regulations thereunder, of the United States or any political subdivision or taxing authority thereof or therein, (b) any judicial decision, official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action") or (c) any amendment to, clarification of, or change in the official position or the interpretation of such Administrative Action or judicial decision that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such amendment, clarification or change is made known, which amendment, clarification, or change is effective or such pronouncement or decision is announced, in each case, on or after, March 6, 1997 there is the creation by such change in tax law of more than an insubstantial risk that (i) the Trust is or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minims amount of taxes, duties or other governmental charges, or (iii) interest paid in cash by the Sponsor to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Sponsor for United States federal income tax purposes. Notwithstanding the foregoing, a Tax Event shall not include any change in tax law that requires the Sponsor for United States federal income tax purposes to defer taking a deduction for any original issue discount ("OID") that accrues with respect to the Debentures until the interest payment related to such OID is paid by the Sponsor in cash; PROVIDED, that such change in tax law does not create more than an insubstantial risk that the Sponsor will be prevented from taking a deduction for OID accruing with respect to the Debentures at a date that is no later than the date the interest payment related to such OID is actually paid by the Sponsor in cash. "Investment Company Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent counsel to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority on or after March 6, 1997 (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). I-6 After the date for any distribution of Debentures upon dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Trust Preferred Securities, will receive a registered certificate or certificates representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing Securities not held by the Depositary or its nominee will be deemed to represent Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Distribution Rate of, and accrued and unpaid interest (including Compound and Additional Interest) equal to accumulated and unpaid Distributions on such Trust Preferred Securities until such certificates are presented to the Sponsor or its agent for transfer or reissue. (d) The Trust may not redeem fewer than all the outstanding Securities unless all accumulated and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or prior to the date of redemption. (e) If the Debentures are distributed to Holders of the Securities, pursuant to the terms of the Indenture, the Sponsor will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange, if any, as the Trust Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) Notice of any redemption of, or notice of distribution of Debentures in exchange for the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(f), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, or by such other means suitable to assure delivery of such written notice, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (g) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each I-7 Holder of Trust Preferred Securities, it being understood that, in respect of Trust Preferred Securities registered in the name of and held of record by the Depository or its nominee (or any successor Clearing Agency or its nominee) or any nominee, the distribution of the proceeds of such redemption will be made to each Clearing Agency Participant (or Person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (h) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this Section 4 (which notice will be irrevocable), then (A) with respect to the Trust Preferred Securities in book-entry form, by 12:00 noon, New York City time, on the redemption date, PROVIDED that the Sponsor has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Trust will deposit irrevocably with the Depository or its nominee (or successor Clearing Agency or its nominee) funds sufficient to pay the applicable Redemption Price plus accrued interest to the date fixed for redemption, including Compound and Additional Interest, and will give the Depository or its nominee (or successor Clearing Agency or its nominee) irrevocable instructions and authority to pay the Redemption Price and such interest to the Holders of the Trust Preferred Securities, and (B) with respect to Trust Preferred Securities issued in definitive form and Common Securities, PROVIDED that the Sponsor has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Trust will pay the relevant Redemption Price and such interest to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the required date of such deposit, Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price and such interest, but without additional interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. In the event that payment of the Redemption Price in respect of any Securities is I-8 improperly withheld or refused and not paid either by the Trust or by the Sponsor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue at the then applicable rate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (i) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Trust Preferred Securities, the Depository or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Trust Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. (j) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Trust Preferred Securities by tender, in the open market or by private agreement. 5. CONVERSION RIGHTS. The Holders of Securities shall have the right at any time beginning prior to the close of business on March 1, 2027 (or, in the case of Securities called for redemption, prior to the close of business on the Business Day prior to the redemption date), at their option, to cause the Conversion Agent to convert Securities, on behalf of the converting Holders, into shares of Apple South Common Stock in the manner described herein on and subject to the following terms and conditions: (a) The Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Apple South Common Stock pursuant to the Holder's direction to the Conversion Agent to exchange such Securities for a portion of the Debentures theretofore held by the Trust on the basis of one Security per $50 principal amount of Debentures, and immediately convert such amount of Debentures into fully paid and nonassessable shares of Apple South Common Stock at an initial conversion rate of 3.3801 shares of Apple South Common Stock per $50 principal amount of Debentures (which is equivalent to a conversion price of $14.793 per share of Apple South Common Stock, subject to certain adjustments set forth in Sections 14.03 and 14.04 of the Indenture (as so adjusted, "Conversion Price")). (b) In order to convert Securities into Apple South Common Stock the Holder shall submit to the Conversion Agent at the office referred to above an I-9 irrevocable request to convert Securities on behalf of such Holder (the "Conversion Request"), together, if the Securities are in certificated form, with such certificates. The Conversion Request shall (i) set forth the number of Securities to be converted and the name or names, if other than the Holder, in which the shares of Apple South Common Stock should be issued and (ii) direct the Conversion Agent (a) to exchange such Securities for a portion of the Debentures held by the Trust (at the rate of exchange specified in the preceding paragraph) and (b) to immediately convert such Debentures on behalf of such Holder, into Apple South Common Stock (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Trust of the Holder's election to exchange Securities for a portion of the Debentures held by the Trust and the Trust shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify Apple South of the Holder's election to convert such Debentures into shares of Apple South Common Stock. If a Security is surrendered for conversion after the close of business on any regular record date for payment of a Distribution and before the opening of business on the corresponding Distribution payment date, then, notwithstanding such conversion, the Distribution payable on such Distribution payment date will be paid in cash to the Person in whose name the Security is registered at the close of business on such record date, and (other than a Security or a portion of a Security called for redemption on a date occurring after such record date and on or prior to such Distribution payment date) when so surrendered for conversion, the Security must be accompanied by payment of an amount equal to the Distribution payable on such Distribution payment date. Except as provided above, neither the Trust nor the Sponsor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions accumulated on the Securities (including any Additional Amounts accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid dividends on the shares of Apple South Common Stock issued upon such conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Notice of Conversion relating to such Securities is received by the Trust in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive Apple South Common Stock issuable upon conversion of the Debentures shall be treated for all purposes as the record holder or holders of such Apple South Common Stock at such time. As promptly as practicable on or after the Conversion Date, Apple South shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Apple South Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the notice I-10 of conversion and the Conversion Agent shall distribute such certificate or certificates, together with the applicable cash payment, if any, to such Person or Persons. (c) Each Holder of a Security by his acceptance thereof appoints First Union National Bank of Georgia "Conversion Agent" for the purpose of effecting the conversion of Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities from time to time for Debentures held by the Trust in connection with the conversion of such Securities in accordance with this Section and (ii) to convert all or a portion of the Debentures into Apple South Common Stock and thereupon to deliver such shares of Apple South Common Stock in accordance with the provisions of this Section and to deliver to the Trust a new Debenture or Debentures for any resulting unconverted principal amount. (d) No fractional shares of Apple South Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be paid in cash based on the current market price per share of Apple South Common Stock, by Apple South to the Conversion Agent, which in turn will make such payment to the Holder or Holders of Securities so converted. (e) The Sponsor shall at all times reserve and keep available out of its authorized and unissued Apple South Common Stock, solely for issuance upon the conversion of the Debentures, free from any preemptive or other similar rights, such number of shares of Apple South Common Stock as shall from time to time be issuable upon the conversion of all the Debentures then outstanding. Notwithstanding the foregoing, the Sponsor shall be entitled to deliver upon conversion of Debentures, shares of Apple South Common Stock reacquired and held in the treasury of Apple South (in lieu of the issuance of authorized and unissued shares of Apple South Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Any shares of Apple South Common Stock issued upon conversion of the Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Trust shall deliver the shares of Apple South Common Stock received upon conversion of the Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of the Sponsor and the Trust shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of Apple I-11 South Common Stock (and all requirements to list Apple South Common Stock issuable upon conversion of Debentures that are at the time applicable), in order to enable the Sponsor to lawfully issue Apple South Common Stock to the Trust upon conversion of the Debentures and the Trust to lawfully deliver Apple South Common Stock to each Holder upon conversion of the Securities. (f) The Sponsor will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Apple South Common Stock on conversion of Debentures and the delivery of the shares of Apple South Common Stock by the Trust upon conversion of the Securities. The Sponsor shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Apple South Common Stock in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Trust the amount of any such tax, or has established to the satisfaction of the Trust that such tax has been paid. (g) Nothing in the preceding Paragraph (f) shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Securities or set forth in this Annex I to the Declaration or to the Declaration itself or otherwise require the Institutional Trustee or the Trust to pay any amounts on account of such withholdings. 6. REGISTRATION RIGHTS The Trust and the Sponsor have agreed with the Initial Purchasers, for the benefit of the Holders of the Securities, that the Sponsor will use its best efforts, and at its cost, to file and cause to become effective on or before the 90th day following the date of original issuance of the Trust Preferred Securities a shelf registration statement with respect to resales of the Securities and to keep such registration statement effective until two years after the issue date. Holders will be required to provide certain information to the Sponsor to be included in the registration statement in order to use the prospectus for resales. The Sponsor shall provide to each Holder copies of the prospectus, notify each Holder when such registration statement has become effective and take certain other actions as are required to permit resales. In the event that (i) the shelf registration statement is not declared effective on or prior to the 90th day following the date of original issuance of the Trust Preferred Securities, or (ii) use of the shelf registration statement for resales is suspended for any time during the two-year period after the effective date, then additional interest (in addition to amounts otherwise due on the Securities) will accrue at an annual rate of 0.50% on the Securities, if clause (i) applies, from March 11, 1997 until such registration statement is declared effective I-12 and, if clause (ii) applies during the period use is so suspended, in each case payable quarterly in arrears, on March 1, June 1, September 1 and December 1, commencing on the first date for payment after such additional interest begins to accrue. 7. VOTING RIGHTS - TRUST PREFERRED SECURITIES. (a) Except as provided under Sections 6(b) and 8, under the Trust Indenture Act and as otherwise required by law and the Declaration, the Holders of the Trust Preferred Securities will have no voting rights. (b) Subject to the requirements set forth in this paragraph, the Holders of a Majority in liquidation amount of the Trust Preferred Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 4.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; PROVIDED, HOWEVER, that if an Indenture Event of Default has occurred and is continuing then, the Holders of 25% of the aggregate liquidation amount of the Trust Preferred Securities may direct the Institutional Trustee to declare the principal of and interest on the Debentures immediately due and payable; PROVIDED FURTHER that where a consent or action under the Indenture would require the consent or act of the holders of more than a majority of the Holders in principal amount of Debentures affected thereby (a "Super-Majority"), the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Trust Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Trust Preferred Securities. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) and (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust on account for U.S. Federal income tax purposes. The Holders of a Majority in liquidation amount of the Trust Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or to direct the exercise of any trust or power conferred I-13 upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee to exercise the remedies available to it as a Holder of the Debentures. If the Institutional Trustee fails to enforce its rights under the Debentures, a Holder of Trust Preferred Securities, to the fullest extent permitted by law, may institute a legal proceeding directly against the Sponsor to enforce the Institutional Trustee's rights under the Debentures without first instituting any legal proceeding against the Institutional Trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Sponsor to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Trust Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of Trust Preferred Securities to the extent of any payment made by the Sponsor to such Holder of Trust Preferred Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Trust Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any required approval or direction of Holders of Trust Preferred Securities may be given at a separate meeting of Holders of Trust Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Trust Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Trust Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Trust Preferred Securities will be required for the Trust to redeem and cancel Trust Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. I-14 Notwithstanding that Holders of Trust Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Trust Preferred Securities were not outstanding. 8. VOTING RIGHTS - COMMON SECURITIES. (a) Except as provided under Sections 7(b), (c) and 8 and as otherwise required by law and the Declaration, the Holders of the Common Securities will not have voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article 5 of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.06 of the Declaration and only after any Event of Default with respect to the Trust Preferred Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 4.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; PROVIDED, HOWEVER, that if an Indenture Event of Default has occurred and is continuing then, the Holders of 25% of the aggregate liquidation amount of the Trust Preferred Securities may direct the Institutional Trustee to declare the principal of and interest on the Debentures immediately due and payable; PROVIDED further that, where a consent or action under the Indenture would require the consent or act of the Holders of more than a majority in principal amount of Debentures affected thereby (a "Super Majority"), the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Pursuant to this Section 7(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Trust Preferred Securities. Other than with respect to directing the time, method and place of I-15 conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) and (iii) above in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may to the fullest extent permitted by law, institute a legal proceeding directly against any Person to enforce the Institutional Trustee's rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 9. AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 12.01 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.01 of the Declaration, then the Holders of outstanding Securities voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities affected thereby; PROVIDED, however, if any amendment or proposal referred to in clause (i) above would I-16 adversely affect only the Trust Preferred Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; PROVIDED, HOWEVER, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; PROVIDED FURTHER that the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 8(b) unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. 10. PRO RATA. A reference in these terms of the Securities to any distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Trust Preferred Securities pro rata according to the aggregate liquidation amount of Trust Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Trust Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Trust Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 11. RANKING. I-17 The Trust Preferred Securities rank PARI PASSU and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Trust Preferred Securities. 12. LISTING. The Regular Trustees shall use their best efforts to permit the Trust Preferred Securities to be designated PORTAL Securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc., relation to trading in the PORTAL Market. 13. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Trust Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Trust Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 14. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities. 15. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Trust Preferred Securities Guarantee or the Common Securities Guarantee (as may be appropriate), and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-18 EXHIBIT A-1 FORM OF TRUST PREFERRED SECURITY CERTIFICATE [IF THE TRUST PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This Trust Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Trust Preferred Security is exchangeable for Trust Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Trust Preferred Security (other than a transfer of this Trust Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Trust Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Trust Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number: Number of Trust Preferred Securities: CUSIP NO. [ ] Certificate Evidencing Trust Preferred Securities of Apple South Financing I AI-1 $3.50 Trust Preferred Securities (liquidation amount $50 per Trust Preferred Security) [If prior to the Transfer Restriction Termination Date or sale pursuant to an effective registration statement or Rule 144, add legend from Section 9.01(d) of the Declaration.] Apple South Financing I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that __________ (the "Holder") is the registered owner of Trust Preferred Securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the $3.50 Term Convertible Securities, Series A (liquidation amount $50 per Trust Preferred Security) (the "Trust Preferred Securities"). The Trust Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Trust Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 11, 1997, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Trust Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Trust Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Trust Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Trust Preferred Securities as evidence of indirect beneficial ownership in the Debentures. Unless the Institutional Trustee's Certificate of Authentication hereon has been properly executed, these Trust Preferred Securities shall not be entitled to any benefit under the Declaration or be valid or obligatory for any purpose. AI-2 IN WITNESS WHEREOF, the Trust has executed this certificate this [ ] day of [ ], 199 . Apple South Financing I By: --------------------------- Name: Title: Regular Trustee [FORM OF CERTIFICATE OF AUTHENTICATION] INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Trust Preferred Securities referred to in the within-mentioned Declaration. Dated: _______ __, 199 FIRST UNION NATIONAL BANK OF GEORGIA, as Institutional Trustee or as Authenticating Agent By: By: --------------------------- Authorized Signatory Authorized Signatory AI-3 [FORM OF REVERSE OF SECURITY] Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of $3.50 (the "Distribution Rate") of the stated liquidation amount of $50 per Trust Preferred Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Trust Preferred Securities will be cumulative, will accrue from March 11, 1997 and will be payable quarterly in arrears, on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 1997, which payment dates shall correspond to the interest payment dates on the Debentures, to Holders of record at the close of business on the regular record date for such Distribution which shall be the close of business on the Business Day next preceding such Distribution payment date unless otherwise provided in the Declaration. The Sponsor has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") PROVIDED that no Extension Period shall last beyond the date of the maturity or any redemption date of the Debentures and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Distribution Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Sponsor may further extend such Extension Period; PROVIDED that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Sponsor may commence a new Extension Period, subject to the above requirements. The Trust Preferred Securities shall be redeemable as provided in the Declaration. The Trust Preferred Securities shall be convertible into shares of Apple South Common Stock, through (i) the exchange of Trust Preferred Securities for a portion of the Debentures and A1-4 (ii) the immediate conversion of such Debentures into Apple South Common Stock, in the manner and according to the terms set forth in the Declaration. A1-5 CONVERSION REQUEST To: First Union National Bank of Georgia as Institutional Trustee of Apple South Financing I The undersigned owner of these Trust Preferred Securities hereby irrevocably exercises the option to convert these Trust Preferred Securities, or the portion below designated, into Common Stock of Apple South, Inc. (the "Apple South Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust, dated as of March ___, 1997 (as amended from time to time, the "Declaration"), by Eric J. Booth, Lansing S. Patterson and Benjamin A. Waites, as Regular Trustees, First Union Bank of Delaware, as Delaware Trustee, First Union National Bank of Georgia, as Institutional Trustee, Apple South, Inc., as Sponsor, and by the Holders, from time to time, of undivided beneficial interests in the assets of Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Trust Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Trust Preferred Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Trust Preferred Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Apple South Common Stock (at the conversion rate specified in the terms of the Trust Preferred Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. A1-6 Date: _______________, _____ in whole ____ in part ___ Number of Trust Preferred Securities to be converted: --------------------------- If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Apple South Common Stock are to be issued, along with the address or addresses of such person or persons --------------------------- --------------------------- --------------------------- --------------------------- --------------------------- --------------------------- ------------------------------------ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ------------------------------ --------------------------- A1-7 --------------------------- Signature Guarantee:* ------------------- - ------------------------- (1)(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership of participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A1-8 ------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Trust Preferred Security Certificate to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this Trust Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ---------------------- Signature: ---------------------- (Sign exactly as your name appears on the other side of this Trust Preferred Security Certificate) SIGNATURE GUARANTEE* - ----------------------- (1)Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be A1-9 FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH (I) TRANSFERS OF INTERESTS IN THE TEMPORARY REGULATION S GLOBAL SECURITY AND (II) TRANSFERS OF INTEREST TO NON-U.S. PERSONS First Union National Bank of Georgia 999 Peachtree Street, N.E. Suite 1100 Atlanta, Georgia 30309 Re: Apple South Financing I (the "Trust") TRUST PREFERRED SECURITIES ------------------------------------- Dear Sirs or Mesdames: In connection with our proposed sale of the number of Trust Preferred Securities designated below, the undersigned owner confirms that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, represents that: (1) the offer of the Trust Preferred Securities was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. - -------------------------------------------------------------------------------- determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. A1-10 You and the Trust are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Date: ___________, ____ Very truly yours, [Name of Transferor] By: -------------------------- Authorized Signature Number of Trust Preferred Securities to be sold: --------------------------- Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number: --------------------------- --------------------------- --------------------------- A1-11 [FORM OF ASSIGNMENT FOR DEFINITIVE TRUST PREFERRED SECURITY] For value received ___________________ hereby sell(s), assign(s) and transfer(s) unto__________________________________ (Please insert social security or other taxpayer identification number of assignee.) the within security and hereby irrevocably constitutes and appoints ______________ attorney to transfer the said security on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within security occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such security is being transferred: [ ] To Apple South, Inc. or a subsidiary thereof; or [ ] Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or [ ] To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or [ ] Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or [ ] Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; and unless the box below is checked, the undersigned confirms that such security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): [ ] The transferee is an Affiliate of the Company. Dated: ----------------------------- A1-12 ----------------------------- ----------------------------- Signature(s) Signature(s) must be guaranteed by a commercial bank or trust company or a member firm of a major stock exchange. Signature Guarantee NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatever. A1-13 SCHEDULE I Changes to Number of Trust Preferred Securities in Global Security - -------------------------------------------------------------------------------- Date Number of Trust Preferred Remaining Trust Preferred Notation - ------- Securities by which this Securities Represented by Made by Global Security Is To Be this Global ------- Reduced or Increased, and Security Reason for Reduction ---------------- or Increase -------------------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- ----- ------------------------ ----------------------- ----------- - -------------------------------------------------------------------------------- AI-14 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE Certificate Number: Number of Common Securities: Certificate Evidencing Common Securities of Apple South Financing I $3.50 Common Securities (liquidation amount $50 per Common Security) THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD UNLESS SUCH OFFER AND SALE ARE REGISTERED UNDER OR ARE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS ALSO SUBJECT TO THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO BELOW. Apple South Financing I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________ (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the $3.50 Common Securities (liquidation amount $50 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 11, 1997, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. A2-1 By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of ___________, 199__. Apple South Financing I By: -------------------------------- Name: Title: Regular Trustee A2-2 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum of $3.50 (the "Distribution Rate") of the stated liquidation amount of $50 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Common Securities will be cumulative, will accrue from March 11, 1997 and will be payable quarterly in arrears, on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 1997, which payment dates shall correspond to the interest payment dates on the Debentures, to Holders of record at the close of business on the regular record date for such Distribution which shall be the close of business on the Business Day next preceding such Distribution payment date unless otherwise provided in the Declaration. The Sponsor has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") PROVIDED that no Extension Period shall last beyond the date of maturity of the Debentures and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Distribution Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Sponsor may further extend such Extension Period; PROVIDED that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the date of maturity of the Debentures. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Sponsor may commence a new Extension Period, subject to the above requirements. The Common Securities shall be redeemable as provided in the Declaration. The Common Securities shall be convertible into shares of Apple South Common Stock, through (i) the exchange of Common Securities for a portion of the Debentures and (ii) the immediate A2-3 conversion of such Debentures into Apple South Common Stock, in the manner and according to the terms set forth in the Declaration. A2-4 CONVERSION REQUEST To: First Union National Bank of Georgia as Institutional Trustee of Apple South Financing I The undersigned owner of these Common Securities hereby irrevocably exercises the option to convert these Common Securities, or the portion below designated, into Common Stock of Apple South, Inc. (the "Apple South Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust dated as of March 11, 1997 (as amended from time to time, the "Declaration"), by Eric J. Booth, Lansing S. Patterson and Benjamin A. Waites, as Regular Trustees, First Union National Bank of Georgia, as Institutional Trustee, First Union Bank of Delaware, as Delaware Trustee, Apple South, Inc., as Sponsor, and by the Holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Common Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Common Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Common Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Apple South Common Stock (at the conversion rate specified in the terms of the Common Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. A2-5 Date: _____________, _____ in whole ___ in part ___ Number of Common Securities to be converted: _______________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Apple South Common Stock are to be issued, along with the address or addresses of such person or persons ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number --------------------------------------------- --------------------------------------------- --------------------------------------------- A2-6 Signature Guarantee:* ------------------------- - ---------------------- 1(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-7 ------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints ________________________________________ _____________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------ Signature: ---------------- (Sign exactly as your name appears on the other side of this Common Security Certificate) Signature Guarantee*: ------------------------------------------ - -------------------------- 1(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be A2-8 [FORM OF ASSIGNMENT FOR SECURITY OR COMMON STOCK ISSUABLE UPON CONVERSION THEREOF] For value received ___________________ hereby sell(s), assign(s) and transfer(s) unto__________________________________ (Please insert social security or other taxpayer identification number of assignee.) the within security and hereby irrevocably constitutes and appoints ______________ attorney to transfer the said security on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within security occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such Security is being transferred: / / To Apple South, Inc. or a subsidiary thereof; or / / Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or / / To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; - -------------------------------------------------------------------------------- determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-9 and unless the box below is checked, the undersigned confirms that such security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Dated: -------------------------------- ------------------------------ ------------------------------ Signature(s) Signature(s) must be guaranteed by a commercial bank or trust company or a member firm of a major stock exchange. Signature Guarantee NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatever. EXHIBIT B SPECIMEN OF DEBENTURE A2-10 EXHIBIT C PURCHASE AGREEMENT C-1 EX-4.3 3 EX 4.3 / INDENTURE APPLE SOUTH, INC., as Issuer TO FIRST UNION NATIONAL BANK OF GEORGIA as Trustee Indenture Dated as of March 6, 1997 CROSS REFERENCE TABLE * Certain Sections of the Indenture Relating to Sections 310 Through 318(a), Inclusive, of the Trust Indenture Act of 1939 SECTION OF TRUST INDENTURE ACT SECTION OF INDENTURE - ------------------------------ -------------------- 310(a) 5.11 310(b) 5.08 5.10 310(c) Not Applicable 311(a) 5.12 311(b) 5.12 311(c) Not Applicable 312(a) 6.01 312(b) 1.08 312(c) Not Applicable 313 6.02 314(a) 6.03 314(b) Inapplicable 314(c) 1.02 314(d) Not Applicable 314(e) 1.02 314(f) Not Applicable 315(a) 5.03 315(b) 5.02 5.15 315(c) 4.02 315(d) Not Applicable 315(e) 4.14 316(a) 4.12 4.13 316(b) 4.08 316(c) 1.08 317(a) 4.04 317(b) 1.08 318(a) 1.08 * This Cross Reference Table does not, for any purpose, constitute part of the Indenture and shall not effect the interpretation of any of its terms or provisions. TABLE OF CONTENTS:(1) RECITALS OF THE COMPANY PAGE ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS . . . . . . . . . .11 SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE . . . . . . . . .12 SECTION 1.04. ACTS OF HOLDERS. . . . . . . . . . . . . . . . . . . . .13 SECTION 1.05. NOTICES, ETC., TO TRUSTEE AND COMPANY. . . . . . . . . .13 SECTION 1.06. NOTICE TO HOLDERS OF CONVERTIBLE DEBENTURES. . . . . . .14 SECTION 1.07. LANGUAGE OF NOTICES, ETC . . . . . . . . . . . . . . . .14 SECTION 1.08. CONFLICT WITH TRUST INDENTURE ACT. . . . . . . . . . . .15 SECTION 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS . . . . . . . .15 SECTION 1.10. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . .15 SECTION 1.11. SEPARABILITY CLAUSE. . . . . . . . . . . . . . . . . . .15 SECTION 1.12. BENEFITS OF INDENTURE. . . . . . . . . . . . . . . . . .15 SECTION 1.13. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .15 SECTION 1.14. LEGAL HOLIDAYS . . . . . . . . . . . . . . . . . . . . .15 ARTICLE 2 GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES SECTION 2.01. DESIGNATION AND PRINCIPAL AMOUNT . . . . . . . . . . . .16 SECTION 2.02. MATURITY . . . . . . . . . . . . . . . . . . . . . . . .16 SECTION 2.03. FORM AND PAYMENT . . . . . . . . . . . . . . . . . . . .16 SECTION 2.04. EXCHANGE AND REGISTRATION OF CONVERTIBLE DEBENTURES; RESTRICTIONS ON TRANSFER; DEPOSITARY . . . . . . . . . . . . . . .16 SECTION 2.05. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. . .21 SECTION 2.06. MUTILATED, DESTROYED, LOST AND STOLEN CONVERTIBLE DEBENTURES AND COUPONS . . . . . . . . . . . . . . . . . . . . . .22 SECTION 2.07. INTEREST . . . . . . . . . . . . . . . . . . . . . . . .22 SECTION 2.08. PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . .25 SECTION 2.09. CANCELLATION . . . . . . . . . . . . . . . . . . . . . .25 SECTION 2.10. ENFORCEMENT RIGHTS . . . . . . . . . . . . . . . . . . .26 - ------------------------- (1) NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. i PAGE ---- ARTICLE 3 SATISFACTION AND DISCHARGE SECTION 3.01. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . .27 SECTION 3.02. APPLICATION OF TRUST MONEY . . . . . . . . . . . . . . .28 ARTICLE 4 REMEDIES SECTION 4.01. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . .28 SECTION 4.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT . . .30 SECTION 4.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 SECTION 4.04. TRUSTEE MAY FILE PROOF OF CLAIM. . . . . . . . . . . . .32 SECTION 4.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CONVERTIBLE DEBENTURES . . . . . . . . . . . . . . . . . . . . . .32 SECTION 4.06. APPLICATION OF MONEY COLLECTED . . . . . . . . . . . . .33 SECTION 4.07. LIMITATION ON SUITS. . . . . . . . . . . . . . . . . . .33 SECTION 4.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST . . . . . . . . . . . . . . . . . . . . . . .34 SECTION 4.09. RESTORATION OF RIGHTS AND REMEDIES . . . . . . . . . . .34 SECTION 4.10. RIGHTS AND REMEDIES CUMULATIVE . . . . . . . . . . . . .34 SECTION 4.11. DELAY OR OMISSION NOT WAIVER . . . . . . . . . . . . . .35 SECTION 4.12. CONTROL BY HOLDERS . . . . . . . . . . . . . . . . . . .35 SECTION 4.13. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . .35 SECTION 4.14. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . .36 SECTION 4.15. WAIVER OF USURY, STAY OR EXTENSION LAWS. . . . . . . . .36 ARTICLE 5 THE TRUSTEE SECTION 5.01. DUTIES AND RESPONSIBILITIES OF THE TRUSTEE . . . . . . .36 SECTION 5.02. NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . .36 SECTION 5.03. CERTAIN RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . .37 SECTION 5.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CONVERTIBLE DEBENTURES . . . . . . . . . . . . . . . . . . . . . .38 SECTION 5.05. MAY HOLD CONVERTIBLE DEBENTURES. . . . . . . . . . . . .38 SECTION 5.06. MONEY HELD IN TRUST. . . . . . . . . . . . . . . . . . .38 SECTION 5.07. COMPENSATION AND REIMBURSEMENT . . . . . . . . . . . . .38 SECTION 5.08. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. . . .39 SECTION 5.09. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR . . . . . . . . .41 SECTION 5.10. DISQUALIFICATION; CONFLICTING INTERESTS. . . . . . . . .41 SECTION 5.11. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. . . . . . . . .42 ii PAGE ---- SECTION 5.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. . . .42 SECTION 5.13. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .42 SECTION 5.14. APPOINTMENT OF AUTHENTICATING AGENT. . . . . . . . . . .42 SECTION 5.15. NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . .44 SECTION 5.16. PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . .44 SECTION 5.17. PAYMENT UPON RESIGNATION OR REMOVAL. . . . . . . . . . .45 ARTICLE 6 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 6.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 6.02. REPORTS BY TRUSTEE . . . . . . . . . . . . . . . . . . .46 SECTION 6.03. REPORTS BY COMPANY . . . . . . . . . . . . . . . . . . .46 ARTICLE 7 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 7.01. COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS . . . . .46 SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED. . . . . . . . . . . .47 SECTION 7.03. OPINION OF COUNSEL TO TRUSTEE. . . . . . . . . . . . . .47 ARTICLE 8 SUPPLEMENTAL INDENTURES SECTION 8.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS . . .48 SECTION 8.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. . . . .48 SECTION 8.03. EXECUTION OF SUPPLEMENTAL INDENTURES . . . . . . . . . .50 SECTION 8.04. EFFECT OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . .50 SECTION 8.05. CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . .50 SECTION 8.06. REFERENCE IN CONVERTIBLE DEBENTURES TO SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 ARTICLE 9 COVENANTS SECTION 9.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST . . . . . . .51 SECTION 9.02. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . .51 SECTION 9.03. MONEY FOR CONVERTIBLE DEBENTURES PAYMENTS TO BE HELD IN TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 SECTION 9.04. COVENANTS AS TO THE TRUST. . . . . . . . . . . . . . . .53 SECTION 9.05. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . .53 SECTION 9.06. MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . .53 iii PAGE ---- SECTION 9.07. PAYMENT OF TAXES AND OTHER CLAIMS. . . . . . . . . . . .54 SECTION 9.08. WAIVER OF CERTAIN COVENANTS. . . . . . . . . . . . . . .54 SECTION 9.09. STATEMENT BY OFFICERS AS TO DEFAULT. . . . . . . . . . .54 ARTICLE 10 REDEMPTION OF THE CONVERTIBLE DEBENTURES SECTION 10.01. ELECTION TO REDEEM; NOTICE TO TRUSTEE . . . . . . . . .54 SECTION 10.02. SELECTION BY TRUSTEE OF CONVERTIBLE DEBENTURES TO BE REDEEMED . . . . . . . . . . . . . . . . . . . . . . . . . .55 SECTION 10.03. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . .55 SECTION 10.04. DEPOSIT OF REDEMPTION PRICE . . . . . . . . . . . . . .56 SECTION 10.05. CONVERTIBLE DEBENTURES PAYABLE ON REDEMPTION DATE . . .57 SECTION 10.06. CONVERTIBLE DEBENTURES REDEEMED IN PART . . . . . . . .57 SECTION 10.07. SPECIAL EVENT REDEMPTION. . . . . . . . . . . . . . . .57 SECTION 10.08. OPTIONAL REDEMPTION BY COMPANY. . . . . . . . . . . . .58 SECTION 10.09. NO SINKING FUND . . . . . . . . . . . . . . . . . . . .59 ARTICLE 11 EXTENSION OF INTEREST PAYMENT PERIOD SECTION 11.01. EXTENSION OF INTEREST PAYMENT PERIOD. . . . . . . . . .59 SECTION 11.02. NOTICE OF EXTENSION . . . . . . . . . . . . . . . . . .60 SECTION 11.03. LIMITATION OF TRANSACTIONS. . . . . . . . . . . . . . .60 ARTICLE 12 FORM OF CONVERTIBLE DEBENTURE SECTION 12.01. FORM OF CONVERTIBLE DEBENTURE . . . . . . . . . . . . .61 ARTICLE 13 ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES SECTION 13.01. ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES. . . . . . . .76 ARTICLE 14 CONVERSION OF CONVERTIBLE DEBENTURES SECTION 14.01. CONVERSION RIGHTS . . . . . . . . . . . . . . . . . . .76 SECTION 14.02. CONVERSION PROCEDURES . . . . . . . . . . . . . . . . .76 SECTION 14.03. CONVERSION PRICE ADJUSTMENTS. . . . . . . . . . . . . .78 SECTION 14.04. ADJUSTMENT OF CONVERSION PRICE--FUNDAMENTAL CHANGE. . .86 SECTION 14.05. NOTICE OF CERTAIN EVENTS. . . . . . . . . . . . . . . .91 SECTION 14.06. COMPANY TO PROVIDE STOCK. . . . . . . . . . . . . . . .92 iv PAGE ---- SECTION 14.07. DIVIDEND OR INTEREST REINVESTMENT PLANS . . . . . . . .92 SECTION 14.08. CERTAIN ADDITIONAL RIGHTS . . . . . . . . . . . . . . .93 SECTION 14.09. PAYMENT OF CERTAIN TAXES UPON CONVERSION. . . . . . . .94 SECTION 14.10. DUTIES OF TRUSTEE REGARDING CONVERSION. . . . . . . . .94 SECTION 14.11. REPAYMENT OF CERTAIN FUNDS UPON CONVERSION. . . . . . .94 ARTICLE 15 SUBORDINATION OF CONVERTIBLE DEBENTURES SECTION 15.01. CONVERTIBLE DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . .95 SECTION 15.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. . . . .95 SECTION 15.03. PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF CONVERTIBLE DEBENTURES . . . . . . . . . . . . . .96 SECTION 15.04. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. . . . .97 SECTION 15.05. PAYMENT PERMITTED IN CERTAIN SITUATIONS . . . . . . . .97 SECTION 15.06. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . .97 SECTION 15.07. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS . . . . . .98 SECTION 15.08. TRUSTEE TO EFFECTUATE SUBORDINATION . . . . . . . . . .98 SECTION 15.09. NO WAIVER OF SUBORDINATION PROVISIONS . . . . . . . . .99 SECTION 15.10. NOTICE TO TRUSTEE . . . . . . . . . . . . . . . . . . .99 SECTION 15.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. . . . . . . . . . . . . . . . . . . . . . . . 100 SECTION 15.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . 100 SECTION 15.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS, PRESERVATION OF TRUSTEE'S RIGHTS . . . . . . . . . . . . . . . . 101 SECTION 15.14. ARTICLE APPLICABLE TO PAYING AGENTS . . . . . . . . . 101 SECTION 15.15. CERTAIN CONVERSIONS DEEMED PAYMENT. . . . . . . . . . 101 v INDENTURE, dated as of March 6, 1997, between Apple South, Inc., a corporation duly organized and existing under the laws of the State of Georgia (herein called the "Company"), having its principal office at Hancock at Washington, Madison, Georgia 30650-1304 and First Union National Bank of Georgia, a Georgia banking corporation having its principal corporate trust office at 999 Peachtree Street, Suite 1100, N.E., Atlanta, Georgia 30309, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY WHEREAS, pursuant to the terms of this Indenture, the Company desires to provide for the issuance of its unsecured subordinated debt securities to be known as its 7% Convertible Subordinated Debentures (the "Convertible Debentures"), the form and substance of such Convertible Debentures and the terms, provisions and conditions thereof to be set forth as provided herein; WHEREAS, Apple South Financing I, a Delaware statutory business trust (the "Trust"), has offered to the public $100,000,000 ($115,000,000 if the over- allotment option is exercised pursuant to the Purchase Agreement) aggregate liquidation amount of its $3.50 Term Convertible Securities, Series A (the "Trust Preferred Securities"), representing undivided beneficial interests in the assets of the Trust and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $1,010,000 ($1,161,500 if such over-allotment option is exercised) aggregate liquidation amount of its Common Securities, in $101,010,000 ($116,161,500 if such over-allotment option is exercised) aggregate principal amount of the Convertible Debentures; and All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the purchase and acceptance of the Convertible Debentures by the Holders thereof, and for the purpose of setting forth the form and substance of the Convertible Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States of America, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; (d) The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) the following terms have the meanings given to them in the Declaration: (i) Business Day; (ii) Clearing Agency; (iii) Common Stock; (iv) Trust Preferred Security Certificate; (v) Delaware Trustee; (vi) Dissolution Tax Opinion; (vii) Distribution; (viii) DTC; (ix) Institutional Trustee; (x) Investment Company Events; (xi) No-Recognition Opinion; (xii) Non-U.S. Person; (xiii) Purchase Agreement; (xiv) PORTAL Market; (xvi) QIB; (xvii) Rule 144A; (xviii) Regulation S; (xix) Redemption Tax Opinion; (xx) Regular Trustees; (xxi) Registration Rights Agreement; (xxii) Special Event; and (xxiii) Tax Event. (f) the following terms have the meanings specified in Section 14.01: (i) Conversion Price; (ii) Conversion Date; (iii) Rights Offering; (iv) Reference Date; (v) Other Rights; (vi) Expiration Time; (vii) Purchased Shares; (viii) Other Event; and (ix) Current Event. "ACT", when used with respect to any Holder of a Debenture, has the meaning specified in SECTION 1.04. "ADDITIONAL INTEREST" has the meaning set forth in Section 2.07(c). 2 "AFFILIATE" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant to SECTION 5.13 to act on behalf of the Trustee to authenticate Convertible Debentures. "AUTHORIZED NEWSPAPER" means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the place, in connection with which the term is used, or in the financial community of such place. Where successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different newspapers in the same city meeting the foregoing requirements and in each case on any Business Day. "BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee of that board. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "COMMISSION" means the United States Securities and Exchange Commission. "COMMON SECURITIES" means undivided beneficial interests in the assets of the Trust which rank pari passu with the Trust Preferred Securities issued by such Trust; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect to distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of the Trust Preferred Securities. "COMMON SECURITIES GUARANTEE" means any Guarantee that the Company enters into that operates directly or indirectly for the benefit of holders of Common Securities of the Trust. "COMMON STOCK" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Shares of Common Stock of the Company issuable on conversion of a Convertible Debenture shall include only shares of the class designated as Common Stock of the Company as of the date of the Board Resolution or 3 other instrument authorizing the Convertible Debentures or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of the payment of dividends or the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all classes resulting from all such reclassifications. "COMPANY" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by the Chairman of the Board of Directors or the President or any Executive Vice President or any Vice President and by the Treasurer or the Secretary or any Assistant Treasurer or any Assistant Secretary of the Company and delivered to the Trustee. "COMPOUND INTEREST" shall have the meaning specified in Section 11.01. "CONVERTIBLE DEBENTURES" has the meaning stated in the first recital of this Indenture and more particularly means any Convertible Debentures authenticated and delivered under this Indenture. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered. "CORPORATION" means a corporation, association, company, joint-stock company or business trust. "COUPON RATE" has the meaning specified in Section 2.07(a). "CREDIT AGREEMENTS" means the credit agreement dated as of February 27, 1996 among Apple South, Inc., Wachovia Bank of Georgia, National Association, as agent and the banks listed on the signature pages thereto, and the credit agreement dated as of September 30, 1996 between Apple South, Inc. and First Union National Bank of Georgia, each as amended, supplemented or replaced from time to time. 4 "DEBENTURE REGISTER" and "DEBENTURE REGISTRAR" have the respective meanings specified in SECTION 2.05. "DECLARATION" means the Amended and Restated Declaration of Trust of Apple South Financing I, a Delaware statutory business trust, dated as of March 11, 1997. "DEFAULTED INTEREST" has the meaning specified in SECTION 2.07(d). "DEFERRED INTEREST" has the meaning specified in Section 11.01. "DEPOSITARY" means the clearing agency registered under the Exchange Act specified for that purpose as contemplated by SECTION 3.1. "DIRECT ACTION" has the meaning specified in SECTION 2.10. "DISSOLUTION EVENT" means that, as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration, and the Convertible Debentures held by the Institutional Trustee are to be distributed to the holders of the Trust Securities issued by the Trust PRO RATA in accordance with the Declaration. "DOLLAR" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts. "EVENT OF DEFAULT" has the meaning specified in SECTION 4.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXTENDED INTEREST PAYMENT PERIOD" has the meaning specified in Section 11.01. "GUARANTOR" means the Company in its capacity as guarantor under any Trust Securities Guarantees. "HOLDER" means the Person in whose name a Convertible Debenture is registered in the Debenture Register. "INDENTURE" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the Convertible Debentures. 5 "INTEREST PAYMENT DATE" has the meaning specified in Section 2.07(a). "MATURITY" means the date on which the principal of the Convertible Debentures or an installment of such principal becomes due and payable, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "MATURITY DATE" means the date on which the Convertible Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "MINISTERIAL ACTION" has the meaning specified in Section 10.07. "90-DAY PERIOD" has the meaning specified in Section 10.07. "NOTICE OF DEFAULT" has the meaning specified in Section 4.01. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board of Directors or the President or any Executive Vice President or any Vice President or the Chief Financial Officer and by the Treasurer or the Secretary or any Assistant Treasurer or any Assistant Secretary of the Company and delivered to the Trustee. "144A GLOBAL DEBENTURE" has the meaning specified in Section 2.04(a). "OPINION OF COUNSEL" means a written opinion of counsel, who may be an employee of or counsel for the Company and who shall be acceptable to the Trustee. "OPTIONAL REDEMPTION PRICE" has the meaning specified in Section 10.07. "OUTSTANDING" means, as of the date of determination, all Convertible Debentures theretofore authenticated and delivered under this Indenture, except: (i) Convertible Debentures theretofore canceled by the Trustee or any Paying Agent or delivered to the Trustee for cancellation or that have previously been canceled; (ii) Convertible Debentures for whose payment or redemption of which money or United States Government Obligations in the necessary amount has been theretofore deposited in accordance with Article III with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of Convertible Debentures; PROVIDED THAT, if Convertible Debentures or portions of Convertible Debentures are to be redeemed prior to 6 the Maturity thereof, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Convertible Debentures which have been paid pursuant to SECTION 2.06 or in exchange for or in lieu of which other Convertible Debentures have been authenticated and delivered pursuant to this Indenture, other than any Convertible Debentures in respect of which there shall have been presented to the Trustee proof satisfactory to it that Convertible Debentures are held by a bona fide purchaser in whose hands Convertible Debentures are valid obligations of the Company. PROVIDED, HOWEVER, that in determining whether the Holders of the requisite aggregate principal amount of the Outstanding Convertible Debentures have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Convertible Debentures owned by the Company or any other obligor upon such Convertible Debentures, or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, or upon any such determination as to the presence of a quorum, only Convertible Debentures which the Trustee actually knows to be so owned shall be so disregarded. Convertible Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Convertible Debentures and that the pledgee is not the Company or any other obligor upon such Convertible Debentures or any Affiliate of the Company or of such other obligor. "PAYING AGENT" means any Person authorized by the Company to pay the principal of and any premium and interest on the Convertible Debentures on behalf of the Company. "PERSON" means a legal person, including any individual, corporation, state, partnership, joint venture, trust, association, joint stock company, limited liability company, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "PLACE OF PAYMENT" means the place or places where, subject to the provisions of SECTION 9.02, the principal of and any premium and interest on Convertible Debentures are payable as contemplated by SECTION 2.03 . "PREDECESSOR CONVERTIBLE DEBENTURE" of a Convertible Debenture means every previous Convertible Debenture evidencing all or a portion of the same debt as that 7 evidenced by such Convertible Debenture; and, for the purposes of this definition, Convertible Debentures authenticated and delivered under SECTION 2.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Convertible Debentures shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Convertible Debenture. "REDEMPTION DATE" means the date fixed for such redemption by or pursuant to this Indenture. "REDEMPTION PRICE" has the meaning specified in Section 10.07. "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date on the Convertible Debentures means the date specified for that purpose, whether or not such day is a Business Day. "REGULATION S GLOBAL DEBENTURE" has the meaning specified in Section 2.04(a). "REPRESENTATIVE" means the (a) indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness. "RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer within the Corporate Trust Office of the Trustee including any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, or any other officer of the Corporate Trust Office customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "RESTRICTED SECURITY" has the meaning specified in SECTION 2.04(d). "RULE 144(k)" means Rule 144(k) under the Securities Act or any successor rule. 8 "SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor statute. "SENIOR INDEBTEDNESS" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (a) indebtedness of the Company for money borrowed under any credit agreements, indentures (other than this Indenture), notes, guarantees or similar documents and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company, including, without limitation, all indebtedness and all obligations of the Company to pay fees and other amounts, under the Credit Agreements or the Senior Indenture, and any refinancing of the Credit Agreements in the bank credit market (including institutional participants therein), including interest accruing on or after a bankruptcy or other similar event, whether or not an allowed claim therein; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the Company (contingent or otherwise) with respect to interest rate or other swap, cap or collar agreements, oil or gas commodity hedge transactions or other similar instruments or agreements or foreign currency hedge, exchange, purchase or similar instruments or agreements; (vi) all obligations of the types referred to in clauses (i) through (v) of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vii) all obligations of the types referred to in clauses (i) through (vi) of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether outstanding on the date of the Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company, except for (A) any such indebtedness that is by its terms subordinated to or PARI PASSU with the Convertible Debentures, and (B) any indebtedness between or among the Company or its Affiliates, including all other debt securities and guarantees in respect of those debt securities, issued to (a) the Trust or a trustee of the Trust and (b) any other trust, or a trustee of such trust, partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "FINANCING ENTITY") in connection with the issuance by such Financing Entity of preferred securities or other securities that rank PARI PASSU with, or junior to, such preferred securities. "SENIOR INDENTURE" means the Indenture dated as of May 1, 1996 between the Company and SunTrust Bank, Atlanta, as amended, supplemented, refinanced or replaced from time to time. 9 "SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to SECTION 2.07(d). "STATED MATURITY" when used means the date specified as the fixed date on which the principal of the Convertible Debentures or such installment of principal or interest is due and payable. "SUBSIDIARY" means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be owned, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture, business trust or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. "TRADING DAY" shall mean a day on which any securities are traded on the national securities exchange or quotation system used to determine the Closing Price. "TRANSFER RESTRICTION TERMINATION DATE" means the first date on which the Trust Preferred Securities, the Convertible Debentures and any Common Stock issued or issuable upon the conversion or exchange thereof (other than (i) such securities acquired by the Company or any Affiliate thereof and (ii) Common Stock issued upon the conversion or exchange of any such security described in clause (i) above) may be sold pursuant to Rule 144(k). "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean the Person who is then a Trustee hereunder. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, PROVIDED, HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "TRUST PREFERRED SECURITIES" has the meaning specified in the recitals hereto. "TRUST PREFERRED SECURITIES GUARANTEE" means any Guarantee that the Guarantor may enter into with First Union National Bank of Georgia or other Persons that 10 operates directly or indirectly for the benefit of holders of the Trust Preferred Securities. "TRUST SECURITIES" means the Common Securities and the Trust Preferred Securities. "TRUST SECURITIES GUARANTEES" means the Common Securities Guarantee and the Trust Preferred Securities Guarantee. "UNITED STATES" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United States for the payment of which its full faith and credit is pledged, or obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States and the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt. "VOTING STOCK", as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS. Except as otherwise expressly provided by this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. 11 Every certificate or opinion by or on behalf of the Company with respect to compliance with a condition or covenant provided for in this Indenture, except for certificates provided for in SECTION 9.09, shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, the individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 12 SECTION 1.04. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Convertible Debenture, shall be sufficient for any purpose of this Indenture and (subject to SECTION 5.03) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to the execution thereof. Where such execution is by a signer acting in a capacity other than the signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of the signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The principal amount and serial numbers of Convertible Debentures held by any Person, and the date of holding the same, shall be proved by the Debenture Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Convertible Debenture shall bind every future Holder of the same Convertible Debenture and the Holder of every Convertible Debenture issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Convertible Debenture. SECTION 1.05. NOTICES, ETC., TO TRUSTEE AND COMPANY. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document 13 provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture, to the attention of its Treasurer, or at any other address previously furnished in writing to the Trustee by the Company. SECTION 1.06. NOTICE TO HOLDERS OF CONVERTIBLE DEBENTURES. Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Convertible Debentures of any event such notice shall be sufficiently given to Holders of Convertible Debentures if in writing and mailed, first-class postage prepaid, to each Holder of a Convertible Debenture affected by such event, at the address of such Holder as it appears in the Debenture Register, not earlier than the earliest date, and not later than the latest date, prescribed for the giving of such notice. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders of Convertible Debentures by mail, then such notification as shall be made with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. In any case where notice to Holders of Convertible Debentures is given by mail, neither the failure to mail such notice, nor any defect in any notice mailed to any particular Holder of a Convertible Debenture shall affect the sufficiency of such notice with respect to other Holders of Convertible Debentures. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Convertible Debentures shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.07. LANGUAGE OF NOTICES, ETC. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. 14 SECTION 1.08. CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.11. SEPARABILITY CLAUSE. In case any provision in this Indenture or the Convertible Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.12. BENEFITS OF INDENTURE. Nothing in this Indenture or the Convertible Debentures, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Debentures Registrar and their successors hereunder, the holders of Trust Securities, and the Holders of Convertible Debentures, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.13. GOVERNING LAW. This Indenture and the Convertible Debentures shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof. SECTION 1.14. LEGAL HOLIDAYS. If any date on which interest or principal (and premium, if any) are payable on the Convertible Debentures is not a Business Day then payments of such interest or principal (and premium, if any) will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. 15 ARTICLE 2 GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES SECTION 2.01. DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized debentures designated the "7% CONVERTIBLE SUBORDINATED DEBENTURES," limited in aggregate principal amount to $101,010,000 ($116,161,500 if the over- allotment option is exercised pursuant to the Purchase Agreement), which amount shall be as set forth in any written order of the Company for the authentication and delivery of Convertible Debentures pursuant to Section 13.01 hereof. SECTION 2.02. MATURITY. The Maturity Date is March 1, 2027. SECTION 2.03. FORM AND PAYMENT. Except as provided in Section 2.04, the Convertible Debentures shall be issued in fully registered certificated form without Coupons in denominations of $50 in principal amount and integral multiples thereof. Principal and interest on the Convertible Debentures issued in certificated form will be payable, the transfer of such Convertible Debentures will be registrable and such Convertible Debentures will be exchangeable for Convertible Debentures bearing identical terms and provisions at the office or agency of the Trustee; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the Holder of any Convertible Debentures is the Institutional Trustee, the payment of the principal of and interest on such Convertible Debentures held by the Institutional Trustee will be made at such place and to such account as may be designated by the Institutional Trustee. SECTION 2.04. EXCHANGE AND REGISTRATION OF CONVERTIBLE DEBENTURES; RESTRICTIONS ON TRANSFER; DEPOSITARY. If distributed to holders of Trust Preferred Securities in connection with a Dissolution Event, the Convertible Debentures will be issued to such holders in the same form as the Trust Preferred Securities that such Convertible Debentures replace in accordance with the following procedures: (a) So long as Convertible Debentures are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, all Convertible Debentures that are so eligible may be represented by one or more Convertible Debentures in global form registered in the name of the Depositary or the nominee of the Depositary, except as otherwise specified below. The transfer and exchange of beneficial interests in any such Convertible Debenture in global form shall be effected through the Depositary in accordance with this Indenture and the procedures of the Depositary therefor. 16 Convertible Debentures that are distributed to QIBs in replacement of Trust Preferred Securities represented by a global Trust Preferred Security will be represented by a global Convertible Debenture (the "144A GLOBAL DEBENTURE"). Convertible Debentures that are distributed to Non-U.S. Persons in replacement of Trust Preferred Securities represented by a global Trust Preferred Security will be represented by a global Convertible Debenture (the "REGULATION S GLOBAL DEBENTURE"). Each of the 144A Global Debenture and the Regulation S Global Debenture shall be referred to herein as a Global Debenture. Convertible Debentures that are distributed to QIBs or to Non-U.S. Persons in replacement of Certificated Trust Preferred Securities will be represented by definitive Convertible Debentures as set forth in Section 2.04(b). If Global Debentures are issued, transfers of interests in the Convertible Debentures between the 144A Global Debenture and the Regulation S Global Debenture will be made in accordance with the standing instructions and procedures of the Depositary and its participants and the Trustee shall make appropriate endorsements to reflect increases or decreases in the principal amounts of such Global Debentures to reflect any such transfers. Except as provided below, beneficial owners of a Convertible Debenture in global form shall not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered Holders of such Convertible Debentures in global form. (b) Trust Preferred Securities held in certificated form, except for certificates representing Trust Preferred Securities held by the Depositary or its nominee (or any successor Clearing Agency or its nominee), shall upon presentation to the Trustee by the Institutional Trustee or by the holder thereof or by the Institutional Trustee on behalf of such holders shall be exchanged for Convertible Debentures in fully registered certificated form of like aggregate principal amount and tenor. (c) So long as the Convertible Debentures are eligible for book-entry settlement, and to the extent that Convertible Debentures are held by QIBs or Non-U.S. Persons, as the case may be, in a Global Debenture, or unless otherwise required by law, upon any transfer of a definitive Convertible Debenture to a QIB in accordance with Rule 144A or to a Non-U.S. Person in accordance with Regulation S, unless otherwise requested by the transferor, and upon receipt of the definitive Convertible Debenture or Convertible Debentures being so transferred, together with a certification from the transferor that the transfer is being made in compliance with Rule 144A or Regulation S, as the case may be (or other evidence satisfactory to the Trustee), the Trustee shall make an endorsement on any 144A Global Debenture or any Regulation S Global Debenture, as the case may be, to reflect an increase in the aggregate principal amount of the Convertible Debentures represented by such Global Debenture, and the Trustee shall cancel such definitive Convertible Debenture or Convertible Debentures 17 in accordance with the standing instructions and procedures of the Depositary, the aggregate principal amount of Convertible Debentures represented by such Global Debenture to be increased accordingly; PROVIDED that no definitive Convertible Debenture, or portion thereof, in respect of which the Company or an Affiliate of the Company held any beneficial interest shall be included in such Global Debenture until such definitive Convertible Debenture is freely tradable in accordance with Rule 144(k); PROVIDED FURTHER that the Trustee shall, at the written request of the Company, issue Convertible Debentures in definitive form upon any transfer of a beneficial interest in the Global Debenture to the Company or any Affiliate of the Company. Any Global Debenture may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Depositary, by the National Association of Securities Dealers, Inc. in order for the Convertible Debentures to be tradeable on the PORTAL Market or as may be required for the Convertible Debentures to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange upon which the Convertible Debentures may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Convertible Debentures are subject. (d) Each Convertible Debenture that bears or is required to bear the legend set forth in this Section 2.04(d) (a "RESTRICTED SECURITY") shall be subject to the restrictions on transfer provided in the legend set forth in this Section 2.04(d), unless such restrictions on transfer shall be waived by the written consent of the Company, and the Holder of each Restricted Security, by such securityholder's acceptance thereof, agrees to be bound by such restrictions on transfer. As used in this Section 2.04(d) and in Section 2.04(e), the terms "transfer" encompasses any sale, pledge, transfer or other disposition of any Restricted Security. Prior to the Transfer Restriction Termination Date, any certificate evidencing a Convertible Debenture or Common Stock issued upon the conversion or exchange of any Convertible Debenture shall bear a legend in substantially the following form, unless otherwise agreed by the Company (with written notice thereof to the Trustee): THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS 18 DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO APPLE SOUTH OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, THE TRANSFEROR MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE INSTITUTIONAL TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE TRANSFEROR MUST, BEFORE SUCH TRANSFER, FURNISH TO THE INSTITUTIONAL TRUSTEE AND THE TRUST, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION 19 AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE INSTITUTIONAL TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Following the Transfer Restriction Termination Date or the sale of a Convertible Debenture or Common Stock issued upon the conversion or exchange of a Convertible Debenture pursuant to an effective registration statement or Rule 144 (or any successor provision) under the Securities Act, any Convertible Debenture or security issued in exchange or substitution therefor (other than (i) Convertible Debentures acquired by the Company or any Affiliate thereof since the issue date of the Convertible Preferred Securities and (ii) Common Stock issued upon the conversion or exchange of any Convertible Debenture described in clause (i) above) may upon surrender of such Convertible Debenture for exchange to the Debenture Registrar in accordance with the provisions of this Section 2.04, be exchanged for a new Convertible Debenture or Convertible Debentures, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.04(d). Notwithstanding any other provisions of the Indenture (other than the provisions set forth in this Section 2.04(d)), a Global Debenture may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee to a successor Depositary or a nominee of such successor Depositary. The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Convertible Debentures in global form. Initially, the Global Debentures shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for Cede & Co. If at any time the Depositary for the Global Debentures notifies the Company that it is unwilling or unable to continue as Depositary for such Convertible Debentures, the Company may appoint a successor Depositary with respect to such Convertible Debentures. If a successor Depositary for the Convertible Debentures is 20 not appointed by the Company within 90 days after the Company receives such notice, the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for authentication and delivery of Convertible Debentures, will authenticate and deliver, Convertible Debentures in definitive form, in an aggregate principal amount equal to the principal amount of the Global Debentures, in exchange for such Global Debentures. Definitive Convertible Debentures issued in exchange for all or a part of a Global Debenture pursuant to this Section 2.04(d) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such definitive Convertible Debentures to the person in whose names such definitive Convertible Debentures are so registered. At such time as all interests in a Global Debenture have been redeemed, converted, exchanged, repurchased or canceled, such Global Debenture shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and instructions of the Depositary. At any time prior to such cancellation, if any interest in a Global Debenture is exchanged for definitive Convertible Debentures, redeemed, converted, exchanged, repurchased by the Company pursuant to Article X or canceled, or transferred for part of a Global Debenture, the principal amount of such Global Debenture shall, in accordance with the standing procedures and instructions of the Depositary be reduced or increased, as the case may be, and an endorsement shall be made on such Global Debenture by, or at the direction of, the Trustee to reflect such reduction or increase. (e) Any Convertible Debenture or Common Stock issued upon the conversion or exchange of a Convertible Debenture that, prior to the Transfer Restriction Termination Date, is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Convertible Debentures or Common Stock, as the case may be, no longer being "restricted securities" (as defined under Rule 144). SECTION 2.05. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at an office or agency to be maintained by the Company in accordance with Section 9.02 a register (the "DEBENTURE REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Convertible Debentures and the registration of transfers of Convertible Debentures. The Trustee is hereby appointed "DEBENTURE REGISTRAR" 21 for the purpose of registering Convertible Debentures and transfers of Convertible Debentures as herein provided. SECTION 2.06. MUTILATED, DESTROYED, LOST AND STOLEN CONVERTIBLE DEBENTURES AND COUPONS. If any mutilated Convertible Debenture is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Convertible Debenture of the same principal amount and like tenor and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Convertible Debenture and (ii) such security or indemnity as may be required by them, then, in the absence of notice to the Company or the Trustee that such Convertible Debenture has been acquired by a bona fide purchaser, the Company shall, subject to the following paragraph, execute, and the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Convertible Debenture, a new Convertible Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Convertible Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Convertible Debenture pay such Convertible Debenture. Upon the issuance of any new Convertible Debenture under this Section, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Convertible Debenture issued pursuant to this Section in lieu of any destroyed, lost or stolen Convertible Debenture shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Convertible Debenture shall be at any time enforceable by anyone, and any such new Convertible Debenture shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Convertible Debentures duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Convertible Debentures. SECTION 2.07. INTEREST. (a) Each Convertible Debenture will bear interest at the rate of 7% per annum (the "COUPON RATE") from March 11, 1997 until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue 22 installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article XI) quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each, an "INTEREST PAYMENT DATE"), commencing on June 1, 1997, to the Person in whose name such Convertible Debenture or any predecessor Convertible Debenture is registered, at the close of business on the Regular Record Date for such interest installment, which, in respect of (i) Convertible Debentures of which the Institutional Trustee is the Holder and the related Trust Preferred Securities are in book-entry only form or (ii) a Global Debenture, shall be the close of business on the Business Day next preceding that Interest Payment Date; PROVIDED, that if the Interest Payment Date is a Redemption Date, then the record date for the interest payment shall be as of the opening of business on such day for the purpose of permitting the Holder of a Convertible Debenture to convert on such record date while continuing to be the record holder for the interest payment and therefore entitled to receive the interest payment on the Interest Payment Date notwithstanding conversion on the record date. Notwithstanding the foregoing sentence, if (i) the Convertible Debentures are held by the Institutional Trustee and the Trust Preferred Securities are no longer in book-entry only form or (ii) the Convertible Debentures are not represented by a Global Debenture, the Company may select a Regular Record Date for such interest installment which shall be any date more than one Business Day prior to an Interest Payment Date. (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in Section 1.14, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed per 30-day month. (c) If, at any time, the Trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will pay as additional interest ("ADDITIONAL INTEREST") on the Convertible Debentures held by the Institutional Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Institutional Trustee after paying such taxes, duties, assessments or other governmental charges will not be less than the amounts the Trust and the Institutional Trustee would have received had no such taxes, duties, assessments or other governmental charges been imposed. (d) Any interest which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (i) and (ii) below: 23 (i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Convertible Debentures (or their respective Predecessor Convertible Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Convertible Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Convertible Debentures at the address of such Holder as it appears in the Debenture Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Convertible Debentures (or their respective Predecessor Convertible Debentures) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (ii); and (ii) The Company may make payment of any Defaulted Interest on the Convertible Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Convertible Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. (e) In the event that (i) the shelf registration statement required to be filed by the Company pursuant to the Registration Rights Agreement is not declared effective on or prior to the 90th day following the date of original issuance of the Trust Preferred Securities, or (ii) use of the shelf registration statement is suspended for any time during the two-year period after the effective date, then additional interest (in 24 addition to amounts otherwise due on the Convertible Debentures) will accrue at an annual rate of 0.50% on the Convertible Debentures, if clause (i) applies, from March 11, 1997 until such registration statement is declared effective and, if clause (ii) applies, during the period use is so suspended, in each case payable quarterly, in arrears, on March 1, June 1, September and December 1, commencing on the first date for payment after such additional interest begins to accrue. Subject to the foregoing provisions of this Section, each Convertible Debenture delivered under this Indenture upon registration of, transfer of or in exchange for or in lieu of any other Convertible Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Convertible Debenture. Any Convertible Debenture which is converted into Common Stock of the Company after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Convertible Debenture whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is 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 that Convertible Debenture (or one or more Predecessor Convertible Debentures) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence of this paragraph, in the case of any Convertible Debenture which is converted, interest whose Stated Maturity is after the date of conversion of such Convertible Debenture shall not be payable. SECTION 2.08. PERSONS DEEMED OWNERS. Prior to due presentment of a Convertible Debenture 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 Convertible Debenture is registered as the owner of such Convertible Debenture for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 2.07) any interest on such Convertible Debenture and for all other purposes whatsoever, whether or not such Convertible Debenture shall be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 2.09. CANCELLATION. All Convertible Debentures surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Convertible Debentures so delivered shall be promptly canceled by the Trustee. The Company may at any time deliver to the Trustee for cancellation any Convertible Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery 25 to the Trustee) for cancellation any Convertible Debentures previously authenticated hereunder which the Company has not issued and sold, and all Convertible Debentures so delivered shall be promptly canceled by the Trustee. No Convertible Debentures shall be authenticated in lieu of or in exchange for any Convertible Debentures canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Convertible Debentures held by the Trustee shall be returned to the Company. SECTION 2.10. ENFORCEMENT RIGHTS. The holders of a majority in liquidation amount of the Trust Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or to direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee to exercise the remedies available to it as a Holder of the Convertible Debentures. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, a holder of Trust Preferred Securities, to the extent permitted by law, may institute a legal proceeding directly against the Company to enforce the Institutional Trustee's rights under the Convertible Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then the registered holder of the Trust Preferred Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Convertible Debentures having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such holder (a "DIRECT ACTION") on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Trust Preferred Securities under the Declaration to the extent of any payment made by the Company to such holder of Trust Preferred Securities in such Direct Action. The holders of Trust Preferred Securities will not be able to exercise any other remedy available to the holders of the Convertible Debentures. 26 ARTICLE 3 SATISFACTION AND DISCHARGE SECTION 3.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Convertible Debentures herein expressly provided for, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a) either (1) all Convertible Debentures theretofore authenticated and delivered (other than (i) Convertible Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06 and (ii) Convertible Debentures for whose payment money has theretofore been deposited 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 9.03) have been delivered to the Trustee for cancellation; or (2) all such Convertible Debentures not theretofore delivered to the Trustee for cancellation, (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose, an amount sufficient to pay and discharge the entire indebtedness on such Convertible Debentures not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and any interest to the date of such deposit (in the case of Convertible Debentures which have 27 become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' 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. Notwithstanding the satisfaction and discharge of this Indenture, the rights of the Trustee under Sections 4.07(3), 5.01 and 5.03, the obligations of the Company to the Trustee under Section 5.07, the obligations of the Company to any Authenticating Agent under Section 5.14 and, if money shall have been deposited with the Trustee pursuant to clause (a)(2) of this Section, the obligations of the Trustee under Section 3.02 and the last paragraph of Section 9.03 shall survive. SECTION 3.02. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 9.03, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 3.01 and all money received by the Trustee in respect of such U.S. Government Obligations shall be held in trust and applied by it, in accordance with the provisions of the Convertible Debentures 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 (and premium, if any) and any interest for whose payment such money and U.S. Government Obligations has been deposited with or received by the Trustee. Money deposited pursuant to this Section not in violation of this Indenture shall not be subject to claims of the holders of Senior Indebtedness under Article XV. ARTICLE 4 REMEDIES SECTION 4.01. EVENTS OF DEFAULT "EVENT OF DEFAULT" means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest upon any Convertible Debenture when it becomes due and payable, and continuance of such default for a period of 30 days (whether or not such payment is prohibited by the 28 subordination provisions set forth in Article XV hereof); PROVIDED, HOWEVER, that a valid extension of an interest payment period by the Company in accordance with Article XI hereof shall not constitute a default in the payment of interest for this purpose; or (b) default in the payment of the principal of or any premium on any Convertible Debenture at its Maturity (whether or not such payment is prohibited by the subordination provisions set forth in Article XV hereof); or (c) failure by the Company to convert any Convertible Debenture (whether or not such conversion or exchange is prohibited by the subordination provisions set forth in Article XV hereof); or (d) default in the performance or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Convertible Debentures a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder; or (e) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (f) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree 29 or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (g) the voluntary or involuntary dissolution, winding-up or other termination of the existence of the Trust except in connection with (A) the distribution of the Convertible Debentures to holders of Trust Securities in liquidation of their interest in the Trust or (B) the redemption of all of the outstanding Trust Securities. SECTION 4.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than an Event of Default specified in Section 4.01(e), (f) or (g)) with respect to Convertible Debentures at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Convertible Debentures may declare the principal amount of all the Convertible Debentures to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount shall become immediately due and payable; PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of the Convertible Debentures then Outstanding may rescind or annul such declaration and its consequences by objecting in writing within 30 days of such declaration. If an Event of Default specified in Section 4.01(e), (f) or (g) with respect to the Convertible Debentures at the time Outstanding occurs, the principal amount of all the Convertible Debentures shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. At any time after such a declaration of acceleration with respect to the Convertible Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Convertible Debentures, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if 30 (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Convertible Debentures, (B) the principal of (and premium, if any, on) any Convertible Debentures which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 4.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 4.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if (1) default is made in the payment of any interest on any Convertible Debenture when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Convertible Debentures at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Convertible Debentures, the whole amount then due and payable on such Convertible Debentures for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor, without duplication of any other amounts paid by the Trust or trustee in 31 respect thereof, upon overdue installments of interest at the rate per annum expressed in such Convertible Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 4.04. TRUSTEE MAY FILE PROOF OF CLAIM. In case of any judicial proceeding relative to the Company (or any other obligor upon the Convertible Debentures), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due 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 5.07. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan or reorganization, arrangement, adjustment or composition affecting the Convertible Debentures or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; PROVIDED HOWEVER, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 4.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CONVERTIBLE DEBENTURES. All rights of action and claims under this Indenture or the Convertible Debentures may be prosecuted and enforced by the Trustee without the possession of any of the Convertible Debentures or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision 32 for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Convertible Debentures in respect of which such judgment has been recovered. SECTION 4.06. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, on the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Convertible Debentures and the notation thereof of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 5.07; SECOND: To the payment of all Senior Indebtedness of the Company of the Company to the extent required by Article XV hereof; THIRD: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Convertible Debentures in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Convertible Debentures for principal and any premium and interest, respectively; and FOURTH: To the payment of the remainder, if any, to the Company. SECTION 4.07. LIMITATION ON SUITS. No Holder of any Convertible Debenture shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Convertible Debentures shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; 33 (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; 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 Outstanding Convertible Debentures; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 4.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, but subject to Article XV of this Indenture, the Holder of any Convertible Debentures shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Article XI) interest on such Convertible Debentures on the Stated Maturity (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 4.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 4.10. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 34 SECTION 4.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Convertible Debentures to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 4.12. CONTROL BY HOLDERS. The Holders of a majority in principal amount of the Outstanding Convertible Debentures shall have the right to 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 the Trustee, with respect to the Convertible Debentures; PROVIDED that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in connection therewith, and (3) the Trustee may take any other action deemed proper by the Trustee which is not consistent with such direction. SECTION 4.13. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Convertible Debentures may on behalf of the Holders of all the Convertible Debentures waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of or any premium or interest on any Convertible Debenture, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without consent of the Holder of each Outstanding Convertible Debenture; PROVIDED, HOWEVER, that such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference of Trust Securities shall have consented to such waiver or modification to such waiver; PROVIDED, FURTHER, that if the consent of the Holder of each Outstanding Convertible Debenture is required, such waiver shall not be effective until each holder of the Trust Securities shall have consented to such waiver. 35 Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 4.14. 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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; PROVIDED that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. SECTION 4.15. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) 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. ARTICLE 5 THE TRUSTEE SECTION 5.01. DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. The duties and responsibilities of the Trustee shall be as provided in the Trust Indenture Act. No provision of this Indenture shall require the Trustee to extend 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 any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 5.02. NOTICE OF DEFAULTS. If a default occurs hereunder, the Trustee shall give the Holders notice of such default as and to the extent provided by the Trust Indenture Act; PROVIDED, HOWEVER, that in the case of any default of the character specified in Section 4.01(e), no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" 36 means any event which is, or after notice or lapse of time or both would become an Event of Default. SECTION 5.03. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Convertible Debentures pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the 37 books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 5.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CONVERTIBLE DEBENTURES. The recitals contained herein and in the Convertible Debentures (except the Trustee's certificates of authentication) shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of any Convertible Debentures. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Convertible Debentures or the proceeds thereof. SECTION 5.05. MAY HOLD CONVERTIBLE DEBENTURES. The Trustee, any Authenticating Agent, any Paying Agent, any Debenture Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Convertible Debentures and, subject to Section 5.10 and 5.12, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Debenture Registrar or such other agent. SECTION 5.06. 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 in writing with the Company. SECTION 5.07. COMPENSATION AND REIMBURSEMENT. The Company agrees: (a) to pay to the Trustee or any successor Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee or any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the compensation and the expenses 38 and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.01(e), (f) or (g) the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar laws. The Trustee shall have a lien prior to the Convertible Debentures as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 5.07, except with respect to funds held in trust for the benefit of the Holders of particular Convertible Debentures. The provisions of this Section 5.07 shall survive the termination of this Indenture. SECTION 5.08. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 5.09. (b) The Trustee may resign at any time with respect to the Convertible Debentures by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 5.09 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Convertible Debentures. (c) The Trustee may be removed at any time with respect to the Convertible Debentures by Act of the Holders of a majority in principal amount of the Outstanding Convertible Debentures delivered to the Trustee and to the Company. If the instrument 39 of acceptance by a successor Trustee required by Section 5.09 shall not have been delivered to the Trustee within 30 days after the delivery of such Act of removal, the Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Convertible Debentures. (d) If at any time: (1) the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act after written request therefor by the Company or by any Holder of a Convertible Debenture who has been a bona fide Holder of a Convertible Debenture for at least six months, or (2) the Trustee shall cease to be eligible under Section 5.11 and Section 310(a) of the Trust Indenture Act and shall fail to resign after written request therefor by the Company or by any such Holder of a Convertible Debenture who has been a bona fide Holder of Convertible Debenture for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Convertible Debentures, or (ii) subject to Section 4.15 any Holder of a Convertible Debenture who has been a bona fide Holder of a Convertible Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Convertible Debentures and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Convertible Debentures, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Convertible Debentures and shall comply with the applicable requirements of Section 5.09. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Convertible Debentures shall be appointed by Act of the Holders of a majority in principal amount of Outstanding Convertible Debentures delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 5.09, become the successor Trustee with respect to the Convertible 40 Debentures and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Convertible Debentures shall have been so appointed by the Company or the Holders of Convertible Debentures and accepted appointment in the manner required by Section 5.09, any Holder of a Convertible Debenture who has been a bona fide Holder of a Convertible Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Convertible Debentures . (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee with respect to the Convertible Debentures in the manner provided in Section 1.06. Each notice shall include the name of the successor Trustee with respect to the Convertible Debentures and the address of its Corporate Trust Office. SECTION 5.09. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Trustee with respect to the Convertible Debentures, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but on the written request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon the written request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 5.10. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to 41 the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 5.11. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall be at all times a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereunder specified in this Article. SECTION 5.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Convertible Debentures), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 5.13. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Convertible Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Convertible Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Convertible Debentures. SECTION 5.14. APPOINTMENT OF AUTHENTICATING AGENT. The Trustee may appoint an Authenticating Agent or Agents with respect to the Convertible Debentures which shall be authorized to act on behalf of the Trustee to authenticate the Convertible Debentures issued upon original issue or upon exchange, registration of transfer or partial redemption thereof 42 or pursuant to Section 2.06, and Convertible Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Convertible Debentures by the Trustee or the Trustee's certificate of authentication such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall promptly give notice of such appointment to all Holders of Convertible Debentures pursuant to Section 1.06. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder with like effect as if originally named as an Authenticating Agent. 43 No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to the Convertible Debentures is made pursuant to this Section, the Convertible Debentures may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Convertible Debentures referred to in the within-mentioned Indenture. First Union National Bank of Georgia As Trustee By -------------------------------------- Authenticating Agent By -------------------------------------- Authorized Signatory SECTION 5.15. NOTICE OF DEFAULTS. If a default occurs hereunder with respect to Convertible Debentures, the Trustee shall give the Holders of Convertible Debentures notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 4.01(d) with respect to Convertible Debentures, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "DEFAULT" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Convertible Debentures. SECTION 5.16. PAYMENT OF EXPENSES. In connection with the offering, sale and issuance of the Convertible Debentures to the Institutional Trustee and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Convertible Debentures, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Convertible Debentures, including commissions to the initial purchasers payable pursuant to the Purchase Agreement and compensation of the Trustee in accordance with the provisions of Section 5.07; 44 (b) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the fees and expenses of the Institutional Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); (c) pay all costs and expenses related to the enforcement by the Institutional Trustee of the rights of the holders of the Trust Preferred Securities; (d) be primarily liable for any indemnification obligations arising with respect to the Declaration; and (e) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. SECTION 5.17. PAYMENT UPON RESIGNATION OR REMOVAL. Upon termination of this Indenture or the removal or resignation of the Trustee pursuant to Section 5.08, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Institutional Trustee, as the case may be, pursuant to Section 5.07 of the Declaration, the Company shall pay to the Delaware Trustee or the Institutional Trustee, and their respective counsel, as the case may be, all amounts accrued to the date of such termination, removal or resignation. ARTICLE 6 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 6.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. The Company will furnish or cause to be furnished to the Trustee (1) semi-annually, not later than January 31 or July 31 in each year, a list, in such form as the Trustee may reasonably require, of the names and 45 addresses of the Holders of Securities of each series as of the preceding January 15 or July 15, as the case may be, and (2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; EXCLUDING from any such list names and addresses received by the Trustee in its capacity as Debenture Registrar. SECTION 6.02. REPORTS BY TRUSTEE. The Trustee shall in each year transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act in the manner provided pursuant thereto. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Convertible Debentures are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when any Convertible Debentures are listed on any stock exchange or market center. SECTION 6.03. REPORTS BY COMPANY. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and reports and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided therein, PROVIDED that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE 7 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 7.01. COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. The Company shall not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any Person, unless (a) either the Company shall be the continuing corporation, or the successor corporation (if other than the Company) shall be a corporation organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Convertible Debentures, according to their tenor, and the due 46 and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation, and (b) the Company or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition. SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Convertible Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any securities which previously shall have been signed and delivered by the officers of the Company, to the Trustee for authentication, and any Convertible Debentures which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Convertible Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Convertible Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Convertible Debentures had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in the Convertible Debentures thereafter to be issued as may be appropriate. In the event of any such sale or conveyance (other than a conveyance by way of lease) the Company or any successor corporation which shall theretofore have become such in the manner described in this Article shall be discharged from all obligations and covenants under this Indenture and the Convertible Debentures and may be liquidated and dissolved. SECTION 7.03. OPINION OF COUNSEL TO TRUSTEE. The Trustee may receive an Opinion of Counsel, prepared in accordance with Section 1.02, as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture. 47 ARTICLE 8 SUPPLEMENTAL INDENTURES SECTION 8.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders of Convertible Debentures, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Convertible Debentures; or (b) to add to the covenants of the Company for the benefit of the Holders of Convertible Debentures or to surrender any right or power herein conferred upon the Company; or (c) to add any additional Events of Default; or (d) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Convertible Debenture Outstanding which is entitled to the benefit of such provision; or (e) to evidence and provide for the acceptance of appointment thereunder by a successor Trustee with respect to the Convertible Debentures; or (f) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Article XIV, including providing for the conversion of the Convertible Debentures into any security or property (other than the Common Stock of the Company); or (g) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, PROVIDED that such action shall not adversely affect the interests of the Holders of Convertible Debentures in any material respect. SECTION 8.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Convertible Debentures, by Act of said Holders delivered to the Company 48 and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Convertible Debentures under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Convertible Debenture affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Convertible Debenture, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount or principal which would be due and payable upon a declaration of acceleration of Maturity, or change any Place of Payment where, or the coin or currency in which any Convertible Debenture or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (b) reduce the percentage in principal amount of the Outstanding Convertible Debentures, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of certain defaults hereunder and their consequences provided for in this Indenture, or (c) change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in Section 9.02, or (d) modify any of the provisions of this Section or Section 4.13 or Section 9.08, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Convertible Debenture; PROVIDED, HOWEVER, that this clause shall not be deemed to require the consent of any Holder of a Convertible Debenture with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 9.08 or the deletion of this proviso, in accordance with the requirements of Sections 5.09 and 8.01(e), or (e) make any change that adversely affects the right to convert any Convertible Debenture as provided in Article XIV (except as permitted by Section 8.01) or decrease the conversion rate or increase the conversion price of the Convertible Debentures, or 49 (f) make any change in Article XV that adversely affects the rights of any Holders of Outstanding Convertible Debentures, Such supplemental indenture shall not be effective until the holders of a majority in liquidation preference of the Trust Securities shall have consented to such supplemental indenture; PROVIDED that if the consent of the Holder of each Outstanding Convertible Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture. It shall not be necessary for any Act of Holders of Convertible Debentures under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 8.03. EXECUTION OF SUPPLEMENTAL INDENTURES. Prior to executing any supplemental indenture permitted by this Article or the modifications thereby of the Trust, the Trustee shall be entitled to receive, and (subject to Section 5.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 8.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Convertible Debentures theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 8.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. SECTION 8.06. REFERENCE IN CONVERTIBLE DEBENTURES TO SUPPLEMENTAL INDENTURES. Convertible Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Convertible Debentures so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Convertible Debentures. 50 ARTICLE 9 COVENANTS SECTION 9.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company covenants and agrees for the benefit of the Convertible Debentures that it will duly and punctually pay the principal of and any premium and interest on the Convertible Debentures in accordance with the terms of the Convertible Debentures and this Indenture. SECTION 9.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in each Place of Payment an office or agency where Convertible Debentures may be presented or surrendered for payment, where Convertible Debentures may be surrendered for registration of transfer, exchange, or conversion and where notices and demands to or upon the Company in respect of the Convertible Debentures and this Indenture may be served. The Company will give prompt notice to the Trustee and to the Holders as provided in Sections 1.05 and 1.06, respectively, of the location and any change in the location, of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency in respect of Convertible Debentures or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders of Convertible Debentures may be made and notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Convertible Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Convertible Debentures for such purposes. The Company will give prompt written notice to the Trustee and the Holders of Convertible Debentures of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 9.03. MONEY FOR CONVERTIBLE DEBENTURES PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent with respect to Convertible Debentures, it will, on or before each due date of the principal of and any premium or interest on any of the Convertible Debentures, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure to act. 51 Whenever the Company shall have one or more Paying Agents for the Convertible Debentures it will, prior to each due date of the principal of and any premium or interest on the Convertible Debentures, deposit with a Paying Agent a sum sufficient to pay the principal and any premium or interest so becoming due, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) comply with the provisions of the Trust Indenture Act applicable to it as Paying Agent; and (b) at any time during the continuance of any default by the Company in the making of any payment with respect to the Convertible Debentures (or any other obligor), upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct the Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by the Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and any premium or interest on any Convertible Debenture and remaining unclaimed for two years after such principal and any premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of the Convertible Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or the Paying Agent with respect to such trust money and all liability of the Company as trustee thereof shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper in each Place of Payment, notice that such money remains unclaimed and that after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. 52 SECTION 9.04. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company will (a) maintain 100% direct or indirect ownership of the Common Securities of the Trust; PROVIDED, HOWEVER, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities, (b) use its reasonable efforts to cause the Trust (i) to remain a statutory business trust, except in connection with a distribution of Convertible Debentures to the holders of Trust Securities in liquidation of such the Trust or the redemption of all of the Trust Securities of the Trust, (ii) to continue to be classified as a grantor trust for United States federal income tax purposes and (iii) to continue to qualify for an exemption from registration under the Investment Company Act of 1940, as amended, and (c) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Convertible Debentures . SECTION 9.05. EXISTENCE. Subject to Article VII the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 9.06. MAINTENANCE OF PROPERTIES. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 9.07. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim 53 whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 9.08. WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 8.01(b) for the benefit of the Holders or in any of Sections 9.04, 9.06 and 9.07, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Convertible Debentures shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. SECTION 9.09. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate signed by its principal executive officer, principal financial officer or principal accounting officer stating whether or not to the best knowledge of the signer thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. ARTICLE 10 REDEMPTION OF THE CONVERTIBLE DEBENTURES SECTION 10.01. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem Convertible Debentures shall be evidenced by an Officers' Certificate. In the case of any redemption, at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Convertible Debentures to be redeemed. In the case of any redemption of Convertible Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Convertible Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. 54 SECTION 10.02. SELECTION BY TRUSTEE OF CONVERTIBLE DEBENTURES TO BE REDEEMED. If less than all the Convertible Debentures are to be redeemed, the particular Convertible Debentures to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Convertible Debentures not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Convertible Debenture; provided that the unredeemed portion of the principal amount of any Convertible Debentures shall be an authorized denomination and shall not be less than the minimum authorized denomination for the Convertible Debentures. If Convertible Debentures selected for partial redemption are converted in part before termination of the conversion right with respect to the portion of the Convertible Debenture so selected, the converted portion of the Convertible Debentures shall be deemed (so far as may be) to be the portion selected for redemption. Convertible Debentures (or portions thereof) which have been converted during a selection of Convertible Debentures to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. In any case where more than one Convertible Debenture is registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one Convertible Debenture. The Trustee shall promptly notify the Company in writing of the Convertible Debentures selected for redemption and, in the case of any Convertible Debentures selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Convertible Debentures shall relate, in the case of any Convertible Debentures redeemed or to be redeemed only in part, to the portion of the principal amount of the Convertible Debentures which has been or is to be redeemed. SECTION 10.03. NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided in Section 1.06 to the Holders of Convertible Debentures to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; 55 (c) if less than all the Outstanding Convertible Debentures are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Convertible Debentures to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Convertible Debenture to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (e) the place or places where such Convertible Debentures are to be surrendered for payment of the Redemption Price; (f) if applicable, the conversion rate or price, the date on which the right to convert the Convertible Debentures to be redeemed will terminate and the place or places where such Convertible Debentures may be surrendered for conversion. Notice of redemption of Convertible Debentures to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 10.04. DEPOSIT OF REDEMPTION PRICE. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in SECTION 9.03) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Convertible Debentures which are to be redeemed on that date. If any Convertible Debenture called for redemption is converted into Common Stock of the Company, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Convertible Debenture shall (subject to any right of the Holder of such Convertible Debenture or any Predecessor Convertible Debenture to receive interest as provided in the last paragraph of SECTION 2.07(d)) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 10.05. CONVERTIBLE DEBENTURES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Convertible Debentures so to be redeemed shall on the Redemption Date become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Convertible Debentures shall cease to bear interest. Upon surrender of any such Convertible Debenture for redemption in accordance with said notice, such Convertible Debenture shall be paid by 56 the Company at the Redemption Price together with accrued interest to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Convertible Debentures or one or more Predecessor Convertible Debentures, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of SECTION 2.07(d). If any Convertible Debenture called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Convertible Debenture. SECTION 10.06. CONVERTIBLE DEBENTURES REDEEMED IN PART. Any Convertible Debenture which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Convertible Debenture without service charge, a new Convertible Debenture or Convertible Debentures of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Convertible Debenture so surrendered. SECTION 10.07. SPECIAL EVENT REDEMPTION. If a Special Event has occurred and is continuing and after receiving a Dissolution Tax Opinion, the Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No-Recognition Opinion cannot be delivered to the Trust, then, notwithstanding Section 10.08(a) but subject to Section 10.08(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the Holders of the Convertible Debentures to redeem the Convertible Debentures, in whole or in part, for cash within 90 days following the occurrence of such Tax Event (the "90-DAY PERIOD") at a redemption price equal to 100% of the principal amount to be redeemed (the "Redemption Price") plus any accrued and unpaid interest thereon (including Compound and Additional Interest) to the date of such redemption, PROVIDED that if at the time there is available to the Company or the Trust the opportunity to eliminate, within the 90-Day Period, the Tax Event by taking some ministerial action ("MINISTERIAL ACTION"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption, and, PROVIDED, FURTHER, that the Company shall have no right to redeem the Convertible Debentures while the Trust is 57 pursuing any Ministerial Action pursuant to its obligations under the Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines, PROVIDED that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price prior to the redemption date. SECTION 10.08. OPTIONAL REDEMPTION BY COMPANY. (a) Subject to the provisions of Section 10.08(b) except as otherwise may be specified or elsewhere in this Indenture, the Company shall have the right to redeem the Convertible Debentures, in whole or in part, from time to time, on or after March 3, 2000. Any redemption pursuant to this paragraph will be made upon not less than 30 days nor more than 60 days notice to the Holder of the Convertible Debentures, at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) (the "OPTIONAL REDEMPTION PRICE") together with accrued and unpaid interest, including Additional Interest to, but excluding, the Redemption Date, if redeemed during the 12-month period beginning March 1: Year Redemption Price ---- ---------------- 2000 104.375% 2001 103.500 2002 102.625 2003 101.750 2004 100.875 and 100% if redeemed on or after March 1, 2005. Notwithstanding the foregoing, no notice of redemption of Convertible Debentures pursuant to this Section 10.08 shall be given unless all accrued and unpaid Deferred Interest has been duly paid. If Convertible Debentures are redeemed on any March 1, June 1, September 1, or December 1, accrued and unpaid interest shall be payable to Holders of record on the relevant record date. So long as the corresponding Trust Preferred Securities are outstanding, the proceeds from the redemption of the Convertible Debentures will be used to redeem Trust Preferred Securities. The Optional Redemption Price shall be paid prior to 12:00 noon, New York time, on the Redemption Date or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay 58 the Optional Redemption Price by 10:00 a.m., New York time, on the date such Optional Redemption Price is to be paid. (b) If a partial redemption of the Convertible Debentures would result in the delisting of the Trust Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Trust Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Convertible Debentures in whole. SECTION 10.09. NO SINKING FUND. The Convertible Debentures are not entitled to the benefit of any sinking fund. ARTICLE 11 EXTENSION OF INTEREST PAYMENT PERIOD SECTION 11.01. EXTENSION OF INTEREST PAYMENT PERIOD. So long as an Event of Default shall not have occurred and be continuing, the Company shall have the right, at any time and from time to time during the term of the Convertible Debentures, to defer payments of interest by extending the interest payment period of such Convertible Debentures for a period not exceeding 20 consecutive quarters (an "EXTENSION PERIOD"), during which Extension Period no interest shall be due and payable; PROVIDED that no Extension Period may extend beyond the Maturity Date or any earlier Redemption Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 11.01, will bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extension Period ("COMPOUND INTEREST"). At the end of the Extension Period, the Company shall pay all accrued and unpaid interest on the Convertible Debentures, including any Additional Interest and Compound Interest (together, "DEFERRED INTEREST") that shall be payable to the Holders of the Convertible Debentures in whose names the Convertible Debentures are registered in the Debenture Register on the first record date after the end of the Extension Period. Before the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the maturity date of the Convertible Debentures. Upon the termination of any Extension Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extension Period. 59 SECTION 11.02 NOTICE OF EXTENSION. (a) If the Institutional Trustee is the only registered Holder of the Convertible Debentures at the time the Company selects an Extension Period, the Company shall give written notice to the Regular Trustees, the Institutional Trustee and the Trustee of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the Trust Securities are payable or (ii) the date the Regular Trustees are required to give notice to the Nasdaq National Market (or other applicable self-regulatory organization) or to holders of the Trust Securities of the record date or the date such distribution is payable. (b) If the Institutional Trustee is not the only Holder of the Convertible Debentures at the time the Company selects an Extension Period, the Company shall give the Holders of the Convertible Debentures and the Trustee written notice of its selection of such Extension Period at least 10 Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date upon which the Company is required to give notice to the Nasdaq National Market (or other applicable self-regulatory organization) or to the Holders of the Convertible Debentures of the record or payment date of such related interest payment. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 11.02 shall be counted as one of the 20 quarters permitted in the maximum Extension Period permitted under Section 11.01. (d) The Regular Trustees shall give notice of Apple South's selection of any such Extension Period to the holders of the Trust Securities. SECTION 11.03. LIMITATION OF TRANSACTIONS. If the Company shall exercise its right to defer payment of interest as provided in Section 11.01, then (i) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (A) purchases or acquisitions of shares of its common stock in connection with the satisfaction by the Company of its obligations under any employee benefit plans, (B) as a result of a reclassification of its capital stock or the exchange or conversion of one class or series of its capital stock for another class or series of its capital stock, (C) the purchase of fractional interests in shares of its capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (D) purchases or acquisitions of shares of Common Stock to be used in connection with acquisitions of Common Stock by shareholders pursuant to the Company's dividend reinvestment plan), (ii) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank PARI PASSU with or junior to the Convertible Debentures and (iii) the Company shall not make any guarantee payment with respect to the foregoing (other than pursuant to the Guarantee). 60 ARTICLE 12 FORM OF CONVERTIBLE DEBENTURE SECTION 12.01. FORM OF CONVERTIBLE DEBENTURE. The Convertible Debentures and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms; PROVIDED that if the Convertible Debenture is a Restricted Security, it shall bear the legend set forth in Section 2.04(d) in accordance with the provisions of that Section: [(FORM OF FACE OF CONVERTIBLE DEBENTURE)] [IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING - - This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Debenture is exchangeable for Convertible Debentures registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Debenture (other than a transfer of this Debenture as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Company or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] 61 No. CUSIP NO. --------------- -------------- APPLE SOUTH, INC. 7% CONVERTIBLE SUBORDINATED DEBENTURE Apple South, Inc., a Georgia corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to, ________________ or registered assigns, the principal sum of _______________ Dollars ($_______) on March 1, 2027, and to pay interest on said principal sum from March 11, 1997, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 1, June 1, September 1, and December 1 of each year commencing June 1, 1997, at the rate of 7% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on this Convertible Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture (referred to on the reverse hereof, be paid to the person in whose name this Convertible Debenture (or one or more Predecessor Securities, as defined in said Indenture) is registered on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date unless otherwise provided in the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such Regular Record Date and may be paid to the Person in whose name this Convertible Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the 62 registered Holders of the Convertible Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Convertible Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Convertible Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the Holder of this Convertible Debenture is the Institutional Trustee, the payment of the principal of (and premium, if any) and interest on this Convertible Debenture will be made at such place and to such account as may be designated by the Institutional Trustee. The indebtedness evidenced by this Convertible Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Convertible Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Convertible Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Convertible Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Convertible Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. 63 IN WITNESS WHEREOF, the Company has caused this instrument to be executed. APPLE SOUTH, INC. By: ------------------------------------- Name: Title Attest: By: -------------------------------- Name: Title: 64 CERTIFICATE OF AUTHENTICATION This is one of the Convertible Debentures of the series of Convertible Debentures described in the within-mentioned Indenture. Dated: March __, 1997 FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee or as Authentication Agent By By ------------------------- --------------------------------- Authorized Signatory Authorized Signatory 65 [FORM OF REVERSE OF DEBENTURE] This Convertible Debenture is issued pursuant to an Indenture dated as of March 6, 1997, duly executed and delivered between the Company and First Union National Bank of Georgia, as Trustee (the "Trustee") (the "Indenture"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Convertible Debentures. Because of the occurrence and continuation of a Special Event, in certain circumstances, this Convertible Debenture may become due and payable at the principal amount hereof together with any interest (including Additional Interest and Compound Interest) accrued thereon (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines. The Company shall have the right to redeem this Convertible Debenture at the option of the Company, upon not less than 30 nor more than 60 days notice in whole or in part at any time on or after March 3, 2000 (an "Optional Redemption") at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) (the "Optional Redemption Price") together with accrued and unpaid interest, including Compound and Additional Interest to, but excluding, the redemption date, if redeemed during the 12-month period beginning March 1: Year Redemption Price ---- ---------------- 2000 104.375% 2001 103.500 2002 102.625 2003 101.750 2004 100.875 and 100% if redeemed on or after March 1, 2005. If Convertible Debentures are redeemed on any March 1, June 1, September 1, or December 1, accrued and unpaid interest shall be payable to holders of record on the relevant record date. So long as the corresponding Trust Preferred Securities are outstanding, the proceeds from the redemption of any of the Convertible Debentures will be used to redeem Trust Preferred Securities. 66 If the Convertible Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Convertible Debentures will be redeemed PRO RATA. In the event of redemption of this Convertible Debenture in part only, a new Convertible Debenture or Convertible Debentures of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Convertible Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures of such series; PROVIDED, HOWEVER, that no such supplemental indenture shall (a) extend the fixed maturity of any Debenture of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or make any change that adversely affects the right to convert any Debenture of any series or make any change in the subordination provisions that adversely affects the rights of any Holders of any Debenture of any series, without the consent of the Holder of each Debenture so affected, or (b) reduce the aforesaid percentage of Debentures of such series, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Debenture of any series then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Debentures of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Debentures of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any Debentures of such series or a failure to convert any Debentures of such series in accordance with its terms upon an election by the Holders thereof. Any such consent or waiver by the registered Holder of this Convertible Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Convertible Debenture and of any Convertible Debenture issued in exchange 67 therefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Convertible Debenture. No reference herein to the Indenture and no provision of this Convertible Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Convertible Debenture at the time and place and at the rate and in the money herein prescribed. As long as an Event of Default under Section 4.01 of the Indenture shall not have occurred and be continuing, the Company shall have the right at any time during the term of the Convertible Debentures and from time to time to extend the interest payment period of such Convertible Debentures for up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Convertible Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, PROVIDED that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Convertible Debenture is transferable by the registered Holder hereof on the Debenture Register of the Company, upon surrender of this Convertible Debenture for registration of transfer at the office or agency of the Trustee in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Convertible Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Convertible Debenture, the Company, the Trustee, any paying agent and the Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Convertible Debenture shall be overdue and notwithstanding any notice of 68 ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Convertible Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Holder of any Convertible Debenture has the right, exercisable at any time through the close of business (New York time) on March 1, 2027 (or, in the case of a Convertible Debenture called for redemption, prior to the close of business on the Business Day prior to the corresponding redemption date), to convert the principal amount thereof (or any portion thereof that is an integral multiple of $50) into shares of Common Stock at the initial conversion rate of 3.3801 shares of Common Stock for each Convertible Debenture (equivalent to a Conversion Price of $14.793 per share of Common Stock), subject to adjustment under certain circumstances. To convert a Convertible Debenture, a Holder must (a) complete and sign a conversion notice substantially in the form attached hereto, (b) surrender the Convertible Debenture to a Conversion Agent, (c) furnish appropriate endorsements or transfer documents if required by the Conversion Agent and (d) pay any transfer or similar tax, if required. If a Convertible Debenture is surrendered for conversion after the close of business on any regular record date for payment of a Distribution and before the opening of business on the corresponding Distribution payment date, then, notwithstanding such conversion, the Distribution payable on such Distribution payment date will be paid in cash to the person in whose name the Convertible Debenture is registered at the close of business on such record date, and (other than a Convertible Debenture or a portion of a Convertible Debenture called for redemption on a redemption date occurring after such record date and on or prior to such Distribution payment date) when so surrendered for conversion, the Convertible Debenture must be accompanied by payment of an amount equal to the Distribution payable on such Distribution payment date. The number of shares issuable upon conversion of a Convertible Debenture is determined by dividing the principal amount of the Convertible Debenture converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion but a cash 69 adjustment will be made for any fractional interest. The outstanding principal amount of any Convertible Debenture shall be reduced by the portion of the principal amount thereof converted into shares of Common Stock. [The Convertible Debentures are issuable only in registered form without Coupons in denominations of $50 and any integral multiple thereof.](2) [This Global Debenture is exchangeable for Convertible Debentures in definitive form only under certain limited circumstances set forth in the Indenture. Convertible Debentures so issued are issuable only in registered form without Coupons in denominations of $50 and any integral multiple thereof.](3) As provided in the Indenture and subject to certain limitations therein set forth, Convertible Debentures of this series are exchangeable for a like aggregate principal amount of Convertible Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Convertible Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. - ------------------------- (2) This text will appear in the case of registered definitive certificates issued to Institutional Accredited Investors. (3) This text will appear in the case of a Global Debenture. 70 [FORM OF ELECTION TO CONVERT] ELECTION TO CONVERT To: Apple South, Inc. The undersigned owner of this Convertible Debenture hereby irrevocably exercises the option to convert this Convertible Debenture, or the portion below designated, into Common Stock of APPLE SOUTH, INC. in accordance with the terms of the Indenture referred to in this Convertible Debenture, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: , ------------- -- in whole Portions of Convertible Debenture to be converted ($50 or integral multiples thereof): $ ----------------- ------------------------------------------------------------ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ Signature Guarantee:* ---------------------------------- - ------------------------- * Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership of participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. 71 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible Debenture to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints ------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this Convertible Debenture on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------- Signature: ------------------------- (Sign exactly as your name appears on the other side of this Convertible Debenture) Signature Guarantee*: ----------------------------------------------------------- - ------------------------- * Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership of participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. 72 FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH (I) TRANSFERS OF INTERESTS IN THE TEMPORARY REGULATION S GLOBAL DEBENTURE AND (II) TRANSFERS OF INTEREST TO NON-U.S. PERSONS First Union National Bank of Georgia 999 Peachtree Street, N.E. Suite 1100 Atlanta, Georgia 30309 Re: Apple South, Inc. (the "Company") Convertible Debentures --------------------------------- Dear Sirs or Mesdames: In connection with our proposed sale of the number of Convertible Debentures designated below, the undersigned owner confirms that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, represents that: (1) the offer of the Convertible Debentures was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. 73 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Date: , ----------- ---- Very truly yours, [Name of Transferor] By: -------------------------- Authorized Signature Number of Convertible Debentures to be sold: ------------------------ Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number: ------------------------ ------------------------ ------------------------ 74 ASSIGNMENT [FORM OF ASSIGNMENT FOR CONVERTIBLE DEBENTURES THAT ARE NOT GLOBAL DEBENTURES] For value received ___________________ hereby sell(s), assign(s) and transfer(s) unto__________________________ (Please insert Social security or other taxpayer identification number of assignee.) the within Security and hereby irrevocably constitutes and appoints ______________ attorney to transfer the said Convertible Debenture on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within Convertible Debenture occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such Security is being transferred: / / To Apple South, Inc. or a subsidiary thereof; or / / Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or / / To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; 75 and unless the box below is checked, the undersigned confirms that such Security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Dated: -------------------------- -------------------------- -------------------------- Signature(s) Signature(s) must be guaranteed by a commercial bank or trust company or a member firm of a major stock exchange. - ---------------------------------- Signature Guarantee NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatever. 76 [FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL DEBENTURES TO REFLECT CHANGES IN PRINCIPAL AMOUNT] Schedule A Changes to Principal Amount of Global Debentures - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Principal Amount of Convertible Debenture by which this Global Debenture Is To Be Reduced or Increased, Remaining Principal and Reason for Reduction Amount of this Notation Date or Increase Global Debenture Made by -------- ------------------------ ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- -------- -------------------- ------------------- --------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 77 ARTICLE 13 ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES SECTION 13.01. ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES. Convertible Debentures in the aggregate principal amount of $101,010,000 ($116,161,500 if the over-allotment option is exercised pursuant to the Purchase Agreement) may, upon execution of this Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Convertible Debentures to or upon the written order of the Company, signed by its Chairman, its Vice Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE 14 CONVERSION OF CONVERTIBLE DEBENTURES SECTION 14.01. CONVERSION RIGHTS. Subject to and upon compliance with the provisions of this Article XIV, the Convertible Debentures are convertible, at the option of the Holder, at any time through the close of business on March 1, 2027 (or, in the case of Convertible Debentures called for redemption, prior to the close of business on the Business Day prior to the corresponding redemption date) into fully paid and nonassessable shares of Common Stock of the Company at an initial conversion rate of 3.3801 shares of Common Stock for each $50 in aggregate principal amount of Convertible Debentures (equal to a conversion price (as adjusted from time to time, the "Conversion Price") of $14.793 per share of Common Stock), subject to adjustment as described in this Article XIV. A Holder of Convertible Debentures may convert any portion of the principal amount of the Convertible Debentures into that number of fully paid and nonassessable shares of Common Stock obtained by dividing the principal amount of the Convertible Debentures to be converted by such conversion price. All calculations under this Article XIV shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. SECTION 14.02. CONVERSION PROCEDURES. (a) In order to convert all or a portion of the Convertible Debentures, the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of Conversion setting forth the principal amount of Convertible Debentures to be converted, together with the name or names, if other than the Holder, in which the shares of Common Stock should be issued upon conversion and, if such Convertible Debentures are definitive Convertible Debentures, surrender to the Conversion Agent the Convertible Debentures to be converted, duly endorsed or assigned to the Company or in blank. In addition, a holder of Trust Preferred Securities may exercise its 78 right under the Declaration to convert such Trust Preferred Securities into Common Stock by delivering to the Conversion Agent an irrevocable Notice of Conversion setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Trust Preferred Security for a portion of the Convertible Debentures held by the Trust (at an exchange rate of $50 principal amount of Convertible Debentures for each Trust Preferred Security) and (ii) to immediately convert such Convertible Debentures, on behalf of such holder, into Common Stock of the Company pursuant to this Article XIV and, if such Trust Preferred Securities are in definitive form, surrendering such Trust Preferred Securities, duly endorsed or assigned to the Company or in blank. So long as any Trust Preferred Securities are outstanding, the Trust shall not convert any Convertible Debentures except pursuant to a Notice of Conversion delivered to the Conversion Agent by a holder of Trust Preferred Securities. If a Trust Preferred Security is surrendered for conversion after the close of business on any regular record date for payment of a Distribution and before the opening of business on the corresponding Distribution payment date, then, notwithstanding such conversion, the Distribution payable on such Distribution payment date will be paid in cash to the person in whose name the Convertible Debenture is registered at the close of business on such record date, and (other than a Convertible Debenture or a portion of a Convertible Debenture called for redemption on a redemption date occurring after such record date and on or prior to such Distribution payment date) when so surrendered for conversion, the Convertible Debenture must be accompanied by payment of an amount equal to the Distribution payable on such Distribution payment date. Except as otherwise provided in the immediately preceding sentence, in the case of any Convertible Debenture which is converted, interest whose Maturity Date is after the date of conversion of such Convertible Debenture shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Convertible Debentures being converted, which shall be deemed to be paid in full. Each conversion shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Conversion was received (the "CONVERSION DATE") by the Conversion Agent from the Holder or from a holder of the Trust Preferred Securities effecting a conversion thereof pursuant to its conversion rights under the Declaration, as the case may be. The Person or Persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the Conversion Date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder in the Notice of Conversion, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. 79 (b) The Company's delivery upon conversion of the fixed number of shares of Common Stock into which the Convertible Debentures are convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Convertible Debentures so converted and any unpaid interest (including Compound and Additional Interest) accrued on such Convertible Debentures at the time of such conversion. (c) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a cash adjustment in an amount equal to the same fraction of the Closing Price of such fractional interest on the date on which the Convertible Debentures were duly surrendered to the Conversion Agent for conversion, or, if such day is not a Trading Day, on the next Trading Day, and the Conversion Agent in turn will make such payment, if any, to the Holder of the Convertible Debentures or the holder of the Trust Preferred Securities so converted. (d) In the event of the conversion of any Convertible Debenture in part only, a new Convertible Debenture or Convertible Debentures for the unconverted portion thereof will be issued in the name of the Holder thereof upon the cancellation thereof in accordance with paragraph (a) above. (e) In effecting the conversion transactions described in this Section 14.02, the Conversion Agent is acting as agent of the holders of Trust Preferred Securities (in the exchange of Trust Preferred Securities for Convertible Debentures) and as agent of the Holders of Convertible Debentures (in the conversion of Convertible Debentures into Common Stock), as the case may be. The Conversion Agent is hereby authorized (i) to exchange Convertible Debentures held by the Trust from time to time for Trust Preferred Securities in connection with the conversion of such Trust Preferred Securities in accordance with this Article XIV and (ii) to convert all or a portion of the Convertible Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Article XIV and to deliver to the Trust a new Convertible Debenture or Convertible Debentures for any resulting unconverted principal amount. SECTION 14.03. CONVERSION PRICE ADJUSTMENTS. (a) The Conversion Price shall be adjusted from time to time as follows: (i) In case the Company shall pay or make a dividend or other distribution on Common Stock in shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction the numerator of which 80 shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company (except to the extent such dividend or distribution is being made with respect to such shares) but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (ii) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller amount of shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iii) In case the Company shall issue rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date fixed for a distribution of such rights or warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as hereinafter defined) per share (determined as provided in subparagraph (vii) below) of Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants (other than pursuant to a dividend reinvestment plan), then the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (iii), the 81 number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company agrees not to issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made in respect of the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. (iv) Subject to the second paragraph of this subparagraph (iv), in case the Company shall, by dividend or otherwise, distribute to all holders of Common Stock (A) shares of capital stock of the Company (other than Common Stock), (B) evidence of indebtedness of the Company and/or (C) other assets (including securities, but excluding (1) any rights or warrants referred to in subparagraph (iii) above, (2) any rights or warrants to acquire capital stock of any entity other than the Company or any subsidiary of the Company (including any rights offerings of the Company with respect to capital stock of companies in which the Company has an investment (a "Rights Offering")), (3) dividends or distributions in connection with the liquidation, dissolution or winding-up of the Company, (4) dividends payable solely in cash that may from time to time be fixed by the Board of Directors of the Company and (5) dividends or distributions referred to in subparagraph (i) above), then in each case (unless the Company makes the election referred to in the next sentence) the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such record date by a fraction the numerator of which shall be the Current Market Price per share (determined as provided in subparagraph (vii) below) of the Common Stock on such record date (the "Reference Date") less the then fair market value on the Reference Date (as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive and shall be described in a statement filed with the Depositary and the Trustee) of the portion of the shares of capital stock of the Company, evidences of indebtedness or other assets so distributed (and for which an adjustment to the Conversion Price has not been made previously pursuant to the terms of this Article XIV) applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the Reference Date. However, the Company may elect, in its sole discretion, in lieu of the foregoing adjustment, to make adequate provision so that each holder of Securities shall have the right to receive upon conversion thereof the amount and kind of shares of capital stock, evidences of indebtedness or other 82 assets such holder would have received had such holder converted such shares on such record date. If the Board of Directors of the Company determines the fair market value of any distribution for purposes of this subparagraph (iv) by reference to the actual or when issued trading market for any securities (including shares of capital stock or evidence of indebtedness of the Company) comprising a distribution of securities, it must in doing so consider the price in such market over the period used in computing the Current Market Price of the Common Stock. For purposes of this subparagraph (iv), any dividend or distribution that includes both (x) any of the items described in clauses (A), (B) or (C) of the first paragraph of this subparagraph (iv) and (y) Common Stock or rights or warrants to subscribe for or purchase Common Stock of the type referred to in subparagraph (iii) shall be deemed to be (1) a dividend or distribution of shares of capital stock of the Company (other than Common Stock), evidences of indebtedness of the Company or other assets of the type referred to in clause (C) of the first paragraph of this subparagraph (iv) (making any Conversion Price reduction required by this subparagraph (iv)) immediately followed by (2) a dividend or distribution of such Common Stock or rights or warrants to purchase Common Stock of the type referred to in subparagraph (iii) (making any further Conversion Price reduction required by subparagraph (i) or (iii) of this Section 14.03(a)), except (A) the Reference Date of such dividend or distribution as defined in this subparagraph (iv) shall be substituted as "the date fixed for the determination of shareholders entitled to receive such rights or warrants" and "the date fixed for such determination" within the meaning of subparagraphs (i) and (iii) of this Section 14.03(a) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of subparagraph (i) of this Section 14.03(a). The occurrence of a distribution or the occurrence of any other event as a result of which holders of Convertible Debentures converting such notes into Common Stock hereunder will not be entitled to receive rights issued pursuant to any shareholder protective rights agreement now or hereafter in effect (the "Other Rights") in the same amount and manner as if such holders had converted such shares immediately prior to the occurrence of such distribution or other event shall be deemed a distribution of Other Rights for the purposes of conversion adjustments pursuant to this subparagraph (iv). In lieu of making any adjustment to the Conversion Price under this subparagraph (iv) as a result of such a distribution of Other Rights, the Company may elect, in its sole discretion, to provide that Other Rights shall be issuable in the same amount and manner upon conversion of the Convertible Debentures without regard to whether the shares of Common Stock issuable upon conversion of the Convertible Debentures were issued before or after such distribution or other event. 83 (v) in case the Company shall, by dividend or otherwise, at any time distribute cash to all holders of Common Stock, excluding (A) any cash dividends on Common Stock to the extent that the aggregate cash dividends per share of Common Stock in any consecutive 12-month period do not exceed the greater of (x) the amount per share of Common Stock of the cash dividends paid on the Common Stock in the immediately preceding 12-month period, to the extent that such dividends for the immediately preceding 12-month period did not require an adjustment to the Conversion Price pursuant to this subparagraph (v) (as adjusted to reflect subdivisions or combinations of the Common Stock) and (y) 15% of the average of the daily Closing Prices (as hereinafter defined) of the Common Stock for the ten consecutive Trading Days immediately prior to the date of declaration of such dividend and (B) any dividend or distribution in connection with the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any redemption of the Rights or any Other Rights; provided, however, that no adjustment shall be made pursuant to this subparagraph (v) if such distribution would otherwise constitute a Fundamental Change (as hereinafter defined) and be reflected in a resulting adjustment to the Conversion Price as provided in this Article XIV) then, in each case (unless the Company makes the election referred to in the proviso following this clause), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect at the close of business on such record date by a fraction the numerator of which shall be the Closing Price of a share of Common Stock on such record date less the amount of cash so distributed (to the extent not excluded as provided above) applicable to one share of Common Stock, and the denominator shall be the Closing Price of a share of Common Stock, such reduction to become effective immediately prior to the opening of business on the day following such record date; provided, however, that the Company may elect, in its sole discretion, in lieu of the foregoing adjustment, to make adequate provision so that each holder of Securities shall thereafter have the right to receive upon conversion the amount of cash such holder would have received had such holder converted each Security on such record date. If any adjustment is required to be made as set forth in this subparagraph (v) as a result of a distribution which is a dividend described in clause (A) of this subparagraph (v), such adjustment will be based upon the amount by which such distribution exceeds the amount of the dividend permitted to be excluded pursuant to such clause (A) of this subparagraph (v). If an adjustment is required to be made pursuant to this subparagraph (v) as a result of a distribution which is not such a dividend, such adjustment would be based upon the full amount of such distribution. (vi) In case of the consummation of a tender or exchange offer (other than an odd-lot tender offer) made by the Company or any subsidiary of the Company for all or any portion of the outstanding shares of Common Stock to the extent that 84 the cash and fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive and shall be described in a resolution of such Board) of any other consideration included in such payment per share of Common Stock at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as amended) exceed by more than 10%, with any smaller excess being disregarded in computing the adjustment to the Conversion Price provided in this subparagraph (vi), the first reported sale price per share of Common Stock on the Trading Day next succeeding the Expiration Time, then the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the Expiration Time by a fraction the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (vii) For the purpose of any computation under this Article XIV, the "Current Market Price per share" of Common Stock on any day shall be deemed to be the average of the daily Closing Prices (as hereinafter defined) per share of Common Stock for the ten consecutive Trading Days prior to and including the date in question; provided, however, that (1) if the "ex" date (as hereinafter defined) for any event (other than the issuance, distribution or Fundamental Change requiring such computation) that requires an adjustment to the Conversion Price pursuant to this Article XIV (the "Other Event") occurs during such ten consecutive Trading Days and prior to the "ex" date for the issuance, distribution or Fundamental Change requiring such computation (the "Current Event"), the Closing Price for each Trading Day prior to the "ex" date for such Other Event shall be adjusted by multiplying such Closing Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such Other Event, (2) if the "ex" date for any Other Event occurs on or after the "ex" date for the Current Event and on or prior to the date in question, the Closing Price for each Trading Day on and after the "ex" date for such Other Event shall be adjusted by multiplying such Closing 85 Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such Other Event (provided that in the event that such fraction is required to be determined at a date subsequent to the date in question and with reference to events taking place subsequent to the date in question, the Board of Directors of the Company or, to the extent permitted by applicable law, a duly authorized committee thereof, whose determination shall be conclusive and described in a resolution of the Board of Directors of the Company or such duly authorized committee thereof, as the case may be, shall in good faith estimate such fraction based on assumptions it deems reasonable regarding such events taking place subsequent to the date in question, and such estimated fraction shall be used for purposes of such adjustment until such time as the actual fraction by which the Conversion Price is so required to be adjusted as a result of such Other Event is determined), and (3) if the "ex" date for the Current Event is on or prior to the date in question, after taking into account any adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined in good faith by the Board of Directors of the Company or, to the extent permitted by applicable law, a duly authorized committee thereof in a manner consistent with any determination of such value for purposes of this Article VII, whose determination shall be conclusive and described in a resolution of the Board of Directors of the Company or such duly authorized committee thereof, as the case may be) of the shares of capital stock, evidences of indebtedness or other assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For purposes of this subparagraph (vii), the term "ex" date, (1) when used with respect to any issuance, distribution or Fundamental Change, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance, such distribution or the cash, securities, property or other assets distributable in such Fundamental Change to holders of the Common Stock, (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective and (3) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. (viii) No adjustment in the Conversion Price shall be required pursuant to this Section 14.03(a) unless the adjustment would require a change of at least 1% of such price; provided, however, that any adjustments which by reason of this subparagraph (viii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the 86 nearest cent (with .005 being rounded upward) or to the nearest 1/100th of a share (with .005 of a share being rounded upward), as the case may be. Notwithstanding anything to the contrary in this Article XIV, the Company from time to time may, to the extent permitted by law, reduce the Conversion Price by any amount for any period of at least 20 Business Days, in which case the Company shall give at least 15 days' notice of such reduction to the holders of Securities and the Trustee. In addition, the Company may, at its option, make such reductions in the Conversion Price in addition to those set forth in this Article XIV, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. (ix) In any case in which this Article XIV provides that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (A) issuing to the holder of any Convertible Debentures converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount in cash in lieu of any fractional shares pursuant to this Article XIV. (x) For purposes of this Article XIV, "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of this Article XIV, shares issuable on conversion of Convertible Debentures shall include only shares of the class designated as the Company Common Stock on the date of the initial issuance of Convertible Debentures by the Company or shares of any class or classes resulting from any reclassification or reclassification thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. 87 (b) whenever the Conversion Price is adjusted as herein provided: (i) the Company shall compute the adjusted Conversion Price and shall prepare a certificate signed by the Chief Financial Officer or the Treasurer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee and the transfer agent for the Trust Preferred Securities and the Convertible Debentures; and (ii) a notice stating the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Trust Preferred Securities and the Convertible Debentures at their last addresses as they appear upon the stock transfer books of the Company and the Trust. SECTION 14.04. ADJUSTMENT OF CONVERSION PRICE--FUNDAMENTAL CHANGE. (a) In the event that the Company shall be a party to any transaction or series of transactions constituting a Fundamental Change, including, without limitation, (i) any recapitalization or reclassification of shares of Common Stock (other than a change in the par value or as a result of a subdivision or combination of the Common Stock), (ii) any consolidation of the Company with, or merger of the Company into, any other corporation or any merger of another corporation into the Company as a result of which holders of Common Stock shall be entitled to receive securities or other property or assets (including cash) with respect to or in exchange for Common Stock (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock), (iii) any sale or transfer of all or substantially all of the assets of the Company, or (iv) any compulsory share exchange, pursuant to any of which the holders of Common Stock shall be entitled to receive other securities, cash or other property, then appropriate provision shall be made as part of the terms of such transaction or series of transactions so that the holder of each Convertible Debenture then outstanding shall have the right thereafter to convert such Convertible Debenture only into (A) if any such transaction does not constitute a Common Stock Fundamental Change (as hereinafter defined), the kind and amount of the securities, cash or other property that would have been receivable upon such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which such Convertible Debenture might have been converted immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange, after, in the case of a Non-Stock Fundamental Change (as hereinafter defined), giving effect to any adjustment in the Conversion Price required by the provisions which follow in subparagraph (i) of Section 14.04(c), and (B) in the case of a Common Stock Fundamental Change (as hereinafter defined), common stock of the kind received by holders of Common Stock as a result of such Common Stock Fundamental Change in an amount determined pursuant to the 88 provisions which follow in subparagraph (ii) of Section 14.04(c). The company formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Common Stock, as the case may be, shall enter into a supplemental indenture with the Trustee, satisfactory in form to the Trustee, the provisions of which provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as my be practicable to the adjustments provided for in this Article XIV. The above provisions shall similarly apply to successive recapitalizations, reclassifications, consolidations, mergers, sales, transfers or share exchanges. (b) Notwithstanding any other provisions in this Article XIV to the contrary, if any Fundamental Change (as hereinafter defined) occurs, then the Conversion Price in effect will be adjusted immediately following such Fundamental Change as described below in Section 14.04(c). In addition, in the event of a Common Stock Fundamental Change, each Convertible Debenture shall be convertible solely into common stock of the kind received by holders of Common Stock as the result of such Common Stock Fundamental Change as more specifically provided below in Section 14.04(c). (c) For purposes of calculating any adjustment to be made pursuant to this Article XIV in the event of a Fundamental Change, immediately following such Fundamental Change (and for such purposes a Fundamental Change shall be deemed to occur on the earlier of (a) the occurrence of such Fundamental Change and (b) the date, if any, fixed for determination of shareholders entitled to receive the cash, securities, property or other assets distributable in such Fundamental Change to holders of the Common Stock); (i) in the case of a Non-Stock Fundamental Change, the Conversion Price per share of Common Stock shall be the lower of (A) the Conversion Price in effect immediately prior to such Non-Stock Fundamental Change, but after giving effect to any other adjustments effected pursuant to this Article XIV, and (B) the product of (1) the greater of the Applicable Price (as hereinafter defined) or the then applicable Reference Market Price (as hereinafter defined) and (2) a fraction the numerator of which shall be $100 and the denominator of which shall be the amount set forth below (based on the date on which such Non-Stock Fundamental Change occurs). For the twelve month period beginning March 1: Year Denominator ---- ----------- 1997 107.00 1998 106.125 1999 105.250 2000 104.375 2001 103.500 2002 102.625 89 2003 101.750 2004 100.875 and thereafter, 100.00; (ii) in the case of a Common Stock Fundamental Change, the Conversion Price per share of Common Stock shall be the Conversion Price in effect immediately prior to such Common Stock Fundamental Change, but after giving effect to any other adjustments effected pursuant to this Article XIV, multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as hereinafter defined) and the denominator of which is the Applicable Price; provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of Common Stock is common stock of the successor, acquiror or other third party (and cash, if any, paid with respect to any fractional interests in such common stock resulting from such Common Stock Fundamental Change) and (B) all of the Common Stock shall have been exchanged for, converted into or acquired for common stock (and cash, if any, with respect to fractional interests) of the successor, acquiror or other third party, the Conversion Price per share of Common Stock immediately following such Common Stock Fundamental Change shall be the Conversion Price in effect immediately prior to such Common Stock Fundamental Change divided by the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of Common Stock as a result of such Common Stock Fundamental Change. (d) The following definitions shall apply to terms used in this Article XIV: (i) "Applicable Price" shall mean (A) in the event of a Non-Stock Fundamental Change in which the holders of Common Stock receive only cash, the amount of cash receivable by a holder of one share of Common Stock and (B) in the event of any other Fundamental Change, the average of the Closing Prices for one share of Common Stock during the ten Trading Days immediately prior to the record date for the determination of the holders of Common Stock entitled to receive cash, securities, property or other assets in connection with such Fundamental Change or, if there is no such record date, prior to the date upon which the holders of Common Stock shall have the right to receive such cash, securities, property or other assets. (ii) "Closing Price" with respect to any securities on any day shall mean the closing sale price, regular way, on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in each case on the Nasdaq National Market ("NASDAQ") or, if such security is not listed or admitted to trading on such NASDAQ, on the principal national 90 securities exchange or quotation system on which such security is quoted or listed or admitted to trading or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security on the over-the-counter market on the date in question as reported by the National Quotation Bureau Incorporated, or a similarly generally accepted reporting service or, if not so available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Company for that purpose or a price determined in good faith by the Board of Directors of the Company. (iii) "Common Stock Fundamental Change" shall mean any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board of Directors of the Company) of the consideration received by the holders of Common Stock pursuant to such transactions consists of shares of common stock that, for the ten consecutive Trading Days immediately prior to such Fundamental Change, has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the Nasdaq National Market; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental Change unless either (A) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Convertible Debentures continue to exist as outstanding Convertible Debentures, or (B) the outstanding Convertible Debentures continue to exist as Convertible Debentures and are convertible into common stock of the successor to the Company. (iv) "Fundamental Change" shall mean the occurrence of any transaction or event or series of transactions or events pursuant to which all or substantially all of the Common Stock shall be exchanged for, converted into, acquired for or constitutes solely the right to receive cash, securities, property or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise); provided, however, in the case of a plan involving more than one such transaction or event, for purposes of adjustment of the Conversion Price, such Fundamental Change shall be deemed to have occurred when substantially all of the Common Stock has been exchanged for, converted into, or acquired for or constitutes solely the right to receive cash, securities, property or other assets, but the adjustment shall be based upon the consideration which the holders of Common Stock received in such transaction or event as a result of which more than 50% of the Common Stock shall have been exchanged for, converted into, or acquired for or shall constitute solely the right to receive cash, securities, property or other assets. (v) "Non-Stock Fundamental Change" shall mean any Fundamental Change other than a Common Stock Fundamental Change. 91 (vi) "PURCHASER STOCK PRICE" shall mean, with respect to any Common Stock Fundamental Change, the average of the Closing Prices for one share of the common stock received by holders of Common Stock in such Common Stock Fundamental Change during the ten Trading Days immediately prior to the record date for the determination of the holders of Common Stock entitled to receive such common stock or, if there is no such record date, prior to the date upon which the holders of Common Stock shall have the right to receive such common stock. (vii) "REFERENCE MARKET PRICE" shall initially mean $8.08 (which is an amount equal to 66-2/3% of the last reported bid price for the Common Stock on the Nasdaq National Market on March 5, 1997) and, in the event of any adjustment to the Conversion Price other than as a result of a Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Conversion Price after giving effect to any such adjustment shall always be the same as the ratio of the initial Reference Market Price to the initial Conversion Price set forth in this Article XIV. (e) In determining the amount and type of consideration received by a holder of Common Stock in the event of a Fundamental Change, consideration received by a holder of Common Stock pursuant to a statutory right of appraisal will be disregarded. SECTION 14.05. NOTICE OF CERTAIN EVENTS. In case: (i) the Company shall declare a dividend (or any other distribution) on Common Stock that would cause an adjustment to the Conversion Price of the Convertible Debentures pursuant to the terms of any of the subparagraphs above (including such an adjustment that would occur but for the terms of the first sentence of Section 14.03(a)(viii) above); or (ii) the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock or combined into a smaller number of shares of Common Stock; or (iii) the Company shall authorize the granting to the holders of Common Stock generally of rights or warrants (for a period expiring within 45 days after the record date fixed for a distribution of such rights and warrants) to subscribe for or purchase any shares of the Company's capital stock or other capital stock of any class or of any other rights (including any Rights Offerings); or (iv) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding shares of Common Stock), or of any consolidation, 92 merger or share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company or a compulsory share exchange; or (v) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company; then the Company shall (i) if any Trust Preferred Securities are outstanding, cause to be filed with the transfer agent for the Trust Preferred Securities, and shall cause to be mailed to the holders of record of the Trust Preferred Securities, at their last addresses as they shall appear upon the stock transfer books of the Trust or (ii) shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 15 days prior to the applicable record or effective date hereinafter specified, a notice stating (A) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). SECTION 14.06. COMPANY TO PROVIDE STOCK. The Company shall reserve, free from pre-emptive rights, out of its authorized but unissued shares, sufficient shares to provide for the conversion of the Convertible Debentures from time to time as such Convertible Debentures are presented for conversion, provided, that nothing contained herein shall be construed to preclude the Company from satisfying its obligations in respect of the conversion of Convertible Debentures by delivery of repurchased shares of Common Stock which are held in the treasury of the Company. If any shares of Common Stock to be reserved for the purpose of conversion of Convertible Debentures hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be validly issued or delivered upon conversion, then the Company covenants that it will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be, PROVIDED, HOWEVER, that nothing in this Section 14.06 shall be deemed to affect in any way the obligations of the Company to convert Convertible Debentures into Common Stock as provided in this Article XIV. 93 Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value, if any, of the Common Stock, the Company will take all corporate action which may, in the Opinion of Counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price. The Company covenants that all shares of Common Stock which may be issued upon conversion of Convertible Debentures will upon issue be fully paid and non-assessable by the Company and free of pre-emptive rights. SECTION 14.07. DIVIDEND OR INTEREST REINVESTMENT PLANS. Notwithstanding the foregoing provisions, the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any such plan, and the issuance of any shares of Common Stock or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Company or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of March 11, 1997, shall not be deemed to constitute an issuance of Common Stock or exercisable, exchangeable or convertible securities by the Company to which any of the adjustment provisions described above applies. There shall also be no adjustment of the Conversion Price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Company except as specifically described in this Article XIV. SECTION 14.08. CERTAIN ADDITIONAL RIGHTS. In case the Company shall, by dividend or otherwise, declare or make a distribution on the Common Stock referred to in Section 14.03(a)(iv) or 14.03(a)(v) (including, without limitation, dividends or distributions referred to in the last sentence of Section 14.03(a)(vi)), the Holder of the Convertible Debentures, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the Conversion Price adjustment in respect of such distribution, shall also be entitled to receive for each share of Common Stock into which the Convertible Debentures are converted, the portion of the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock; PROVIDED, HOWEVER, that, at the election of the Company (whose election shall be evidenced by a resolution of the Board of Directors) with respect to all Holders so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors). If any conversion of Convertible Debentures described in the immediately preceding sentence 94 occurs prior to the payment date for a distribution to holders of Common Stock which the Holder of Convertible Debentures so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a resolution of the Board of Directors) to distribute to such Holder a due bill for the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, PROVIDED, that such due bill (a) meets any applicable requirements of the principal national securities exchange or other market on which the Common Stock is then traded and (b) requires payment or delivery of such shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of shares of Common Stock receiving such distribution. SECTION 14.09. PAYMENT OF CERTAIN TAXES UPON CONVERSION. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of its Common Stock on conversion of Convertible Debentures pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of its Common Stock in a name other than that of the Holder of the Convertible Debenture or Convertible Debentures to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid. SECTION 14.10. DUTIES OF TRUSTEE REGARDING CONVERSION. Neither the Trustee nor any conversion agent shall at any time be under any duty or responsibility to any Holder of Convertible Debentures that is convertible into Common Stock 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, whether herein or in any supplemental indenture (or whether a supplemental indenture need be entered into), any resolutions of the Board of Directors or written instrument executed by one or more officers of the Company 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 or property, which may at any time be issued or delivered upon the conversion of any Convertible Debentures 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 issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Convertible Debenture for the purpose of conversion or to comply with any of the covenants of the Company contained in this Article XIV or in the applicable supplemental indenture, resolutions of the Board of Directors or written instrument executed by one or more duly authorized officers of the Company. All Convertible Debentures delivered for conversion shall be delivered to the Trustee to be 95 canceled by or at the direction of the Trustee, which shall dispose of the same as provided in SECTION 2.09. SECTION 14.11. REPAYMENT OF CERTAIN FUNDS UPON CONVERSION. Any funds which at any time shall have been deposited by the Company or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of, and premium, if any, and interest, if any, on any of the Convertible Debentures and which shall not be required for such purposes because of the conversion of such Convertible Debentures as provided in this Article XIV shall after such conversion be repaid to the Company by the Trustee upon the Company's written request. ARTICLE 15 SUBORDINATION OF CONVERTIBLE DEBENTURES SECTION 15.01. CONVERTIBLE DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company covenants and agrees, and each Holder, by the Holder's acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Convertible Debentures and the payment of the principal of (and premium, if any) and interest on each and all of the Convertible Debentures are hereby expressly made subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article shall prevent the occurrence of any default or Event of Default hereunder. SECTION 15.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal (and premium, if any) or interest on the Convertible Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Convertible Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, or by the Holders of the Convertible Debentures or by the Trustee under the Indenture if received by them or it, directly to the holders of Senior Indebtedness of the 96 Company (PRO RATA to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the Convertible Debentures or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include 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 which are subordinated in right of payment to all Senior Indebtedness which may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Convertible Debentures are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article VII shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article VII. SECTION 15.03. PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF CONVERTIBLE DEBENTURES. In the event that any Convertible Debentures are declared due 97 and payable before their Stated Maturity, then and in such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness or provision shall be made for such payment in cash, before the Holders of the Convertible Debentures are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Convertible Debentures) by the Company on account of the principal of (or premium, if any) or interest on the Convertible Debentures or on account of the purchase or other acquisition of Convertible Debentures. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Convertible Debenture prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which SECTION 14.01 would be applicable. SECTION 15.04. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, as the case may be, beyond any applicable grace period with respect thereto, or in the event that the maturity of any Senior Indebtedness of the Company, as the case may be, has been accelerated because of a default, then, in any such case, no payment shall be made by the Company with respect to the principal (including redemption payments) of, or premium, if any, or interest on the Convertible Debentures until such default is cured or waived or ceases to exist or any such acceleration or demand for payment has been rescinded. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this SECTION 15.04 such payment shall be paid over or delivered to the Company. SECTION 15.05. PAYMENT PERMITTED IN CERTAIN SITUATIONS. Nothing contained in this Article or elsewhere in this Indenture shall prevent (a) the Company, at any time except during the pendency of any dissolution, winding-up, liquidation or reorganization of the Company, whether voluntary or involuntary or any bankruptcy, insolvency, receivership or other proceedings of the Company referred to in Section 15.02 or under the conditions described in Section 15.03 or 15.04, from making payments at any time of principal of or premium, if any, or interest on the Convertible Debentures, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or 98 on account of the principal of, or premium, if any, or interest on the Convertible Debentures or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 15.06. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. Subject to the payment in full of all Senior Indebtedness or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the rights of the Holders of Convertible Debentures shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of indebtedness of the Company which by its express terms is subordinated to indebtedness of the Company to substantially the same extent as the Convertible Debentures are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Convertible Debentures shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of Convertible Debentures or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to or for the benefit of the holders of Senior Indebtedness by Holders of Convertible Debentures or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. SECTION 15.07. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of Convertible Debentures on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Convertible Debentures is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company), to pay to the Holders of Convertible Debentures the principal of (and premium, if any) and interest on the Convertible Debentures as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of Convertible Debentures and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Convertible Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this 99 Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 15.08. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a Convertible Debenture by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. SECTION 15.09. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Convertible Debentures, without incurring responsibility to the Holders of Convertible Debentures and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of Convertible Debentures to the holders of Senior Indebtedness do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 15.10. NOTICE TO TRUSTEE. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Convertible Debentures pursuant to the provisions of this Article. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Convertible Debentures pursuant to the provisions of this Article, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of SECTION 5.02, shall be entitled in all respects to assume that no 100 such facts exist; PROVIDED, HOWEVER, that if the Trustee shall have not received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Convertible Debentures, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. Subject to the provisions of Section 5.02, 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 therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee therefor). 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, 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, 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. SECTION 15.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 5.03, and the Holders of Convertible Debentures shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Convertible Debentures, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 15.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS. 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, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into the Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be 101 liable to any such holders or creditors if it shall in good faith pay over or distribute to Holders of Convertible Debentures or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. SECTION 15.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS, PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 5.03. SECTION 15.14. ARTICLE APPLICABLE TO PAYING AGENTS. 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 shall in such case (unless the context otherwise requires) 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 in addition to or in place of the Trustee; PROVIDED, HOWEVER, that Section 14.13 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 15.15. CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of this Article only, (a) the issuance and delivery of junior securities (or cash paid in lieu of fractional shares) upon conversion of Convertible Debentures in accordance with Article XIV, shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest on Convertible Debentures or on account of the purchase or other acquisition of Convertible Debentures, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities and cash paid in lieu of fractional shares) upon conversion of a Convertible Debenture shall be deemed to constitute payment on account of the principal of such Convertible Debenture. For the purposes of this Section, the term "JUNIOR SECURITIES" means (i) shares of any stock of any class of the Company and (ii) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Convertible Debentures are so subordinated as provided in this Article. Nothing contained in this Article or elsewhere in this Indenture or in the Convertible Debentures is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, the right, which is absolute and unconditional, of the Holder of any Convertible Debenture to convert such Convertible Debenture in accordance with Article XIV. 102 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. APPLE SOUTH, INC. By _________________________ Name: Title: FIRST NATIONAL BANK OF GEORGIA, AS TRUSTEE By __________________________ Name: Title: 103 EX-4.7 4 EX 4.7 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of March 11, 1997, by and among Apple South, Inc., a Georgia corporation (the "Company"), Apple South Financing I, a special purpose business trust created under the laws of the State of Delaware (the "Trust") and J.P. Morgan Securities Inc. and Smith Barney Inc., as the initial purchasers (the "Initial Purchasers") pursuant to the Purchase Agreement dated as of March 6, 1997 among the Company, the Trust and the Initial Purchasers (the "Purchase Agreement"). This Agreement is made pursuant to the Purchase Agreement which provides for the sale by the Trust to the Initial Purchasers of an aggregate of up to 2,000,000 (2,300,000 if the Initial Purchaser's over-allotment option is exercised in full) of its $3.50 Term Convertible Securities, Series A (together with all Convertible Subordinated Debentures of the Company distributed to the Holders (as hereinafter defined), the "Trust Preferred Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Trust and the Company have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights with respect to the Trust Preferred Securities set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Holder" shall mean any of the Initial Purchasers, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become owners of Registrable Securities. "Initial Purchasers" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate liquidation preference amount of outstanding Registrable Securities; PROVIDED that, for purposes of Section 5(b), whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Trust or the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) shall not be considered outstanding and shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in the Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Trust Preferred Securities; PROVIDED, HOWEVER, that the Trust Preferred Securities shall cease to be Registrable Securities when (i) the Registration Statement with respect to such Trust Preferred Securities shall have been declared effective under the 1933 Act and such Trust Preferred Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Trust Preferred Securities have been sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iii) such Trust Preferred Securities shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expense incident to performance of or compliance by the Trust and the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws, (iii) all expenses of any Person in preparing or assisting in preparing, word processing, printing and distributing, at the request of the Trust or the Company, the Registration Statement, Prospectus, any 2 amendments or supplements thereto, any underwriting agreement, securities sales agreement and other documents relating to the performance of and compliance with this Agreement, (iv) the fees and disbursements of counsel for each of the Trust and the Company and the fees and disbursements of one counsel for the Holders incurred on or before the initial effectiveness of the Registration Statement, which counsel shall be counsel for the Initial Purchasers or other counsel selected by the Trust or the Company and not objected to by the Majority Holders ("counsel for the Holders"), (v) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding underwriting discounts, if any, and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder and (vi) the fees and expenses of listing the Registrable Securities on any securities exchange or quotation system in accordance with Section 3(n) hereof. "Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(a) of this Agreement which covers all of the Registrable Securities (except Registrable Securities that the Holders have elected not to include in such Registration Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(a) hereof. "Trust" shall have the meaning set forth in the preamble. "Trust Preferred Securities" shall have the meaning set forth in the preamble. "Underwriters" shall have the meaning set forth in Section 3 hereof. "Underwritten Offering" shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public. 2. REGISTRATION UNDER THE 1933 ACT. (a) The Trust and the Company shall use their best efforts to cause to be filed as soon as practicable, and not later than the 90th day after the original issuance of the Trust Preferred Securities a Registration Statement providing for the sale of the 3 Registrable Securities and to have such Registration Statement declared effective by the SEC. Each of the Trust and the Company agree to use their best efforts to keep the Registration Statement continuously effective until the date that is the third anniversary of the effective date thereof or such shorter period that will terminate when all of the Registrable Securities covered by the Registration Statement have been sold pursuant to the Registration Statement. The Trust and the Company further agree to supplement or amend the Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Trust and the Company for such Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their best efforts to cause any such amendment to become effective and such Registration Statement to become usable as soon as practicable thereafter. (b) The Trust and the Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a). Each Holder shall pay all underwriting discounts, if any, and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Registration Statement. (c) The Registration Statement pursuant to Section 2(a) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; PROVIDED, HOWEVER, that, if, after it has been declared effective, the offering of Registrable Securities pursuant to the Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. (d) Without limiting the remedies available to the Holders, the Trust and the Company acknowledge that any failure by the Trust or the Company to comply with their obligations under Section 2(a) hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damage for such injuries precisely and that, in the event of any such failure, any Holder may obtain such relief as may be required to specifically enforce the Trust's and the Company's obligations under Section 2(a) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of each of the Trust and the Company with respect to the Registration Statement pursuant to Section 2(a) hereof, the Trust and the Company shall reasonably promptly: 4 (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form shall (x) be selected by the Trust and the Company, (y) be available for the sale of the Registrable Securities by the selling Holders thereof and (z) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and cause the Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; and keep the Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities; (c) furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers and to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of the Prospectus, including the preliminary Prospectus and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Trust and the Company consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use its best efforts (i) to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by the Registration Statement shall reasonably request in writing a reasonable time prior to the time the Registration Statement is declared effective by the SEC and (ii) to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that neither the Trust nor the Company shall be required to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where they would not otherwise be required to qualify but for this Section 3(d), (B) file any general consent to service of process or (C) subject themselves to taxation in any such jurisdiction if they are not so subject; 5 (e) notify each Holder of Registrable Securities, counsel for the Holders and for the Initial Purchasers (or, if applicable, separate counsel for the Holders) and, if requested by such Persons, confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to the Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of the Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Trust and the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects or if the Trust and the Company receive any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period the Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Trust and the Company that a post-effective amendment to the Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of the Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws) and enable such Registrable Securities to be in such denominations and registered in such names as the selling Holders may reasonably request at least two business days prior to the closing of any sale of Registrable Securities; (i) upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by 6 reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Trust and the Company have amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of the Registration Statement, Prospectus, any amendment to the Registration Statement or amendment or supplement to the Prospectus, or any document which is to be incorporated by reference into the Registration Statement or Prospectus after the initial filing of the Registration Statement, provide copies of such document to the Initial Purchasers and their counsel and to counsel for the Holders and make such of the representatives of the Trust and the Company as shall be reasonably requested by the Initial Purchasers or their counsel and counsel for the Holders available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, Prospectus or any amendment of or supplement to the Registration Statement or the Prospectus or any document which is to be incorporated by reference into the Registration Statement or the Prospectus, of which the Initial Purchasers and their counsel and counsel for the Holders shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel and counsel for the Holders shall reasonably object; (k) obtain a CUSIP number for all Registrable Securities not later than the effective date of the Registration Statement; (l) make available for inspection by a representative of the Holders of the Registrable Securities, any Underwriter participating in any disposition pursuant to such Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Trust and the Company, and cause the respective officers, directors and employees of each of the Trust and the Company to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration Statement, in each case that would customarily be reviewed or examined in connection with "due diligence" review of the Trust and the Company; (m) if reasonably requested by any Holder of Registrable Securities covered by the Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such 7 Prospectus supplement or such post-effective amendment as soon as the Company has received notification of the matters to be incorporated in such filing; (n) cause all Registrable Securities covered by the Registration Statement to be (i) listed on each securities exchange or quotation system on which similar securities issued by either of the Trust or the Company are then listed, if so requested by the Majority Holders and (ii) rated with the appropriate rating agencies, if so requested by the Majority Holders; and (o) in the case of an Underwritten Offering, enter into such customary agreements and take all such other customary actions in connection therewith (including, those reasonably requested by counsel for the Holders) in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Trust, the Company and the Company's subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Trust and the Company (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from the independent certified public accountants of the Trust and the Company (and, if necessary, any other certified public accountant of any subsidiary of the Trust and the Company, or any business acquired by the Trust and the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by counsel for the Holders to evidence the continued validity of the representations and warranties of the Trust and the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions in an underwriting agreement. In the case of any Underwritten Offering, the Company shall provide written notice to the Holders of all Registrable Securities of such Underwritten Offering at least 30 days prior to the filing of a prospectus supplement for such Underwritten Offering. Such notice shall (x) offer each such Holder the right to participate in such Underwritten Offering, (y) specify a date, which shall be no earlier than 10 days following the date of such notice, by which such Holder must inform the Company of its intent to participate in such Underwritten Offering and (z) include the 8 instructions such Holder must follow in order to participate in such Underwritten Offering. The Trust and the Company may require each Holder of Registrable Securities to promptly furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Trust and the Company may from time to time reasonably request in writing. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Securities pursuant to the Registration Statement, the Trust and the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Holders of Registrable Securities covered by the Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Holders of a majority in liquidation preference amount of the Registrable Securities included in such offering. 4. INDEMNIFICATION AND CONTRIBUTION. (a) Each of the Trust and the Company agree to indemnify and hold harmless each Initial Purchaser, each Holder and each Person, if any who controls any Initial Purchaser or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Initial Purchaser or any Holder, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto pursuant to which Registrable 9 Securities were registered under the 1933 Act, including all documents incorporated therein by reference), or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or supplemented if the Trust or the Company shall have furnished any amendments or supplements thereto), or arising out of or based upon any omission or alleged omission to state therein a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to such Initial Purchaser or Holder furnished in writing to the Company by or on behalf of any Initial Purchaser or Holder expressly for use in connection therewith. In connection with any Underwritten Offering permitted by Section 3 hereof, each of the Trust and the Company will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Initial Purchaser and each Holder agrees, severally and not jointly, to indemnify and hold harmless the Trust, the Company, their directors and officers, and any person who controls the Trust or the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from the Trust and the Company to such Initial Purchaser or Holder, but only with respect to information relating to such Initial Purchaser or Holder furnished in writing by or on behalf of such Initial Purchaser or Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto). (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "Indemnified Person") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the 10 fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Initial Purchasers and all persons, if any, who control any of the Initial Purchasers within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section, (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Trust, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Trust within the meaning of either such Section and (d) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either such Section. Any such separate firm for the Initial Purchasers and such control persons of Initial Purchasers shall be designated in writing by the Initial Purchasers, any such separate firm for the Holders and such control persons of Holders shall be designated in writing by the Majority Holders, any such separate firm for the Company, its directors, its officers and such control persons of the Company shall be designated in writing by the Company and any such separate firm for the Trust, its directors, its officers and such control persons of the Trust shall be designated in writing by the Trust. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such 11 settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in this Section 4 is unavailable to an indemnified party under paragraphs (a) or (b) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Trust and the Company on the one hand and the Initial Purchasers or Holders on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Trust and the Company on the one hand and the Initial Purchasers or Holders on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by Initial Purchaser or the Holders on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Trust, the Company, each Initial Purchaser and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers and the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4, (i) no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Trust Preferred Securities purchased by such Initial Purchaser were offered exceeds the amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and (ii) no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Securities were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 4 are several in proportion to the aggregate principle 12 amount of Trust Preferred Securities sold by them pursuant to such Registration Statement. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 4 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 4 and the representations and warranties of the Trust and the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Initial Purchasers, any Holder or any person controlling any Initial Purchaser, any Holder, the Trust's or the Company's directors or officers or any person controlling the Trust or the Company, (ii) any termination of this Agreement and (iii) any sale of Registrable Securities pursuant to the Registration Statement. 5. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. Neither the Trust nor the Company have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of either of the Trust's or the Company's other issued and outstanding securities under any such agreements. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Trust and the Company have obtained the written consent of Holders of at least a majority in aggregate liquidation preference amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent. (c) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Trust by means of a notice given in accordance with the provisions of this Section 5(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the Trust or the Company, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 5(c). 13 All such notices and communications shall be deemed to have been duly given at the time delivered, if personally delivered; five business days after being deposited in the mail, postage pre-paid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment or assumption, subsequent Holders; PROVIDED that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement. If any transferees of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities, shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such person shall be entitled to receive the benefits hereof. No Initial Purchaser shall have any liability or obligation to either of the Trust or the Company with respect to any failure by a Holder to comply with, or any breach by any Holder of, the obligations of such Holder under this Agreement. (e) PURCHASES AND SALES OF TRUST PREFERRED SECURITIES. Neither the Trust nor the Company shall, and shall use best efforts to cause its affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and then resell or otherwise transfer any Trust Preferred Securities other than to the Trust, the Company or their respective affiliates. (f) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries to the agreements made hereunder between the Trust and the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. This Agreement shall be governed by laws of the State of New York. 14 (j) SEVERABILITY. In the event that one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. APPLE SOUTH FINANCING I By: APPLE SOUTH, INC., as Sponsor By --------------------------------- Name: Title: APPLE SOUTH, INC. By --------------------------------- Name: Title: Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. SMITH BARNEY INC. Acting severally on behalf of themselves and the several Initial Purchasers By: J.P. Morgan Securities Inc. Acting severally on behalf of itself and the several Initial Purchasers By --------------------------------- Name: Title: 16 EX-23.3 5 EX-23.3 INDEPENDENT ACCOUNTANTS' CONSENT The Board of Directors Apple South, Inc.: We consent to incorporation by reference in the registration statement on Form S-3 of Apple South, Inc. of our report dated January 24, 1997, except for note 15, as to which the date is February 7, 1997, relating to the consolidated balance sheets of Apple South, Inc. as of December 29, 1996 and December 31, 1995, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 29, 1996, which report appears in the December 29, 1996 annual report on Form 10-K of Apple South, Inc. KPMG Peat Marwick LLP Atlanta, Georgia April 15, 1997 EX-25.1 6 EXH. 25.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM T-1 -------------------------- STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) X ----- -------------------------- FIRST UNION NATIONAL BANK OF GEORGIA (Exact name of Trustee as specified in its charter) 999 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30309 58-1079889 (Address of principal (Zip Code) (I.R.S. Employer Identification No.) executive office) Emily E. Katt First Union National Bank of Georgia 999 Peachtree Street N.E., Suite 1100 Atlanta, Georgia 30309 (404) 827-7347 (Name, Address and Telephone Number of Agent for Service) ---------------------------- APPLE SOUTH, INC. (Exact name of obligor as specified in its charter) GEORGIA (State or other jurisdiction of incorporation or organization) 59-2778983 (IRS employer identification no.) 1071 EUGENE LANE MADISON, GEORGIA 30650 706-343-2261 (Name, address, including zip code, and telephone number, including area code, of principal executive offices) ----------------------------- 2,300,000 $3.50 TERM CONVERTIBLE SECURITIES, SERIES A (Title of the indenture securites) 1. General information. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: The Comptroller of the Currency, Washington, D.C. Federal Reserve Bank of Atlanta, Georgia. Federal Deposit Insurance Corporation, Washington, D.C. Securities and Exchange Commission, Division of Market Regulation, Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. Affiliations with obligor. The obligor is not an affiliate of the Trustee. 3. Voting Securities of the Trustee. Not applicable 4. Trusteeships under other indentures. Not applicable 5. Interlocking directorates and similar relationships with the obligor or underwriters. Not applicable 6. Voting securities of the Trustee owned by the obligor or its officials. Not applicable 7. Voting securities of the Trustee owned by underwriters or their officials. Not applicable 8. Securities of the obligor owned or held by the Trustee. Not applicable 9. Securities of underwriters owned or held by the Trustee. Not applicable 10. Ownership or holdings by the Trustee of voting securities of certain affiliates or security holders of the obligor. Not applicable 11. Ownership or holdings by the Trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. Not applicable 3 12. Indebtedness of the obligor to the Trustee. Not applicable 13. Defaults by the obligor. Not applicable 14. Affiliations with the underwriters. Not applicable 15. Foreign trustee. Not applicable. 16. List of Exhibits. (1) Articles of Association of the Trustee as now in effect. (See Exhibit 1 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (2) Certificate of Authority of the Trustee to commence business. (See Exhibit 2 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (3) Authorization of the Trustee to exercise corporate trust powers. Incorporated in Exhibit (4). (4) By-Laws of the Trustee, as amended, to date. (See Exhibit 4 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included on Page 6 of this Form T-1 Statement. (7) Most recent report of condition of the Trustee. (8) Not applicable. (9) Not applicable. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF GEORGIA, a national association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta, and State of Georgia on the 10th day of April 1997. FIRST UNION NATIONAL BANK OF GEORGIA (Trustee) BY: /s/ Emily E. Katt ------------------------------------- Emily E. Katt, Vice President EXHIBIT T-1 (6) CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Apple South, Inc., up to 2,300,000 $3.50 Term Convertible Securities, Series A, First Union National Bank of Georgia, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF GEORGIA BY: /s/ R. Douglas Milner ------------------------------------- Dated: April 10, 1997 R. Douglas Milner, Vice President 5 EX-25.2 7 EXH. 25.2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM T-1 ------------------------ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) X ----- ------------------------ FIRST UNION NATIONAL BANK OF GEORGIA (Exact name of Trustee as specified in its charter) 999 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30309 58-1079889 (Address of principal (Zip Code) (I.R.S. Employer Identification No.) executive office) Emily E. Katt First Union National Bank of Georgia 999 Peachtree Street N.E., Suite 1100 Atlanta, Georgia 30309 (404) 827-7347 (Name, Address and Telephone Number of Agent for Service) ------------------------ APPLE SOUTH, INC. (Exact name of obligor as specified in its charter) GEORGIA (State or other jurisdiction of incorporation or organization) 59-2778983 (IRS employer identification no.) 1071 EUGENE LANE MADISON, GEORGIA 30650 706-343-2261 (Name, address, including zip code, and telephone number, including area code, of principal executive offices) ------------------------ $116,161,500 7% CONVERTIBLE SUBORDINATED DEBENTURES DUE MARCH 1, 2027 (Title of the indenture securites) 1. General information. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: The Comptroller of the Currency, Washington, D.C. Federal Reserve Bank of Atlanta, Georgia. Federal Deposit Insurance Corporation, Washington, D.C. Securities and Exchange Commission, Division of Market Regulation, Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. Affiliations with obligor. The obligor is not an affiliate of the Trustee. 3. Voting Securities of the Trustee. Not applicable 4. Trusteeships under other indentures. Not applicable 5. Interlocking directorates and similar relationships with the obligor or underwriters. Not applicable 6. Voting securities of the Trustee owned by the obligor or its officials. Not applicable 7. Voting securities of the Trustee owned by underwriters or their officials. Not applicable 8. Securities of the obligor owned or held by the Trustee. Not applicable 9. Securities of underwriters owned or held by the Trustee. Not applicable 10. Ownership or holdings by the Trustee of voting securities of certain affiliates or security holders of the obligor. Not applicable 11. Ownership or holdings by the Trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. Not applicable 3 12. Indebtedness of the obligor to the Trustee. Not applicable 13. Defaults by the obligor. Not applicable 14. Affiliations with the underwriters. Not applicable 15. Foreign trustee. Not applicable. 16. List of Exhibits. (1) Articles of Association of the Trustee as now in effect. (See Exhibit 1 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (2) Certificate of Authority of the Trustee to commence business. (See Exhibit 2 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (3) Authorization of the Trustee to exercise corporate trust powers. Incorporated in Exhibit (4). (4) By-Laws of the Trustee, as amended, to date. (See Exhibit 4 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included on Page 6 of this Form T-1 Statement. (7) Most recent report of condition of the Trustee. (8) Not applicable. (9) Not applicable. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF GEORGIA, a national association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta, and State of Georgia on the 10th day of April 1997. FIRST UNION NATIONAL BANK OF GEORGIA (Trustee) BY: /s/ Emily E. Katt ------------------------------------- Emily E. Katt, Vice President EXHIBIT T-1 (6) CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Apple South, Inc., up to 2,300,000 $3.50 Term Convertible Securities, Series A, First Union National Bank of Georgia, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF GEORGIA BY: /s/ R. Douglas Milner ------------------------------------- Dated: April 10, 1997 R. Douglas Milner, Vice President 5 EX-25.3 8 EXH. 25.3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM T-1 ------------------------ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) X ------ ------------------------ FIRST UNION NATIONAL BANK OF GEORGIA (Exact name of Trustee as specified in its charter) 999 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30309 58-1079889 (Address of principal (Zip Code) (I.R.S. Employer Identification No.) executive office) Emily E. Katt First Union National Bank of Georgia 999 Peachtree Street N.E., Suite 1100 Atlanta, Georgia 30309 (404) 827-7347 (Name, Address and Telephone Number of Agent for Service) --------------------------- APPLE SOUTH, INC. (Exact name of obligor as specified in its charter) GEORGIA (State or other jurisdiction of incorporation or organization) 59-2778983 (IRS employer identification no.) 1071 EUGENE LANE MADISON, GEORGIA 30650 706-343-2261 (Name, address, including zip code, and telephone number, including area code, of principal executive offices) ---------------------------- $115,000,000 PREFERRED SECURITIES GUARANTEE (Title of the indenture securites) 1. General information. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: The Comptroller of the Currency, Washington, D.C. Federal Reserve Bank of Atlanta, Georgia. Federal Deposit Insurance Corporation, Washington, D.C. Securities and Exchange Commission, Division of Market Regulation, Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. Affiliations with obligor. The obligor is not an affiliate of the Trustee. 3. Voting Securities of the Trustee. Not applicable 4. Trusteeships under other indentures. Not applicable 5. Interlocking directorates and similar relationships with the obligor or underwriters. Not applicable 6. Voting securities of the Trustee owned by the obligor or its officials. Not applicable 7. Voting securities of the Trustee owned by underwriters or their officials. Not applicable 8. Securities of the obligor owned or held by the Trustee. Not applicable 9. Securities of underwriters owned or held by the Trustee. Not applicable 10. Ownership or holdings by the Trustee of voting securities of certain affiliates or security holders of the obligor. Not applicable 11. Ownership or holdings by the Trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. Not applicable 3 12. Indebtedness of the obligor to the Trustee. Not applicable 13. Defaults by the obligor. Not applicable 14. Affiliations with the underwriters. Not applicable 15. Foreign trustee. Not applicable. 16. List of Exhibits. (1) Articles of Association of the Trustee as now in effect. (See Exhibit 1 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (2) Certificate of Authority of the Trustee to commence business. (See Exhibit 2 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (3) Authorization of the Trustee to exercise corporate trust powers. Incorporated in Exhibit (4). (4) By-Laws of the Trustee, as amended, to date. (See Exhibit 4 of the Form T-1 filed in connection with Registration Statement No. 33-92776, which is incorporated herein by reference) (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included on Page 6 of this Form T-1 Statement. (7) Most recent report of condition of the Trustee. (8) Not applicable. (9) Not applicable. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF GEORGIA, a national association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta, and State of Georgia on the 10th day of April 1997. FIRST UNION NATIONAL BANK OF GEORGIA (Trustee) BY: /s/ Emily E. Katt ------------------------------------- Emily E. Katt, Vice President EXHIBIT T-1 (6) CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Apple South, Inc., up to 2,300,000 $3.50 Term Convertible Securities, Series A, First Union National Bank of Georgia, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF GEORGIA BY: /s/ R. Douglas Milner ------------------------------------- Dated: April 10, 1997 R. Douglas Milner, Vice President 5 EX-27 9 EXHIBIT 27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-29-1996 JAN-01-1996 DEC-29-1996 3,923 52 4,568 0 6,143 24,687 380,523 0 457,827 40,181 215,891 0 0 391 191,038 457,827 546,022 546,022 150,090 460,397 0 0 11,417 18,224 6,550 11,674 0 0 0 11,674 0.30 0
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