<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-18859
------------------
INTERNATIONAL HOME FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3377322
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1633 LITTLETON ROAD, PARSIPPANY, N.J. 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 359-9920
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of registrant's common stock, par value $0.01
per share, at September 30, 1998 was 77,463,970.
1
<PAGE> 2
INTERNATIONAL HOME FOODS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income 3
Three Months Ended September 30, 1998 and 1997
Nine Months Ended September 30, 1998 and 1997
Condensed Consolidated Balance Sheets 4
September 30, 1998 and December 31, 1997
Condensed Consolidated Statements of Cash Flows 5
Nine Months Ended September 30, 1998 and 1997
Condensed Consolidated Statements of 6
Comprehensive Income
Three Months Ended September 30, 1998 and 1997
Nine Months Ended September 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 18
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
</TABLE>
2
<PAGE> 3
INTERNATIONAL HOME FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 439,744 $ 349,511 $ 1,230,686 $ 843,933
Cost of sales 231,234 182,156 642,488 412,950
------------- ------------- ------------- -------------
Gross profit 208,510 167,355 588,198 430,983
Marketing expenses 84,654 69,140 244,084 178,394
Selling, general, and administrative expenses 56,253 43,922 162,712 119,941
Restructuring charge 118,087 -- 118,087 --
Stock compensation expense 260 44,763 946 44,763
------------- ------------- ------------- -------------
(Loss)/income from operations (50,744) 9,530 62,369 87,885
------------- ------------- ------------- -------------
Interest expense 24,196 27,470 70,790 79,235
Interest income and other, net (549) 103 (314) 1,674
------------- ------------- ------------- -------------
Income before (benefit)/provision for
income taxes (75,489) (17,837) (8,735) 10,324
(Benefit)/provision for income taxes (26,518) (7,031) (151) 4,233
------------- ------------- ------------- -------------
Net (loss)/income $ (48,971) $ (10,806) $ (8,584) $ 6,091
============= ============= ============= =============
Basic earnings per share (1):
Net (loss)/income $ (0.63) $ (0.17) $ (0.11) $ 0.10
------------- ------------- ------------- -------------
Shares used in computing basic earnings
per share 77,449,186 61,922,990 77,351,764 61,922,990
------------- ------------- ------------- -------------
Diluted earnings per share (1):
Net (loss)/income $ (0.63)* $ (0.17)* $ (0.11)* $ 0.10
------------- ------------- ------------- -------------
Shares used in computing diluted earnings
per share 80,460,848 66,198,090 80,832,342 63,347,912
------------- ------------- ------------- -------------
</TABLE>
(1) Per share and share amounts are restated to give effect to the 5.3292 for
one reverse stock split on November 17, 1997.
* Effect of incremental shares is antidilutive.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
INTERNATIONAL HOME FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,289 $ 11,872
Accounts receivable, net of allowances 149,666 108,132
Inventories 264,103 220,565
Prepaid expenses and other current assets 22,222 16,661
Deferred income taxes 20,808 21,102
--------------- ---------------
Total current assets 468,088 378,332
Property, plant and equipment, net 249,361 210,195
Intangible assets, net 405,172 308,846
Deferred income taxes 344,447 338,611
Other assets 26,536 26,066
--------------- ---------------
Total assets $ 1,493,604 $ 1,262,050
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to banks $ 16,889 $ 12,228
Current portion of long-term debt 51,484 27,400
Revolving credit facility 51,504 40,000
Accounts payable 56,563 38,871
Accrued salaries, wages and benefits 18,469 16,591
Accrued advertising and promotion 48,241 50,308
Accrued interest 18,123 7,844
Other accrued liabilities 45,314 36,954
--------------- ---------------
Total current liabilities 306,587 230,196
Long-term debt 1,097,463 942,600
Postretirement benefits obligation 23,737 19,545
Other noncurrent liabilities 6,219 2,079
--------------- ---------------
Total liabilities 1,434,006 1,194,420
--------------- ---------------
Commitments and contingencies
STOCKHOLDERS' EQUITY (1)
Preferred stock - par value $.01 per share; authorized,
100,000,000 shares; no shares issued or outstanding $ -- $ --
Common stock - par value $.01 per share; authorized,
300,000,000 shares; issued and outstanding
77,463,970 and 77,155,550 shares 775 772
Additional paid-in capital 54,097 52,202
Retained earnings 9,450 18,034
Accumulated other comprehensive income (loss) (4,724) (3,378)
--------------- ---------------
Total stockholders' equity 59,598 67,630
--------------- ---------------
Total liabilities and stockholders' equity $ 1,493,604 $ 1,262,050
=============== ===============
</TABLE>
(1) Per share and share amounts are restated to give effect to the 5.3292 for
one reverse stock split on November 17, 1997.
See accompanying notes to condensed consolidated financial statements.
4
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INTERNATIONAL HOME FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss)/income $ (8,584) $ 6,091
Adjustments to reconcile net (loss)/income to net cash provided by operating
activities:
Depreciation and amortization 29,834 21,921
Deferred income taxes (5,543) 2,944
Stock option compensation 946 44,763
Restructuring charge 117,519 --
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (33,585) (712)
Inventories (12,727) (7,289)
Other current assets 3,017 1,324
Accounts payable 13,392 6,284
Accrued liabilities (1,137) 26,933
Other (3,202) (15,427)
------------ ------------
Net cash provided by operating activities 99,930 86,832
------------ ------------
INVESTING ACTIVITIES:
Purchases of plant and equipment, net (20,442) (8,609)
Purchase of businesses, net of cash acquired (277,773) (163,058)
------------ ------------
Net cash used in investing activities (298,215) (171,667)
------------ ------------
FINANCING ACTIVITIES:
Increase/(decrease) in due to banks 4,661 (2,151)
Issuance of long-term debt 210,000 80,000
Payment of debt issuance costs (1,707) --
Repayment of long-term debt (31,141) (29,500)
Borrowings from revolving credit facility 316,000 86,000
Repayment of borrowings from revolving credit facility (302,984) (15,000)
Payment to minority stockholder -- (16,556)
Proceeds from exercise of stock options 1,971 --
------------ ------------
Net cash provided by financing activities 196,800 102,793
------------ ------------
Effect of exchange rate changes on cash 902 (97)
(Decrease)/increase in cash and cash equivalents (583) 17,861
Cash and cash equivalents at beginning of period 11,872 45,859
------------ ------------
Cash and cash equivalents at end of period $ 11,289 $ 63,720
============ ============
Cash paid during the period for:
Interest $ 57,882 $ 63,449
Income taxes $ 11,043 $ 432
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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INTERNATIONAL HOME FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net (loss)/income $ (48,971) $ (10,806) $ (8,584) $ 6,091
Other comprehensive income/(loss), net of tax:
Foreign currency translation 231 6 (1,346) (96)
---------- ---------- ---------- ----------
Total other comprehensive income/(loss) 231 6 (1,346) (96)
---------- ---------- ---------- ----------
Comprehensive (loss)/income $ (48,740) $ (10,800) $ (9,930) $ 5,995
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. ACCOUNTING POLICIES
Interim Financial Statements
In the opinion of International Home Foods, Inc. ("the Company"), the
accompanying condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the Company's financial position as of September 30,
1998, results of operations for the three and nine months ended
September 30, 1998 and 1997 and the cash flows for the nine months
ended September 30, 1998 and 1997. The results of operations for the
three and nine month periods are not necessarily indicative of the
results to be expected for the full year. The accompanying condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's 1997 Annual Report on Form 10-K/A.
Use of Estimates
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles and necessarily include
amounts based on judgments and estimates made by management. Actual
results could differ from these estimates. Estimates are used when
accounting for potential bad debts, inventory obsolescence and
spoilage, trade and promotion allowances, coupon redemptions,
depreciation and amortization, stock option compensation, deferred
income taxes and tax valuation allowances, restructuring charges, and
contingencies, among other items.
2. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Background and Basis of Presentation
The Company was previously an indirect wholly-owned subsidiary of
American Home Products Corporation ("American Home Products"). On
September 5, 1996, American Home Products entered into an agreement
pursuant to which an affiliate ("Hicks Muse Holding") of Hicks, Muse,
Tate & Furst Equity Fund III, L.P. ("Hicks Muse") acquired (the "IHF
Acquisition") an 80% interest in the Company. The IHF Acquisition was
consummated on November 1, 1996.
The IHF Acquisition was accounted for as a leveraged recapitalization.
Accordingly, the Company's assets and liabilities retained their
historical bases for financial reporting purposes. For tax purposes,
the IHF Acquisition was treated as a taxable business combination
resulting in a "step-up" in the tax bases of the Company's assets and
liabilities.
Business
The Company operates in a single industry which manufactures and
markets a diversified portfolio of shelf-stable food products including
entrees, side dishes, spreadable fruit products, snacks, canned fish
and canned meats, among others. The Company sells its products
primarily in the United States, Puerto Rico, Canada and Mexico, and is
not dependent on any single or major group of customers for its sales.
7
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INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. ACQUISITIONS
Effective July 1, 1997, the Company consummated the acquisition of
substantially all of the assets (the "Assets") of Bumble Bee Seafoods,
Inc. and its wholly-owned subsidiaries, Bumble Bee International, Inc.,
Santa Fe Springs Holding Company and Commerce Distributing Company
(collectively, the "Sellers"), pursuant to the terms of an Asset
Purchase and Sale Agreement dated as of May 1, 1997 (the "Agreement")
by and among the Sellers, the Company and its wholly-owned subsidiary,
Bumble Bee Acquisition Corporation. The aggregate consideration paid
for the Assets was approximately $163,100, including transaction fees.
The Assets consist primarily of inventory, accounts receivable,
property, plant and equipment and trademarks formerly used by the
Sellers for the processing and marketing of canned seafood products,
principally tuna and salmon, including processing facilities in Puerto
Rico, Ecuador and California. The transaction was approved by an order
of the Federal Bankruptcy Court for the Southern District of California
on June 19, 1997, as part of the bankruptcy proceedings of the Sellers.
The Company financed the purchase of the Assets with approximately
$110,000 borrowings under its Senior Bank Facilities and the balance of
the purchase price from the Company's available cash balances as of the
date of the closing.
On October 1, 1997, the Company acquired Productos Del Monte (PDM) from
an affiliate of Hicks Muse for 3,127,415 shares of Common Stock. The
shares issued for PDM were valued at their estimated fair value of
approximately $40,000, which approximated the purchase price that the
Hicks Muse affiliate paid for PDM in 1996. PDM is a leading
manufacturer and marketer of branded catsup, canned vegetables and
bottled salsa in Mexico. The acquisition of PDM was treated as a
combination of entities under common control. Accordingly, the
historical accounting values of PDM were carried over for financial
accounting purposes. In February 1998, the Company settled a dispute
between the Hicks Muse affiliate and PDM's former owners. The
settlement has been recorded as a reduction of the purchase price paid
by the Hicks Muse affiliate, resulting in a reduction of goodwill
recorded by the Company.
On October 1, 1997, the Company acquired all of the stock of Creative
Products, Inc. of Rossville ("Creative Products") for approximately
$52,000 in cash. Creative Products is the leading manufacturer of
cooking spray sold to private label customers and food service
operators. In addition, Creative Products manufactures on a contract
basis a number of health and beauty aid products, including hair
mousses, hair sprays and deodorants.
On November 21, 1997 the Company acquired substantially all of the
assets of Orleans Seafood, Inc. for $26,900, including transaction
fees. The acquisition was funded through borrowings under the Company's
Senior Bank Facilities. Orleans is a specialty canned seafood
manufacturer and marketer.
8
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INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Acquisitions, (Continued)
On March 9, 1998, the Company, through its Canadian subsidiary,
International Home Foods (Canada), Inc., purchased certain assets
relating to the Puritan stews and canned meats business from Unilever's
T. J. Lipton Canada division for a total purchase price of
approximately $40,950, including transaction fees. The acquisition was
funded with borrowings under the Company's Revolving Credit Facility.
Puritan is the largest processor and marketer of canned stews and meats
in Canada, with products marketed under the Puritan and Fraser Farms
brand names.
On April 14, 1998, the Company acquired all of the stock of Grist Mill
Co. (Grist Mill) for approximately $112,765, including transaction
fees. The Company financed the acquisition with borrowings under its
Revolving Credit Facility. Grist Mill is a manufacturer and distributor
of store brand and value-priced branded food products including
ready-to-eat cereals, fruit snacks, granola bars, fruit-filled cereal
bars, crisp rice marshmallow bars and preformed pie crusts.
On September 8, 1998 the Company, through its subsidiary Trenton Home
Foods, Inc., acquired the Libby's(R) brand of retail and international
canned meat products, and the Trenton, Missouri manufacturing facility
for those products from Nestle USA, Inc. for approximately $128,206,
including transaction fees. The Company, through a fifteen year license
agreement with Nestle, will continue to use the Libby's(R) trademark.
In addition, the Company and Nestle have entered into a long-term
supply agreement under which the Company will continue to manufacture
Nestle foodservice products at the facility in Trenton, Missouri. The
Company financed the acquisition of the Libby's(R) canned meat business
with borrowings under its Revolving Credit Facility. Libby's(R) is a
leading domestic manufacturer, importer and global marketer of canned
meat products, including Vienna sausages, corned beef, salmon, hash and
chili, and the Spreadables(R) and Broadcast(R) brands.
The excess of cost over fair value of net assets acquired for the above
acquisitions will be amortized generally over 40 years. The information
below includes non-cash investing and financing activities supplemental
to the consolidated statements of cash flows. These acquisitions have
been accounted for using the purchase method of accounting, and the
operating results of the acquired companies have been included in the
consolidated financial statements from the dates of acquisition. A
summary of the excess of cost over fair value of net assets acquired
resulting from preliminary purchase price allocations for the 1998
acquisitions is as follows:
<TABLE>
<CAPTION>
Trenton
Puritan Grist Mill Home Foods
------------ ------------ ------------
<S> <C> <C> <C>
Cost of acquisition, including
transaction fees $ 40,950 $ 112,765 $ 128,206
Less: acquired assets
Current assets 4,620 23,275 18,250
Property, plant and equipment 6,473 30,323 25,001
Other assets -- 717 --
Add: liabilities assumed -- 4,986 5,428
------------ ------------ ------------
Excess of cost over net assets
acquired $ 29,857 $ 63,436 $ 90,383
============ ============ ============
</TABLE>
9
<PAGE> 10
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Acquisitions, (Continued)
The following unaudited proforma consolidated results of operations have been
prepared as if the acquisitions of Bumble Bee and the Other Acquisitions (PDM,
Creative Products, Orleans Seafood, Puritan, Grist Mill and Trenton Home Foods)
had occurred as of the beginning of 1997, and reflect proforma adjustments for
goodwill, interest expense and tax expense:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
September 30, 1998 September 30, 1997
---------------------------------------- ---------------------------------------------------
Other Other
IHF Acquisitions(1) Total IHF Bumble Bee Acquisitions(2) Total
---------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 1,230,686 $ 166,906 $1,397,592 $ 843,933 $ 183,888 $ 307,838 $ 1,335,659
Operating income/(loss) $ 62,369 $ 10,823 $ 73,192 $ 87,885 $ (7,831) $ 18,559 $ 98,613
Net (loss)/income $ (8,584) $ 1,043 $ (7,541) $ 6,091 $ (7,085) $ (512) $ (1,506)
Earnings per share:
Basic $ (0.11) $ 0.01 $ (0.10) $ 0.10 $ (0.11) $ (0.01) $ (0.02)
Diluted $ (0.11) $ 0.01 $ (0.10)* $ 0.10 $ (0.11) $ (0.01) $ (0.02)
</TABLE>
(1) Amounts include Puritan, Grist Mill and Trenton Home Foods.
(2) Amounts include PDM, Creative Products, Orleans Seafood, Puritan, Grist
Mill and Trenton Home Foods.
* Effect of incremental shares is antidilutive.
The proforma consolidated results do not purport to be indicative of results
that would have occurred had the acquisitions been in effect for the period
presented, nor do they purport to be indicative of the results that will be
obtained in the future.
4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following amounts are included in Accumulated other comprehensive
income (loss) at September 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Foreign currency translation $ (4,724) $ (3,378)
--------------- ---------------
Accumulated other comprehensive
income (loss) $ (4,724) $ (3,378)
=============== ===============
</TABLE>
The changes in other comprehensive income (loss), and the related tax effects,
are as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Foreign currency translation
Amount before taxes $ 672 $ 6 $ (1,532) $ (96)
Income tax (expense)/benefit (441) -- 186 --
------------ ------------ ------------ ------------
Amount net of taxes 231 6 (1,346) (96)
------------ ------------ ------------ ------------
Total other comprehensive
income (loss) $ 231 $ 6 $ (1,346) $ (96)
============ ============ ============ ============
</TABLE>
10
<PAGE> 11
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of: September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Raw materials $ 66,083 $ 46,127
Work in progress 20,142 20,770
Finished goods 177,878 153,668
------------- -------------
Total $ 264,103 $ 220,565
============= =============
</TABLE>
6. INCOME TAXES
Historically, the Company has generated operating income and
realization of deferred tax assets is dependent upon the Company's
ability to generate sufficient future taxable income which management
believes is more likely than not. The Company anticipates future
taxable income sufficient to realize the recorded deferred tax assets.
Future taxable income is based on management's forecasts of the
operating results of the Company and there can be no assurance that
such results will be achieved.
Management continually reviews such forecasts in comparison with actual
results and expected trends. In the event management determines that
sufficient future taxable income may not be generated to fully realize
the deferred tax assets, the Company will provide a valuation allowance
by a charge to income tax expense in the period of such determination.
7. RESTRUCTURING CHARGE
In September 1998, in conjunction with management's plan to reduce
costs and improve operational efficiencies, the Company recorded a
restructuring charge of $118.1 million ($75.3 million after tax). The
principal actions in the restructuring plan involve the closure of the
Vacaville, California and Clearfield, Utah production facilities and
the related impact of the transfer of production to other facilities,
mainly Milton, Pennsylvania, and the write-down of goodwill associated
with the Campfire crisp rice snack bar brand and the Polaner fruit
spreads brand.
The Vacaville, California production facility is expected to close in
December 1998, while the adjacent distribution center and the
Clearfield, Utah facility are expected to close in the first quarter of
1999. The total closure costs of approximately $40.6 million represents
$29.5 million of non-cash charges, primarily for the write-down of
property, plant and equipment to net realizable value, cash charges of
$9.0 million for severance and related benefit costs for affected
employees, and $2.1 million in facility closure costs. The severance
and related costs relate to the termination of approximately 525
employees.
Production of a majority of the products currently manufactured at the
Vacaville facility will be shifted to other facilities, mainly Milton,
Pennsylvania. The Company will outsource the production of tomato paste
and will enter into a third-party manufacturing agreement for the
production of Ro*Tel diced tomatoes, both of which are currently
manufactured at the Vacaville facility. The manufacturing of the
Campfire products will
11
<PAGE> 12
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Restructuring Charge, (Continued)
be transferred to the Lakeville, Minnesota facility that was recently
acquired as part of the Grist Mill acquisition. The Company anticipates
that it will incur approximately $3.0 million of additional
non-capitalizable expenses as the transfer and installation of the
relocated equipment occurs. It is expected that the entire process will
be completed by the end of 1999.
The Campfire and Polaner brands have been impacted by continued retail
category sales declines, which have further deteriorated in recent
months. The current and projected sales trends and the resulting impact
on the brands' future profitability have impaired the valuation of
their long-lived assets, necessitating a write-down to each brand's
fair value. The write-down of goodwill is $47.7 million and $29.7
million for the Campfire crisp rice snack bar brand and for the Polaner
fruit spreads brand, respectively.
At September 30, 1998, $10.6 million of restructuring charges remained
in Other accrued liabilities. This amount is comprised of severance and
related costs and facility closure costs. Payments in the amount of
$0.6 million were made in September 1998.
8. LONG-TERM DEBT
The Company amended its Senior Secured Bank Credit Facilities (Senior
Bank Facilities) as of September 16, 1998. The Senior Bank Facilities
now comprise (i) a $516.5 million Tranche A term loan facility,
maturing in 2004 with mandatory semiannual repayments commencing
September 30,1998 and aggregating $17.2 million, $50.8 million, $72.4
million, $92.8 million, $104.2 million and $115.6 million in the years
1998 through 2003, respectively, and the remaining $63.5 million on May
31, 2004; (ii) a $149.8 million Tranche B term loan facility, maturing
in 2005 with mandatory semiannual repayments commencing September 30,
1998 aggregating $0.2 million in 1998, $0.4 million in years 1999
through 2003, $20.2 million in 2004, and the remaining $127.4 million
in 2005; (iii) a $100.0 million Tranche B-1 term loan facility,
maturing in 2006 with mandatory semiannual repayments commencing March
31, 1999 aggregating approximately $0.3 million in each of the years
1999 through 2005, and the remaining $98.2 million in 2006; (iv) a $230
million revolving credit facility (the Revolving Credit Facility),
which includes a Canadian facility of $30 million, maturing in 2004, or
earlier upon repayment of the Tranche A term loans.
Borrowings under the amended Senior Bank Facilities bear interest based
on the Eurodollar Rate or an Alternate Base Rate, as defined, plus
applicable margins. The Canadian portion of the Revolving Credit
Facility bears interest at the Canadian Prime Rate, or the Canadian
Bankers' Acceptance Rate, as defined, plus applicable margins. Margins
range from 0.5% to 2.00%. At September 30, 1998, interest rates in
effect for Tranches A, B, B-1 and the Revolving Credit Facility were
7.04%, 7.29%, 7.60% and 7.40%, respectively.
12
<PAGE> 13
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
9. GUARANTOR FINANCIAL DATA
The Company's 10 3/8% Senior Subordinated Notes due 2006 (the Senior
Subordinated Notes) are fully and unconditionally guaranteed by each of
the Company's subsidiaries on a joint and several basis. The Company
has not presented separate financial statements and other disclosures
concerning each of the subsidiary guarantors because management has
determined that such information is not material to the holders of the
Senior Subordinated Notes. Presented below is summarized combined
financial information of the subsidiary guarantors:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ ------------------
(unaudited)
<S> <C> <C>
Current assets $ 331,334 $ 262,531
Noncurrent assets 600,551 426,396
Current liabilities 140,633 80,108
Noncurrent liabilities 147,090 269,591
</TABLE>
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 218,585 $ 129,273 $ 588,723 $ 197,842
Gross profit 78,670 42,703 213,872 72,785
Net (loss)/income (55,498)(1) 2,377 (42,276)(1) 3,208
Net cash provided by
operating activities 28,856 22,678
Net cash used in
investing activities (188,426) (5,404)
Net cash provided by (used in)
financing activities 158,530 (14,464)
</TABLE>
(1) Includes restructuring charge of $61.3 million (net of $33.8
million tax benefit).
10. FINANCIAL INSTRUMENTS
The Company currently does not use derivative financial instruments for
trading or speculative purposes, nor is the Company a party to
leveraged derivatives. In accordance with the Senior Bank Facilities,
the Company is required to enter into interest rate protection
agreements to the extent necessary to provide that, when combined with
the Company's Senior Subordinated Notes, at least 50% of the Company's
aggregate indebtedness is subject to either fixed interest rates or
interest rate protection through December 1998.
13
<PAGE> 14
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Financial Instruments, (Continued)
The Company has entered into interest rate swap, cap and collar
agreements to reduce the impact of changes in interest rates on its
floating rate debt. The swap agreements are contracts to exchange
floating interest rate payments for fixed interest rate payments as
well as fixed interest rate payments for floating interest rate
payments periodically over the life of the agreements without the
exchange of the underlying notional amounts. The notional amounts of
interest rate agreements are used to measure interest to be paid or
received and do not represent the amount of exposure to credit loss.
For interest rate instruments that effectively hedge interest rate
exposures, the net cash amounts paid or received on the agreements are
accrued and recognized as an adjustment to interest expense.
As of September 30, 1998, the Company had the following interest rate
instruments in effect (notional amounts are in millions; the collar and
swap rates are based on three-month and six-month LIBOR):
<TABLE>
<CAPTION>
Notional Strike
Amount Rate Period
-------- ------ ------------
<S> <C> <C> <C>
Interest Rate Collar $135 8.00% 9/97 - 12/98
5.25%
Interest Rate Swaps $200 9.72% 8/98 - 11/01
600 5.43% 8/98 - 8/03
</TABLE>
The Company has also entered into interest rate cap and interest rate
collar agreements that became effective on October 2, 1998 as follows
(notional amounts are in millions; rates are based on six-month LIBOR):
<TABLE>
<CAPTION>
Notional Strike
Amount Rate Period
-------- ------ -------------
<S> <C> <C> <C>
Interest Rate Cap $225 6.75% 10/98 - 10/99
Interest Rate Collar $150 5.75% 10/98 - 10/01
3.76%
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the interest rate instruments are the estimated
amounts that the Company would receive or pay to terminate the
agreements at the reporting date, taking into account current interest
rates and the current creditworthiness of the counterparties. At
September 30, 1998, the Company estimates it would have to pay $18.5
million to terminate the agreements.
14
<PAGE> 15
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
12. RELATED PARTY TRANSACTIONS
Effective November 1, 1996, the Company entered into a 10-year
monitoring and oversight agreement with an affiliate of its majority
stockholder. The agreement provides for an annual fee of the greater of
$1,000 or 0.1% of the budgeted consolidated net sales of the Company
for the current year. In addition, effective November 1, 1996, the
Company entered into a financial advisory agreement with the affiliate
under which the affiliate will be entitled to a fee of 1.5% of the
transaction value, as defined, for each add-on transaction, as defined.
The Company incurred monitoring and oversight fees of $400 and $250 for
the three months ended September 30, 1998 and 1997 and $1,200 and $750
for the nine months ended September 30, 1998 and 1997, respectively. In
addition, the Company incurred financial advisory fees of $1,890 and
$2,445 for the three months ended September 30, 1998 and 1997 and
$3,967 and $2,445 for the nine months ended September 30, 1998 and
1997, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company has ongoing royalty arrangements with several parties,
primarily representing licensing agreements for its wet spices business
and for the use of characters in the Company's canned pasta business.
In the ordinary course of business, the Company enters into contracts
for the purchase of certain of its raw materials.
Based upon its experience to date, the Company believes that the future
cost of compliance with existing environmental laws, regulations and
decrees, including the Comprehensive Environmental Response,
Compensation and Liability Act, and liability for known environmental
claims, will not have a material adverse effect on the Company's
financial statements as a whole. However, future events, such as
changes in existing laws and regulations or their interpretation, and
more vigorous enforcement policies of regulatory agencies, may give
rise to additional expenditures or liabilities that could be material.
The Company is involved in various pending or threatened litigation and
claims. Although the outcome of any legal proceeding cannot be
predicted with certainty, management believes that any liability
arising from, or the resolution of any pending or threatened litigation
or claims, in the aggregate will not have a material adverse effect on
the consolidated financial position, results of operations or cash
flows of the Company.
15
<PAGE> 16
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
14. EARNINGS PER SHARE
Basic Earnings Per Share ("EPS") is based upon the weighted average
number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if options to issue
common stock are assumed to be exercised or converted into common
stock.
The EPS computations are based on the following amounts:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic EPS computation:
Net (loss)/income available to
common shares $ (48,971) $ (10,806) $ (8,584) $ 6,091
Average number of shares
outstanding 77,449,186 61,922,990 77,351,764 61,922,990
Basic earnings per share $ (0.63) $ (0.17) $ (0.11) $ 0.10
Diluted EPS computation:
Net (loss)/income available to
common shares $ (48,971) $ (10,806) $ (8,584) $ 6,091
Average number of shares
outstanding 77,449,186 61,922,990 77,351,764 61,922,990
Effect of dilutive stock
options 3,011,662 4,275,100 3,480,578 1,424,922
------------ ------------ ------------ ------------
Total number of shares
outstanding 80,460,848 66,198,090 80,832,342 63,347,912
Diluted earnings per share $ (0.63)* $ (0.17)* $ (0.11)* $ 0.10
</TABLE>
* Effect of incremental shares is antidilutive.
15. IMPACT OF RECENT ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosures About Segments of an Enterprise and Related
Information", was issued to establish standards for public business
enterprises reporting information regarding operating segments in
annual and interim financial statements issued to shareholders. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement is
effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. The Company is
currently evaluating the reporting requirements of this statement and
the impact on its existing segment reporting.
In February 1998, SFAS 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits", was issued to standardize employers'
disclosures about pension and other postretirement benefit plans. This
Statement is effective for fiscal years beginning after December 15,
1997.
16
<PAGE> 17
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Impact of Recent Accounting Standards, (Continued)
On March 4, 1998 Statement of Position (SOP) No. 98-1, "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use",
was issued. The SOP was issued to address diversity in practice
regarding whether and under what conditions the costs of internal-use
software should be capitalized. SOP 98-1 is effective for financial
statements for years beginning after December 15, 1998. The Company
does not expect future adoption of this Statement in 1999 to have a
material effect on reported results.
In June 1998, SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued to establish standards for accounting
for derivatives and hedging activities and supersedes and amends a
number of existing standards. This statement requires all derivatives
to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In addition, all
hedging relationships must be designated, reassessed and documented
pursuant to the provisions of SFAS 133. This statement is effective for
fiscal years beginning after June 15, 1999. The Company is currently
evaluating the effect this statement will have on its financial
statements.
16. SUBSEQUENT EVENTS
On October 23, 1998, the Company purchased 4.4 million shares of its
common stock, par value $.01 per share, from AHP Subsidiary Holding
Corporation, a subsidiary of American Home Products for approximately
$57,200 ($13.00 per share) and intends to hold the shares in treasury.
The purchase of the common stock was financed by the Company with
borrowings under its Senior Bank Facilities. American Home Products
continues to own approximately 4.4 million shares and continues to have
demand registration rights that it may exercise in the future with
respect to these shares.
17
<PAGE> 18
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS - Three and Nine Months Ended September 30, 1998 and 1997.
NET SALES - The Company's net sales were $439.7 million for the three months
ended September 30, 1998 as compared to $349.5 million in the comparable 1997
quarter, an increase of $90.2 million, or 25.8%. Approximately $85.3 million of
the increase related to sales of companies acquired subsequent to September 30,
1997 (Productos Del Monte, Creative Products, Orleans Seafood, Puritan, Grist
Mill and Trenton Home Foods) and therefore were not reflected in the 1997
amounts. Bumble Bee Seafood sales increased $4.8 million to $104.7 million in
the three months ended September 30, 1998. Sales of the Company's other brands
were slightly higher than the comparable 1997 quarter, primarily due to
increases in Chef Boyardee sales, offset by (i) competitive pressures in the
crisp rice snack bars category, (ii) a reduction in sales of Crunch 'n Munch
products to certain mass merchant customers due to reduced promotional activity,
and (iii) continuing lower sales in Polaner All-Fruit.
For the nine months ended September 30, 1998, net sales were $1,230.7 million as
compared to $843.9 million for the comparable 1997 nine months, an increase of
$386.8 million, or 45.8%. Approximately $190.1 million of the increase related
to sales of companies acquired subsequent to September 30, 1997 (Productos Del
Monte, Creative Products, Orleans Seafood, Puritan, Grist Mill and Trenton Home
Foods) and therefore were not reflected in the 1997 amounts. The Bumble Bee
Seafoods sales increase of $210.3 million over the 1997 period reflects sales
for the nine months of 1998 as compared to sales for the three months ended
September 30, 1997 (Bumble Bee Seafoods was acquired on July 1, 1997). Sales of
the Company's other brands decreased by $13.6 million, primarily as a result of
lower volume in the Company's snack food category due to (i) competitive
pressures in the crisp rice snack bars category, (ii) a reduction in sales of
Crunch 'n Munch products to certain mass merchant customers due to reduced
promotional activity, and (iii) continuing lower sales in Polaner All-Fruit.
COST OF GOODS SOLD - Cost of goods sold was $231.2 million for the three months
ended September 30, 1998 as compared to $182.2 million in the comparable 1997
quarter. Expressed as a percentage of net sales, cost of goods sold increased to
52.6% from 52.1% in 1997. This was primarily attributable to the inclusion of
the operations of the companies acquired in the fourth quarter of 1997 and 1998,
which have lower gross margins in comparison with the Company's historical
margins. Cost of goods sold for Bumble Bee Seafoods (acquired on July 1, 1997)
expressed as a percentage of net sales declined to 68.6% from 71.1% in the
comparable 1997 quarter, primarily resulting from a more favorable sales mix.
Cost of goods sold for the Company's historical brands declined to 43.0% of net
sales from 44.5% of net sales in the comparable 1997 quarter. The decline in
cost of goods sold as a percentage of net sales for the historical brands
resulted from the continuing overall reductions in the Company's manufacturing
costs, which reflect management's continuing cost reduction initiatives.
18
<PAGE> 19
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Cost of Goods Sold, (Continued)
For the nine months ended September 30, 1998, cost of goods sold as a percentage
of net sales increased to 52.2% from 48.9% for the comparable 1997 period. This
was primarily attributable to the inclusion of the operations of the companies
acquired in the fourth quarter of 1997 and 1998, which have lower gross margins
in comparison to the Company's historical margins. Excluding the 1997 and 1998
acquisitions, cost of goods sold declined to 43.0% of net sales from 46.0% of
net sales for the comparable 1997 period, reflecting management's continuing
cost reduction initiatives and price increases in Chef Boyardee canned pasta in
July, 1997.
TOTAL MARKETING EXPENSES - Total marketing expenses increased to $84.7 million
for the three months ended September 30, 1998 as compared to $69.1 million in
1997. Expressed as a percentage of net sales, total marketing expenses decreased
to 19.3% from 19.8% for the comparable 1997 period. The increase of $15.5
million was attributable to the inclusion of the fourth quarter 1997 and 1998
acquisitions (Productos Del Monte, Creative Products, Orleans Seafood, Puritan,
Grist Mill and Trenton Home Foods), which aggregated $14.0 million, as well as
Bumble Bee Seafoods ($0.3 million) and existing brands ($1.2 million, primarily
resulting from increased media spending).
Total marketing expenses increased to $244.1 million for the nine months ended
September 30, 1998, as compared to $178.4 million for the comparable 1997
period. Expressed as a percentage of net sales, total marketing expenses
decreased to 19.8% from 21.1% for the comparable 1997 nine month period. The
increase of $65.7 million was attributable to the inclusion of the 1997 and 1998
acquisitions (Bumble Bee Seafoods, Productos Del Monte, Creative Products,
Orleans Seafood, Puritan, Grist Mill and Trenton Home Foods), which aggregated
$69.8 million, offset by $4.1 million of lower expenditures on existing brands,
primarily resulting from increased media spending, offset by a reduction in
coupon promotions and improved management of trade promotion spending.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative (SG&A) expenses and other expenses were $174.6 million for the
three months ended September 30, 1998 ($56.3 million excluding the restructuring
charge of $118.1 million and the stock option compensation charge of $0.2
million) as compared to $88.7 million in 1997 ($43.9 million excluding the stock
option compensation charge of $44.8 million). Approximately $11.0 million of the
$12.4 million increase was attributable to the companies acquired in the fourth
quarter 1997 and 1998 (Productos Del Monte, Creative Products, Orleans Seafood,
Puritan, Grist Mill and Trenton Home Foods). The balance of the increase was
attributable to Bumble Bee Seafoods ($0.1 million) and existing brands ($1.3
million). Total SG&A expenses as a percentage of net sales increased to 12.8% in
the three months ended September 30, 1998 from 12.6% in the comparable quarter
(excluding the restructuring charge and the stock option compensation charge in
1998 and the stock option compensation charge in 1997).
SG&A and other expenses increased to $281.7 million for the nine months ended
September 30, 1998 compared to $164.7 million for the comparable 1997 period.
Total SG&A expenses excluding the charges noted above were $162.7 million for
the nine months ended September
19
<PAGE> 20
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Selling, General and Administrative Expenses, (Continued)
30, 1998 compared to $119.9 million for the comparable 1997 period.
Approximately $27.3 million of the $42.8 million increase was attributable to
the companies acquired in the fourth quarter 1997 and 1998 (Productos Del Monte,
Creative Products, Orleans Seafood, Puritan, Grist Mill and Trenton Home Foods).
The Bumble Bee Seafoods increase of $12.8 million over the 1997 period reflects
nine months of 1998 as compared to the three months ended September 30, 1997.
The balance of the increase, or $2.7 million, was attributable to the existing
brands. Total SG&A expenses as a percentage of net sales declined to 13.2% for
the nine months ended September 30, 1998 from 14.2% for the comparable 1997
period.
In September 1998, the Company recorded a restructuring charge of $118.1 million
relating to the closure of the Vacaville, California and Clearfield, Utah
production facilities and the related impact of the transfer of production to
other facilities, mainly Milton, Pennsylvania, and the write-down of goodwill of
the Campfire crisp rice snack bar brand and the Polaner fruit spreads brand.
The Vacaville, California production facility is expected to close in December
1998, while the adjacent distribution center and the Clearfield, Utah facility
are expected to close in the first quarter of 1999. The total closure costs of
approximately $40.6 million represents $29.5 million of non-cash charges,
primarily for the write-down of property, plant and equipment to net realizable
value, cash charges of $9.0 million for severance and related benefit costs for
affected employees, and $2.1 million in facility closure costs. The severance
and related costs relate to the termination of approximately 525 employees.
Production of a majority of the products currently manufactured at the Vacaville
facility will be shifted to other facilities, mainly Milton, Pennsylvania. The
Company will outsource the production of tomato paste and will enter into a
third-party manufacturing agreement for the production of Ro*Tel diced tomatoes,
both of which are currently manufactured at the Vacaville facility. The
manufacturing of the Campfire products will be transferred to the Lakeville,
Minnesota facility that was recently acquired as part of the Grist Mill
acquisition. The Company anticipates that it will incur approximately $3.0
million of additional non-capitalizable expenses as the transfer and
installation of the relocated equipment occurs. It is expected that the entire
process will be completed by the end of 1999.
The Campfire and Polaner brands have been impacted by continued retail category
sales declines, which have further deteriorated in recent months. The current
and projected sales trends and the resulting impact on the brands' future
profitability have impaired the valuation of their long-lived assets,
necessitating a write-down to each brand's fair value. The write-down of
goodwill is $47.7 million and $29.7 million for the Campfire crisp rice snack
bar brand and for the Polaner fruit spreads brand, respectively.
At September 30, 1998, $10.6 million of restructuring charges remained in Other
accrued liabilities. This amount is comprised of severance and related costs
and facility closure costs. Payments in the amount of $0.6 million were made in
September 1998.
In the third quarter of 1997, the Company recorded a non-cash charge aggregating
$44.8 million related to stock option compensation.
20
<PAGE> 21
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
INTEREST EXPENSE - Interest expense for the three months ended September 30,
1998 was $24.2 million as compared to $27.5 million for the comparable 1997
period. The decrease in interest expense reflects a lower outstanding debt
balance during the quarter ended September 30, 1998 as compared to the
comparable 1997 quarter as well as a lower weighted average interest rate for
the period.
Interest expense for the nine months ended September 30, 1998 was $70.8 million
as compared to $79.2 million for the comparable 1997 period. The decrease in
interest expense is due to a lower outstanding debt balance during the nine
months ended September 30, 1998 as compared to the comparable 1997 period as
well as a lower weighted average interest rate for the period.
PROVISION FOR INCOME TAXES - The income tax benefit for the three months ended
September 30, 1998 was $26.5 million compared to a tax benefit of $7.0 million
for the comparable 1997 period. The effective tax rate of 35.1% for the three
months ended September 30, 1998 was impacted by the recognition, within the
quarter, of the tax affect of the write-off of non-deductible goodwill, which
was a component of the restructuring charge. Excluding the restructuring charge,
the effective tax rate for the three months ended September 30, 1998 was 38.2%
as compared to 39.4% for the comparable 1997 period.
The income tax benefit for the nine months ended September 30, 1998 was $0.2
million compared to the tax expense of $4.2 million for the comparable 1997
period. The effective tax rate of 1.7% was impacted by the recognition of the
tax affect of the write-off of non-deductible goodwill, as discussed above, and
by the significant reduction of operating income attributable to the
restructuring charge. Excluding the restructuring charge, the effective tax rate
was 39.0% as compared to 41.0% for the comparable 1997 period. The Company
anticipates sufficient future income to realize deferred tax assets recorded at
September 30, 1998. In the event management determines that sufficient future
taxable income may not be generated to fully realize the deferred tax assets,
the Company will provide a valuation allowance by a charge to income tax expense
in the period of such determination.
NET (LOSS)/INCOME - For the three month period ended September 30, 1998, the net
loss was $49.0 million as compared to a net loss of $10.8 million for the
comparable 1997 period for the factors discussed above. Excluding the
restructuring charge and the non-cash stock option compensation charge in 1998
and the non-cash stock option compensation charge in 1997, net income increased
to $26.5 million from $16.3 million, or 62.6%.
For the nine month period ended September 30, 1998, the net loss was $8.6
million as compared to net income of $6.1 million for the comparable 1997 period
for the factors discussed above. Excluding the restructuring charge and the
non-cash stock option compensation charge in 1998 and the non-cash stock option
compensation charge in 1997, net income increased to $67.3 million from $32.5
million, or 107.1%.
21
<PAGE> 22
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended September
30, 1998 was $99.9 million, or $13.1 million higher than the comparable 1997
period. The increase was attributable to additional depreciation and
amortization ($7.9 million) and the restructuring charge ($117.5 million),
offset by changes in assets and liabilities ($45.3 million), stock option
compensation expense ($43.8 million), deferred income taxes ($8.5 million), and
lower net income ($14.7 million).
Net cash used in investing activities for the nine months ended September 30,
1998 was $298.2 million, or $126.5 million higher than the comparable 1997
period. The Company through its Canadian subsidiary, International Home Foods
(Canada), Inc., purchased substantially all of the assets relating to the
Puritan stews and canned meats business from Unilever's T. J. Lipton Canada
division for approximately $41.0 million. The Company purchased Grist Mill Co.
for approximately $106.6 million, net of cash acquired. In addition, the Company
through its subsidiary Trenton Home Foods, Inc., acquired the Libby's brand of
retail and international canned meat products and the Trenton, Missouri
manufacturing facility for $128.2 million. For the nine months ended September
30, 1998, the Company invested $20.4 million in capital expenditures, an
increase of $11.8 million over the comparable 1997 period, primarily
attributable to expenditures for companies acquired in 1997 and 1998 ($11.3
million).
Cash provided by financing activities was $196.8 million for the nine months
ended September 30, 1998, compared to cash provided by financing activities for
the nine months ended September 30, 1997 of $102.8 million. The Company borrowed
$316.0 million and repaid $303.0 million under the terms of its Revolving Credit
Facility. In addition, the Company borrowed $210.0 million in term loans under
the tranches of its Senior Bank Facilities, and repaid $31.1 million under the
term loans. The net additional borrowings were used to fund the acquisitions of
Puritan, Grist Mill and Trenton Home Foods. The Company incurred $1.7 million of
debt issuance costs and received $2.0 million in proceeds from the exercise of
stock options.
The Company amended its Senior Bank Facilities on September 16, 1998 by adding a
new $100.0 million term loan and used the proceeds to repay a portion of the
outstanding borrowings under its Revolving Credit Facility. At November 6, 1998,
the Company had $114.4 million available under its Revolving Credit Facility.
On October 23, 1998 the Company purchased 4.4 million shares of its common
stock, par value $.01 per share, from AHP Subsidiary Holding Corporation, a
subsidiary of American Home Products for approximately $57,200 ($13.00 per
share) and intends to hold the shares in treasury. The purchase of the common
stock was financed by the Company with borrowings under its Senior Bank
Facilities.
22
<PAGE> 23
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources, (Continued)
Management believes that cash generated from operations and borrowings under the
Senior Bank Facilities will be sufficient to satisfy working capital
requirements and required capital expenditures. Further expansion of the
business through acquisitions may require the Company to incur additional
indebtedness or issue equity securities. There can be no assurance that
additional debt or equity will be available to the Company, or if available,
will be on terms acceptable to the Company.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES
The Company currently does not use derivative financial instruments for trading
or speculative purposes, nor is the Company a party to leveraged derivatives. In
accordance with the Senior Bank Facilities, the Company is required to enter
into interest rate protection agreements to the extent necessary to provide
that, when combined with the Company's Senior Subordinated Notes, at least 50%
of the Company's aggregate indebtedness is subject to either fixed interest rate
or interest rate protection through December 1998.
The Company has entered into interest rate swap, cap and collar agreements to
reduce the impact of changes in interest rates on its floating rate debt. The
swap agreements are contracts to exchange floating interest rate payments for
fixed interest rate payments as well as fixed interest rate payments for
floating interest rate payments periodically over the life of the agreements
without the exchange of the underlying notional amounts. The notional amounts of
interest rate agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. For interest rate
instruments that effectively hedge interest rate exposures, the net cash amounts
paid or received on the agreements are accrued and recognized as an adjustment
to interest expense.
As of September 30, 1998, the Company had the following interest rate
instruments in effect (notional amounts are in millions; the collar and swap
rates are based on three-month and six-month LIBOR):
<TABLE>
<CAPTION>
Notional Strike
Amount Rate Period
-------- ------ ------
<S> <C> <C> <C>
Interest Rate Collar $ 135 8.00% 9/97 - 12/98
5.25%
Interest Rate Swaps $ 200 9.72% 8/98 - 11/01
600 5.43% 8/98 - 8/03
</TABLE>
The Company has also entered into interest rate cap and interest rate collar
agreements that became effective on October 2, 1998 as follows (notional amounts
are in millions; rates are based on six-month LIBOR):
<TABLE>
<CAPTION>
Notional Strike
Amount Rate Period
-------- ------ ------
<S> <C> <C> <C> <C>
Interest Rate Cap $ 225 6.75% 10/98 - 10/99
Interest Rate Collar $ 150 5.75% 10/98 - 10/01
3.76%
</TABLE>
23
<PAGE> 24
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
IMPACT OF RECENT ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures About Segments of an Enterprise and Related Information", was
issued to establish standards for public business enterprises reporting
information regarding operating segments in annual and interim financial
statements issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. The Company is currently evaluating the
reporting requirements of this statement and the impact on its existing segment
reporting.
In February 1998, SFAS 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", was issued to standardize employers' disclosures about
pension and other postretirement benefit plans. This Statement is effective for
fiscal years beginning after December 15, 1997.
On March 4, 1998 Statement of Position (SOP) No. 98-1, "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use", was issued. The
SOP was issued to address diversity in practice regarding whether and under what
conditions the costs of internal-use software should be capitalized. SOP 98-1 is
effective for financial statements for years beginning after December 15, 1998.
The Company does not expect future adoption of this Statement in 1999 to have a
material effect on reported results.
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities", was issued to establish standards for accounting for derivatives
and hedging activities and supersedes and amends a number of existing standards.
This statement requires all derivatives to be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
In addition, all hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS 133. This statement is effective
for fiscal years beginning after June 15, 1999. The Company is currently
evaluating the effect this statement will have on its financial statements.
READINESS FOR YEAR 2000 - Many computer systems and other equipment with
embedded chips or processors use only two digits to represent the year, and as a
result may be unable to accurately process certain data before, during or after
the Year 2000. As a result, entities are at risk for possible miscalculations or
systems failures causing disruptions in business operations. This Year 2000
issue can arise at any point in the Company's supply, manufacturing, processing,
distribution and financial chains.
24
<PAGE> 25
INTERNATIONAL HOME FOODS, INC.
Item 2
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Readiness for Year 2000, (Continued)
A Year 2000 Compliance Project, directed by the Vice President of Information
Systems, has been in process at the Company since 1997. The Company's business
systems are either being replaced with newer systems that are Year 2000
compliant or each system that will be retained is being remediated. The internal
project team for manufacturing systems compliance is complemented by a project
control review by an outside consulting firm. The project scope is not limited
to computerized business systems. Infrastructure issues including, but not
limited to, telephone switches, personal computers, data communication network
control software and production process control software, are also being
addressed.
Achieving Year 2000 compliance for our business systems will largely be a
by-product of our corporate initiative to improve access to business information
through a common, integrated computing system across the organization. The
Company has implemented an Enterprise Resource Planning (ERP) System based on
SSA's Business Planning and Control System (BPCS) software. This software is
being used in all existing operations and is/or will be used in recently
acquired operations. It is anticipated that this software will be Year 2000
compliant by December 31, 1998. Other non-Year 2000 compliant business software
is being replaced or upgraded to versions which are Year 2000 compliant. Total
business systems compliance costs are anticipated to not exceed $0.2 million,
excluding internal costs.
The Company's infrastructure issues are currently being assessed and management
anticipates completion of a remediation plan by November 30, 1998. Management
anticipates substantial critical manufacturing process control system compliance
by January 31, 1999. All major manufacturing process control systems are
anticipated to be Year 2000 compliant by May 31, 1999. Remediation cost
estimates are not yet final but are not expected to be material.
The Company is in the process of surveying its business partners, including
customers and vendors, as well as original equipment manufacturers, financial
institutions, and employee benefit providers to determine the status of their
Year 2000 compliance efforts.
The Company will develop contingency plans as it becomes apparent that such
plans are warranted.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. The Company believes that with the completion of the remediation of
the business systems, the possibility of significant interruptions of normal
operations should be reduced. However due to the general uncertainty inherent in
the Year 2000 problem, resulting in part from the inability to ensure readiness
of third parties, the Year 2000 compliance issue could have a material adverse
impact on the Company's results of operations, cash flows and financial
condition. Based upon information available at this time, the Company believes
that the cost of Year 2000 readiness will not have a material adverse effect on
the consolidated financial position, results of operations or cash flows of the
Company. Year 2000 expenditures are being funded through operating cash flow.
25
<PAGE> 26
INTERNATIONAL HOME FOODS, INC.
PART II
ITEM 5 OTHER INFORMATION
Pursuant to Rule 14a-4(c)(1) of the Exchange Act of 1934, the
Company's management will have discretionary authority with
respect to proxies submitted to the 1999 annual meeting of
stockholders on any matter which the Company does not receive
notice of by no later than sixty days before such meeting or (if
later) ten days after the first public notice of such meeting is
sent to the stockholders of the Company. This rule does not
affect the deadline set forth in Rule 14a-8 of the Exchange Act
of 1934 for including a shareholder proposal in the Board of
Directors' solicitation of proxies. A shareholder proposal must
be received by Lynne Misericordia, Treasurer, 1633 Littleton
Road, Parsippany, New Jersey 07054, on or before December 8,
1998, in order to be included in such proxy materials pursuant
to Rule 14a-8.
ITEM 6 EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits:
(10) Credit Agreement, dated November 1, 1996, amended and
restated as of September 16, 1998, by and among the Company
and the banks signatory thereto.
(12) Statements showing computation of ratio of earnings to
fixed charges based on SEC Regulation S-K, Item 503.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
Dated September 25, 1998, under Item 7 (Financial Statements and
Exhibits).
Dated October 27, 1998, under Item 5 (Other Events) and Item 7
(Financial Statements and Exhibits).
26
<PAGE> 27
INTERNATIONAL HOME FOODS, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
International Home Foods, Inc.
(Registrant)
Date: November 12, 1998 /s/ C. DEAN METROPOULOS
-------------------------
C. Dean Metropoulos
Chairman of the Board and
Chief Executive Officer
Date: November 12, 1998 /s/ N. MICHAEL DION
-------------------------
N. Michael Dion
Senior Vice President and
Chief Financial Officer
27
<PAGE> 28
INTERNATIONAL HOME FOODS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- ------ --------
<S> <C>
10 Credit Agreement, dated November 1, 1996, amended and restated as
of September 16, 1998, by and among the Company and the banks
signatory thereto.
12 Computation of Consolidated Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
================================================================================
$996,300,000
CREDIT AGREEMENT
among
INTERNATIONAL HOME FOODS, INC.,
as Parent Borrower,
INTERNATIONAL HOME FOODS (CANADA) INC.,
as Canadian Borrower,
The Several Lenders
from Time to Time Parties Hereto,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Documentation Agent,
BANKERS TRUST COMPANY,
as Syndication Agent,
THE CHASE MANHATTAN BANK OF CANADA,
as Canadian Administrative Agent,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of November 1, 1996,
as Amended and Restated as of September 16, 1998
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . 26
1.3 Certain Pro Forma Calculations . . . . . . . . . . . . . . . . 27
SECTION 2. AMOUNT AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . 27
2.1 Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.2 Procedure for Term Loan Reborrowing . . . . . . . . . . . . . 28
2.3 Repayment of Term Loans . . . . . . . . . . . . . . . . . . . 28
2.4 US$ Revolving Credit Commitments . . . . . . . . . . . . . . . 29
2.5 Procedure for US$ Revolving Credit Borrowing . . . . . . . . . 29
2.6 Swing Line Commitment . . . . . . . . . . . . . . . . . . . . 30
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.8 Commitment Fees, etc. . . . . . . . . . . . . . . . . . . . . 31
2.9 Termination or Reduction of Revolving Credit Commitments . . . 32
2.10 Optional Prepayments . . . . . . . . . . . . . . . . . . . . 32
2.11 Mandatory Prepayments and Commitment Reductions . . . . . . . 32
2.12 Conversion and Continuation Options . . . . . . . . . . . . . 34
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches . . 34
2.14 Interest Rates and Payment Dates . . . . . . . . . . . . . . 34
2.15 Computation of Interest and Fees . . . . . . . . . . . . . . 35
2.16 Inability to Determine Interest Rate . . . . . . . . . . . . 36
2.17 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . 36
2.18 Requirements of Law . . . . . . . . . . . . . . . . . . . . . 37
2.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.20 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.21 Change of Lending Office . . . . . . . . . . . . . . . . . . 40
2.22 Replacement of Lenders under Certain Circumstances . . . . . 40
2.23 C$ Revolving Credit Commitments . . . . . . . . . . . . . . . 41
2.24 Procedure for C$ Revolving Credit Borrowing . . . . . . . . . 41
2.25 Bankers' Acceptances . . . . . . . . . . . . . . . . . . . . 42
2.26 Spot Exchange Rate Calculations . . . . . . . . . . . . . . . 44
2.27 Commitment Reallocations . . . . . . . . . . . . . . . . . . 44
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . 45
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . 45
3.2 Procedure for Issuance of Letter of Credit . . . . . . . . . . 46
3.3 Commissions, Fees and Other Charges . . . . . . . . . . . . . 46
3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . 46
3.5 Reimbursement Obligation of the Parent Borrower . . . . . . . 47
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . 47
3.7 Letter of Credit Payments . . . . . . . . . . . . . . . . . . 48
3.8 Applications . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 48
4.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . 48
4.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . 49
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.4 Corporate Power; Authorization; Enforceable Obligations . . . 49
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . 50
4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . 50
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . 50
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.11 Federal Regulations . . . . . . . . . . . . . . . . . . . . . 50
4.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 50
4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.14 Investment Company Act; Other Regulations . . . . . . . . . . 51
4.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 51
4.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 51
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . 51
4.18 Accuracy of Information, etc . . . . . . . . . . . . . . . . 52
4.19 Security Documents . . . . . . . . . . . . . . . . . . . . . 52
4.20 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.21 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . 53
4.22 Regulation H . . . . . . . . . . . . . . . . . . . . . . . . 53
4.23 Year 2000 Matters . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 54
5.1 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . 54
5.2 Conditions to Each Extension of Credit . . . . . . . . . . . . 54
5.3 Conditions to Amendment/Restatement Closing Date . . . . . . . 54
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 55
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . 55
6.2 Certificates; Other Information . . . . . . . . . . . . . . . 56
6.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . 57
6.4 Conduct of Business and Maintenance of Existence, etc. . . . 57
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . 57
6.6 Inspection of Property; Books and Records; Discussions . . . . 57
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 58
6.9 Interest Rate Protection . . . . . . . . . . . . . . . . . . . 58
6.10 Additional Collateral, etc . . . . . . . . . . . . . . . . . 58
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 60
7.1 Financial Condition Covenants . . . . . . . . . . . . . . . . 60
7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . 61
7.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 62
7.4 Limitation on Fundamental Changes . . . . . . . . . . . . . . 64
7.5 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . 65
7.6 Limitation on Dividends . . . . . . . . . . . . . . . . . . . 65
7.7 Limitation on Capital Expenditures . . . . . . . . . . . . . . 66
7.8 Limitation on Investments, Loans and Advances . . . . . . . . 66
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. . . . . . . . . . . . . . . . . . . . . . 68
7.10 Limitation on Transactions with Affiliates . . . . . . . . . 68
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.11 Limitation on Sales and Leasebacks . . . . . . . . . . . . . 69
7.12 Limitation on Changes in Fiscal Periods . . . . . . . . . . . 69
7.13 Limitation on Negative Pledge Clauses . . . . . . . . . . . . 69
7.14 Limitation on Lines of Business . . . . . . . . . . . . . . . 69
7.15 Limitation on Amendments to Acquisition Documents . . . . . . 69
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9. THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 73
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . 73
9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . 73
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . 74
9.6 Non-Reliance on Agents and Other Lenders . . . . . . . . . . . 74
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 74
9.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . 75
9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . 75
9.10 Authorization to Release Liens . . . . . . . . . . . . . . . 75
9.11 Documentation Agent and Syndication Agent . . . . . . . . . . 75
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 75
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 75
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . 78
10.4 Survival of Representations and Warranties . . . . . . . . . 78
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . 78
10.6 Successors and Assigns; Participations and Assignments . . . 79
10.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . 81
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 81
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 81
10.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . 81
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 82
10.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . 82
10.13 Judgment Currency . . . . . . . . . . . . . . . . . . . . . 82
10.14 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . 83
10.15 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . 83
10.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
- iii -
<PAGE> 5
SCHEDULES:
1.1A Revolving Credit Commitments and Term Loans as of
Amendment/Restatement Closing Date
1.1B Mortgaged Property
1.1C Additional Mortgaged Property
1.1D Permitted Investments
4.4 Consents, Authorizations, Filings and Notices
4.15 Subsidiaries on Amendment/Restatement Closing Date
4.19(a) UCC Filing Jurisdictions
4.19(a)-A UCC Filing Jurisdictions--Bumble Bee
4.19(a)-B UCC Filing Jurisdictions--DM US Holding, Corp. and
Creative Products, Inc.
4.19(b) Mortgage Filing Jurisdictions
4.19(b)-A Mortgage Filing Jurisdictions--Bumble Bee
4.19(b)-B Mortgage Filing Jurisdictions--IHF Acquisition Corp.
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
7.8(g) Existing Investments
7.10 Certain Fees
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D-1 Form of Mortgage -- Borrower
D-2 Form of Mortgage -- Subsidiary Guarantor
E Form of Assignment and Acceptance
F Form of Legal Opinion of Vinson & Elkins
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
G-3 Form of Swing Line Note
G-4 Form of B/A Equivalent Note
H Form of Reallocation Notice
I Form of Canadian Guarantee
J Form of Addendum
- iv -
<PAGE> 6
CREDIT AGREEMENT, dated as of November 1, 1996, as amended and restated
as of September 16, 1998, among INTERNATIONAL HOME FOODS, INC., a Delaware
corporation (the "Parent Borrower"), International Home Foods (Canada) Inc., a
Canadian corporation (the "Canadian Borrower"), the several banks and other
financial institutions or entities from time to time parties to this Agreement
(the "Lenders"), MORGAN STANLEY SENIOR FUNDING, INC., as documentation agent
(in such capacity, the "Documentation Agent"), BANKERS TRUST COMPANY, as
syndication agent (in such capacity, the "Syndication Agent"), The Chase
Manhattan Bank of Canada, as Canadian administrative agent (in such capacity,
the "Canadian Administrative Agent"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders hereunder.
W I T N E S S E T H :
WHEREAS, the Borrowers entered into the Credit Agreement, dated
as of November 1, 1996, as amended and restated as of June 17, 1998 (as so
amended and restated, the "Existing Credit Agreement"), with Morgan Stanley
Senior Funding, Inc., as documentation agent, Bankers Trust Company, as
syndication agent, The Chase Manhattan Bank, as administrative agent, and the
several banks and other financial institutions or entities parties thereto;
WHEREAS, the parties hereto have agreed to amend and restate the
Existing Credit Agreement as provided in this Agreement, which Agreement shall
become effective upon the satisfaction of certain conditions precedent set
forth in Section 5.3 hereof; and
WHEREAS, it is the intent of the parties hereto that this
Agreement not constitute a novation of the obligations and liabilities existing
under the Existing Credit Agreement or evidence repayment of any of such
obligations and liabilities and that this Agreement amend and restate in its
entirety the Existing Credit Agreement and re-evidence the obligations of the
Parent Borrower outstanding thereunder;
NOW, THEREFORE, in consideration of the above premises, the
parties hereto hereby agree that on the Amendment/Restatement Closing Date (as
defined below) the Existing Credit Agreement shall be amended and restated in
its entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the
rate of interest per annum publicly announced from time to time by Chase
as its prime rate in effect at its principal office in New York City
(the Prime Rate not being intended to be the lowest rate of interest
charged by Chase in connection with extensions of credit to debtors);
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-
Month Secondary CD Rate and (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the C/D Reserve Percentage
and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day)
by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical
Release H.15(519)
<PAGE> 7
2
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it; and "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it. Any change in the
ABR due to a change in the Prime Rate, the Base CD Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate, the Base CD Rate or
the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.
"Acceptance Fee": a fee payable in C$ by the Canadian Borrower
to a C$ Revolving Credit Lender with respect to the acceptance or
purchase of a B/A, calculated on the face amount of such B/A at a rate
per annum equal to the B/A Spread on the basis of the number of days in
the applicable Contract Period (inclusive of the first day and exclusive
of the last day) and a year of 365 days (it being agreed that the B/A
Spread in respect of a B/A Equivalent Note is equivalent to the B/A
Spread otherwise applicable to a banker's acceptance having the same
face amount and Contract Period as the subject B/A Equivalent Note).
"Acquisition Agreement": the Agreement of Sale and Plan of
Merger, dated as of September 5, 1996, among the Sellers, AH Food Co.,
the Buyer and the Merger Sub.
"Acquisitions": the collective reference to the AHP Acquisition
and the Heritage Acquisition.
"Additional US$ Revolving Credit Commitments": as defined in
Section 2.27.
"Additional US$ Revolving Credit Facility": as defined in the
definition of "Facility".
"Additional US$ Revolving Credit Lender": each C$ Revolving
Credit Lender (or, in the case of any C$ Revolving Credit Lender that is
a Schedule II chartered bank under the Bank Act (Canada), such Lender's
Related US$ Lender).
"Additional US$ Revolving Credit Loans": any revolving credit
loans made to the Parent Borrower under the Additional US$ Revolving
Commitments. Each Additional US$ Revolving Credit Loan shall be a
Eurodollar Loan or ABR Loan.
"Additional US$ Revolving Credit Percentage": as to any
Additional US$ Revolving Credit Lender at any time, the percentage which
such Lender's Additional US$ Revolving Credit Commitment then
constitutes of the aggregate Additional US$ Revolving Credit Commitments
(or, at any time after the Additional US$ Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Additional US$ Revolving Credit Loans
then outstanding constitutes of the aggregate principal amount of the
Additional US$ Revolving Credit Loans then outstanding).
"Adjustment Date": as defined in the Pricing Grid.
<PAGE> 8
3
"Administrative Agent": Chase, together with its affiliates
(including, with respect to matters relating to the C$ Revolving Credit
Facility, the Canadian Administrative Agent), as the arranger of the
Facilities and as the administrative agent for the Lenders under this
Agreement and the other Loan Documents, together with any of its
successors. Without limiting the generality of the foregoing, all
payments made hereunder in C$ shall be made to the Canadian
Administrative Agent.
"Affiliate": as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a) vote
51% or more of the securities having ordinary voting power for the
election of directors (or persons performing similar functions) of such
Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Agents": the collective reference to the Administrative Agent,
the Syndication Agent and the Documentation Agent.
"Aggregate C$ Revolving Credit Exposure": the aggregate amount
of the C$ Revolving Credit Exposure.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"AH Food Co.": American Home Food Products, Inc., a Delaware
corporation.
"AHP": American Home Products Corporation, a Delaware
corporation.
"AHP Acquisition": as defined in Section 5.1(b) of the November
1997 Amendment/Restatement.
"AHP Food Business": as defined in Section 5.1(b) of the
Existing Credit Agreement.
"AHP Holding": AHP Subsidiary Holding Corporation, a Delaware
corporation.
"Amendment/Restatement Closing Date": September 16, 1998.
"Applicable Canadian Pension Legislation": at any time, any
pension legislation then applicable to the Canadian Borrower, including
all regulations made thereunder, and all rules, regulations, rulings and
interpretations made or issued by any Governmental Authority having or
asserting jurisdiction in respect thereof.
"Applicable Margin": for each Type of Loan, the rate per annum
set forth under the relevant column heading below:
<TABLE>
<CAPTION>
ABR Loans Eurodollar Loans
--------- ----------------
<S> <C> <C>
Tranche A Term Loans,
Revolving Credit Loans and 0.50% 1.50%
Swing Line Loans
Tranche B Term Loans 0.75% 1.75%
</TABLE>
; provided that on and after the first Adjustment Date occurring after
June 30, 1998, the Applicable Margin will be determined pursuant to the
Pricing Grid.
<PAGE> 9
4
"Applicable Percentage": (x) with respect to any US$ Revolving
Credit Lender, the percentage of the aggregate US$ Revolving Credit
Commitments represented by such Lender's US$ Revolving Credit
Commitment, (y) with respect to any Additional US$ Revolving Lender, the
percentage of the aggregate Additional US$ Revolving Credit Commitments
represented by such Lender's Additional US$ Revolving Credit Commitment
or (z) with respect to any C$ Revolving Credit Lender, the percentage of
the aggregate C$ Revolving Credit Commitments represented by such
Lender's C$ Revolving Credit Commitment.
"Application": an application, in such form (reasonably
acceptable to the Parent Borrower) as the relevant Issuing Lender may
specify from time to time, requesting such Issuing Lender to open a
Letter of Credit.
"Approved Fund": with respect to any Lender that is a fund that
invests in bank loans, any other fund or trust or entity that invests in
bank loans and is advised or managed by the same investment advisor as
such Lender or by and Affiliate of such investment advisor.
"Asset Sale": any Disposition of Property other than (a) any
Disposition of Property permitted by any of clauses (a) through (h) of
Section 7.5 and (b) any Disposition of Property which, together with any
related Disposition of Property, yields gross proceeds to the Parent
Borrower or any of its Subsidiaries (valued at the initial principal
amount thereof in the case of non-cash proceeds consisting of notes or
other debt securities and valued at fair market value in the case of
other non-cash proceeds) of less than $2,000,000, provided, that the
aggregate gross proceeds of Dispositions of Property excluded from the
definition of "Asset Sale" pursuant to this clause (b) shall not exceed
$5,000,000 in any fiscal year of the Parent Borrower.
"Asset Swap": any substantially concurrent purchase and sale, or
exchange, of Property used or usable in the business of the Parent
Borrower and its Subsidiaries.
"Assigned Dollar Value": in respect of any C$ Revolving Credit
Borrowing, the amount thereof expressed in Dollars in the initial
Borrowing Request with respect thereto or, in the case of a B/A
Borrowing, the amount thereof expressed in Dollars as the face amount of
the B/As relating thereto. Thereafter, Assigned Dollar Value shall
mean, in respect of any C$ Revolving Credit Borrowing, the Dollar
Equivalent of the principal amount of the Loans relating to such C$
Revolving Credit Borrowing (or, in respect of any B/A Borrowing, the
face amounts of the B/As) as determined on the most recent Reset Date
based on the Spot Exchange Rate.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"August 1998 Confidential Information Memorandum": the
Confidential Information Memorandum dated August 1998 and furnished to
the Lenders.
"Available Additional US$ Revolving Credit Commitment": as to
any Additional US$ Revolving Credit Lender at any time, an amount equal
to (a) such Lender's Additional US$ Revolving Credit Commitments minus
(b) such Lender's outstanding Additional US$ Revolving Credit Loans.
"Available C$ Revolving Credit Commitment": as to any C$
Revolving Credit Lender at any time, an amount equal to (a) such
Lender's C$ Revolving Credit Commitment minus (b) such Lender's C$
Revolving Credit Exposure.
<PAGE> 10
5
"Available Revolving Credit Commitments": the collective
reference to the Available Additional US$ Revolving Credit Commitments,
the Available C$ Revolving Credit Commitments and the Available US$
Revolving Credit Commitments.
"Available US$ Revolving Credit Commitment": as to any US$
Revolving Credit Lender at any time, an amount equal to (a) such
Lender's US$ Revolving Credit Commitment minus (b) such Lender's US$
Revolving Extensions of Credit; provided, that in calculating any
Lender's US$ Revolving Extensions of Credit for the purpose of
determining such Lender's Available US$ Revolving Credit Commitment
pursuant to Section 2.8(a), the aggregate principal amount of Swing Line
Loans then outstanding shall be deemed to be zero.
"B/A": a bill of exchange denominated in C$, drawn by the
Canadian Borrower and accepted by a C$ Revolving Credit Lender in
accordance with this Agreement, provided that with respect to a C$
Revolving Credit Lender that is not a chartered bank under the Bank Act
(Canada) or that has notified the Administrative Agent that it is
otherwise unable to accept such bills of exchange, it shall mean a B/A
Equivalent Note.
"B/A Borrowing": a Borrowing comprised of B/As.
"B/A Equivalent Note": as defined in Section 2.25(g).
"B/A Spread": for any day, with respect to any B/A Borrowing,
the Applicable Margin that would apply to such Borrowing on such day if
such Borrowing were a Eurodollar Loan under the US$ Revolving Credit
Facility.
"Board": the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Borrowers": the collective reference to Parent Borrower and the
Canadian Borrower.
"Borrowing": a group of Loans of a single Type made under a
single Facility or consisting solely of Swing Line Loans and made on a
single date and, in the case of Eurodollar Loans and B/As, as to which a
single Interest Period or Contract Period, as the case may be, is in
effect.
"Borrowing Date": any Business Day specified by the relevant
Borrower as a date on which such Borrower requests the relevant Lenders
to make Loans hereunder.
"Borrowing Request": a request by a Borrower for a Borrowing in
accordance with the terms of Section 2 and substantially in a form
approved by the Administrative Agent.
"Bumble Bee": Bumble Bee Seafoods, Inc., a Delaware corporation.
"Bumble Bee Acquisition": the acquisition described in the
Bumble Bee Purchase Agreement.
"Bumble Bee Purchase Agreement": the Asset Purchase and Sale
Agreement, dated as of May 1, 1997, among Bumble Bee, Bumble Bee
International, Inc., Commerce Distributing Company and Santa Fe Springs
Holding Company, as sellers, the Parent Borrower and Bumble Bee
Acquisition Corporation, as buyer.
"Business": as defined in Section 4.17.
<PAGE> 11
6
"Business Day": a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by
law to close; provided that when used in connection with a Eurodollar
Loan, "Business Day" shall also exclude any day on which banks are not
open for dealings in Dollar deposits in the London interbank market; and
provided further that when used in connection with a C$ Revolving Credit
Loan, "Business Day" shall also exclude any day on which banks are
authorized or required by law to be closed in Toronto, Ontario.
"Buyer": AHFP Holding Corporation, a Delaware corporation.
"C$": lawful money of Canada.
"C$ Revolving Credit Borrowing": a Borrowing comprised of C$
Revolving Credit Loans.
"C$ Revolving Credit Commitment": with respect to any Lender at
any time, the commitment (if any) of such Lender to make Loans and
accept B/As pursuant to Sections 2.23 through 2.25. The amount of each
Lender's C$ Revolving Credit Commitment is the amount set forth opposite
such Lender's name in Schedule 1.1A under the caption "C$ Revolving
Credit Commitment", as such amount may be changed from time to time
pursuant to this Agreement. The C$ Revolving Credit Commitment of each
Lender shall always be expressed in Dollars.
"C$ Revolving Credit Exposure": with respect to any C$ Revolving
Credit Lender at any time, the Assigned Dollar Value at such time of all
outstanding C$ Revolving Credit Loans of such Lender.
"C$ Revolving Credit Facility": as defined in the definition of
"Facility".
"C$ Revolving Credit Lender": a Lender that is not a non-
resident within the meaning of the Income Tax Act (Canada) with a C$
Revolving Credit Commitment or holding C$ Revolving Credit Loans.
"C$ Revolving Credit Loan": any Canadian Prime Rate Loan made or
B/A accepted or purchased by a Lender pursuant to its C$ Revolving
Credit Commitment.
"C$ Revolving Credit Percentage": as to any C$ Revolving Credit
Lender at any time, the percentage which such Lender's C$ Revolving
Credit Commitment then constitutes of the Total C$ Revolving Credit
Commitments (or, at any time after the C$ Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal or face amount of such Lender's C$ Revolving Credit Loans then
outstanding constitutes of the aggregate principal or face amount of the
C$ Revolving Credit Loans then outstanding).
"Calculation Date": (a) the last Business Day of each March,
June, September and December and (b) at any time when the Aggregate C$
Revolving Credit Exposure exceeds 85% of the Total C$ Revolving Credit
Commitments or at any time when a Default or Event of Default shall have
occurred and be continuing, any other date which the Administrative
Agent may determine in its discretion to be a Calculation Date.
"Canadian Administrative Agent": as defined in the preamble to
this Agreement.
"Canadian Borrower": as defined in the preamble to this
Agreement.
"Canadian Guarantee": the Guarantee Agreement to be executed and
delivered by each Canadian Subsidiary Guarantor, substantially in the
form of Exhibit I, as the same may be amended, supplemented or otherwise
modified from time to time.
<PAGE> 12
7
"Canadian Prime Borrowing": a Borrowing comprised of Canadian
Prime Rate Loans.
"Canadian Prime Rate": on any day, the annual rate of interest
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
greater of:
(a) the annual rate of interest announced from time to time by
the Administrative Agent as its prime rate in effect at
its principal office in Toronto on such day being the
reference rate used by the Administrative Agent for
determining interest rates on C$ denominated commercial
loans to its customers in Canada; and
(b) the annual rate of interest equal to the sum of (i) the
CDOR Rate in effect on such day, and (ii) 1%.
"Canadian Prime Rate Loan": a Loan denominated in C$ which bears
interest at a rate based upon the Canadian Prime Rate.
"Canadian Subsidiary": any Subsidiary of the Parent Borrower
organized under the laws of Canada (or any province therein).
"Canadian Subsidiary Guarantor": each Canadian Subsidiary other
than the Canadian Borrower.
"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures by such Person and its
Subsidiaries for the acquisition or leasing (pursuant to a capital
lease) of fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such period)
which should be capitalized under GAAP on a consolidated balance sheet
of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued
by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition; (b) certificates of deposit, time deposits, eurodollar time
deposits or overnight bank deposits having maturities of six months or
less from the date of acquisition issued by any Lender or by any
commercial bank organized under the laws of the United States of America
or any state thereof having combined capital and surplus of not less
than $250,000,000; (c) commercial paper of an issuer rated at least A-2
by Standard & Poor's Ratings Services or P-2 by Moody's Investors
Service, Inc., or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally, and maturing
within six months from the date of acquisition; (d) money market
accounts or funds with or issued by Qualified Issuers; and (e)
repurchase obligations with a term of not more than 90 days for
underlying securities of the types described in clause (a) above entered
into with any bank meeting the qualifications specified in clause (b)
above.
<PAGE> 13
8
"C/D Assessment Rate": for any day as applied to any ABR Loan,
the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation (the "FDIC") classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment
risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or
such successor's) insuring time deposits at offices of such institution
in the United States.
"CDOR Rate": on any date, the annual rate of interest which is
the rate based on an average rate applicable to C$ bankers' acceptances
for a term of 30 days appearing on the "Reuters Screen CDOR Page" (as
defined in the International Swaps and Derivatives Association, Inc.
definitions, as modified and amended from time to time) at approximately
10:00 a.m. (Toronto time), on such date, or if such date is not a
Business Day, then on the immediately preceding Business Day, provided
that, if such rate does not appear on the Reuters Screen CDOR Page as
contemplated, then the CDOR Rate on any date shall be calculated as the
rate for the term referred to above applicable to C$ bankers'
acceptances quoted by the Administrative Agent as of 10:00 a.m. (Toronto
time) on such date or, if such date is not a Business Day, then on the
immediately preceding Business Day.
"C/D Reserve Percentage": for any day as applied to any ABR
Loan, that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board as in effect from time to time) in respect of
new non-personal time deposits in Dollars having a maturity of 30 days
or more.
"Chase": The Chase Manhattan Bank.
"Closing Date": November 1, 1996.
"Code": the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment Fee Rate": 3/8 of 1% per annum; provided that on and
after the first Adjustment Date occurring after June 30, 1998, the
Commitment Fee Rate will be determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Parent Borrower
within the meaning of Section 4001 of ERISA or is part of a group which
includes the Parent Borrower and which is treated as a single employer
under Section 414 of the Code or under Applicable Canadian Pension
Legislation (for greater certainty, the Canadian Borrower shall be
deemed to be a Commonly Controlled Entity).
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Consolidated Current Assets": at a particular date, all amounts
(other than cash and Cash Equivalents) which would, in conformity with
GAAP, be set forth opposite the caption "total current assets" (or any
like caption) on a consolidated balance sheet of the Parent Borrower and
its Subsidiaries at such date.
"Consolidated Current Liabilities": at a particular date, all
amounts which would, in conformity with GAAP, be set forth opposite the
caption "total current liabilities" (or any like caption) on a
consolidated balance sheet of the Parent Borrower and its Subsidiaries
at such date, but excluding
<PAGE> 14
9
(a) the current portion of any Funded Debt of the Parent Borrower and
its Subsidiaries, (b) without duplication of clause (a) above, all
Indebtedness consisting of Revolving Credit Loans or Swing Line Loans to
the extent otherwise included therein, (c) accrued interest expense and
(d) accrued income tax expense.
"Consolidated EBITDA": for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as
a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) total income tax expense, (b) interest expense,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with
Indebtedness (including the Loans), (c) depreciation and amortization
expense, (d) amortization of intangibles (including, but not limited to,
goodwill) and organization costs, (e) any extraordinary expenses or
losses (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period,
losses on sales of assets other than inventory sold in the ordinary
course of business) and (f) any other non-cash charges, and minus, to
the extent included in the statement of such Consolidated Net Income for
such period, the sum of (a) interest income, (b) any extraordinary
income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets other than inventory sold in the
ordinary course of business) and (c) any other non-cash income, all as
determined on a consolidated basis.
"Consolidated Fixed Charge Coverage Ratio": for any period, the
ratio of (a) (i) Consolidated EBITDA for such period less (ii) the
lesser of (x) the aggregate amount actually paid by the Borrower and its
Subsidiaries in cash during such period on account of Capital
Expenditures (excluding (1) the principal amount of Indebtedness (other
than Loans) incurred in connection with such expenditures and (2)
Capital Expenditures made pursuant to Section 7.7(b) or (c)) and (y) if
applicable, the Scheduled Capital Expenditure Amount for such period to
(b) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
Consolidated Tax Expense for such period and (c) scheduled payments made
during such period on account of principal of Indebtedness of the Parent
Borrower or any of its Subsidiaries (including the Term Loans).
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense": for any period, total cash
interest expense (including that attributable to Capital Lease
Obligations), net of interest income, of the Parent Borrower and its
Subsidiaries for such period with respect to all outstanding
Indebtedness of the Parent Borrower and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Protection Agreements to the
extent such net costs are allocable to such period in accordance with
GAAP).
"Consolidated Leverage Ratio": as at the last day of any period,
the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated
EBITDA for such period.
"Consolidated Net Income": for any period, the consolidated net
income (or loss) of the Parent Borrower and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP; provided that there
shall be excluded therefrom the income (or deficit) of any Person
accrued prior to the date it becomes a Subsidiary of the Parent Borrower
or is merged into or consolidated with the Parent Borrower or any of its
Subsidiaries.
<PAGE> 15
10
"Consolidated Senior Leverage Ratio": as at the last day of any
period, the ratio of (a) Consolidated Total Debt (excluding Indebtedness
attributable to the Senior Subordinated Notes and other Indebtedness of
the Parent Borrower subordinated on terms at least as favorable to the
Lenders as those applicable to the Senior Subordinated Notes) on such
day to (b) Consolidated EBITDA for such period.
"Consolidated Tax Expense": for any period, provision for cash
income taxes made by the Parent Borrower or any of its Subsidiaries for
such period on a consolidated basis.
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Indebtedness (excluding (a) Indebtedness of the type
described in clause (d), (h) or (i) of the definition thereof to the
extent such Indebtedness would not appear on a consolidated balance
sheet of the Parent Borrower and its Subsidiaries in accordance with
GAAP, (b) Indebtedness of the type described in clause (f) of the
definition thereof to the extent such Indebtedness consists of undrawn
amounts in respect of letter of credit facilities and (c) Trade
Acceptances that have payment terms of not more than 90 days from the
date of acceptance), net of cash and Cash Equivalents, of the Parent
Borrower and its Subsidiaries at such date, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Working Capital": the excess of Consolidated
Current Assets over Consolidated Current Liabilities.
"Continuing Directors": the directors of the Parent Borrower on
the Closing Date, after giving effect to the Acquisitions and the other
transactions contemplated hereby, and each other director, if, in each
case, such other director's nomination for election to the board of
directors of the Parent Borrower is recommended by a majority of the
then Continuing Directors or such other director receives the vote of
the Permitted Investors in his or her election by the shareholders of
the Parent Borrower.
"Contract Period": the term of a B/A selected by the Canadian
Borrower in accordance with Section 2.25 commencing on the date of such
Borrowing or any rollover date, as applicable, of such B/A (which shall
be a Business Day) and expiring on a Business Day which shall be either
30 days, 60 days, 90 days or (subject to availability from each C$
Revolving Credit Lender) 180 days thereafter, provided that no Contract
Period shall extend beyond the Revolving Credit Termination Date.
Notwithstanding the foregoing, whenever the last day of any Contract
Period would otherwise occur on a day which is not a Business Day, the
last day of such Contract Period shall occur on the next succeeding
Business Day and such extension of time shall in such case be included
in computing the Acceptance Fee in respect of the relevant B/A.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contributed Equity": (a) the proceeds of any capital
contribution made to the Parent Borrower (or to a Parent and in turn
contributed to the Parent Borrower) by any member of the Existing
Investor Group and (b) the proceeds of any private placement of Capital
Stock of the Parent Borrower (or of a Parent and in turn contributed to
the Parent Borrower) consummated after the Closing Date, provided, that
the aggregate amount of proceeds of sales of Capital Stock to Persons
other than members of the Existing Investor Group that may be included
in "Contributed Equity" pursuant to this clause (b) shall not exceed
$50,000,000 during the term of this Agreement. As used in this
definition, (i) "Existing Investor Group" refers to any Permitted
Investor (other than any Parent), AHP or any of its Affiliates or any
Person that owns Capital Stock of the Buyer on the Closing Date or that
acquires Capital Stock of the Buyer within 60 days after the Closing
Date and (ii) "Parent" refers to the Buyer or any other direct or
indirect holding company parent of the Parent Borrower.
<PAGE> 16
11
"Default": any of the events specified in Section 8, whether or
not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Discount Proceeds": for any B/A, an amount (rounded to the
nearest whole cent, and with one-half of one cent being rounded upwards)
calculated on the applicable date of the Borrowing of which such B/A is
a part or any rollover date for such Borrowing by multiplying:
(a) the face amount of the B/A; by
(b) the quotient of one divided by the sum of one plus the
product of:
(i) the Discount Rate (expressed as a decimal)
applicable to such B/A, and
(ii) a fraction, the numerator of which is the Contract
Period of the B/A and the denominator of which is
365,
with such quotient being rounded up or down to the fifth decimal place,
and .000005 being rounded up.
"Discount Rate":
(a) with respect to any C$ Revolving Credit Lender that is a
Schedule I chartered bank under the Bank Act (Canada), as applicable to
a B/A being purchased by such Lender on any day, the average (as
determined by the Administrative Agent) of the respective percentage
discount rates (expressed to two decimal places and rounded upward, if
necessary, to the nearest 0.01%) quoted by the Schedule I Reference
Banks as the percentage discount rate at which the Schedule I Reference
Banks would, in accordance with their normal practices, at or about
10:00 a.m., Toronto time, on such date, be prepared to purchase bankers'
acceptances accepted by the Schedule I Reference Banks having a face
amount and term comparable to the face amount and term of such B/A; and
(b) with respect to any C$ Revolving Credit Lender that is not a
Schedule I chartered bank under the Bank Act (Canada), as applicable to
a B/A being purchased by such Lender on any day, the average (as
determined by the Administrative Agent) of the respective percentage
discount rates (expressed to two decimal places and rounded upward, if
necessary, to the nearest 0.01%) quoted by the Schedule II Reference
Banks as the percentage discount rates at which the Schedule II
Reference Banks would, in accordance with their normal practices, at or
about 10:00 a.m., Toronto time, on such date, be prepared to purchase
bankers' acceptances accepted by the Schedule II Reference Banks having
a face amount and term comparable to the face amount and term of such
B/A; provided, however, that no Discount Rate calculated pursuant to
this clause (b) shall exceed the Discount Rate calculated pursuant to
clause (a) above in respect of the same issue of B/As plus 10 basis
points (.10%) per annum.
"Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of" shall
have correlative meanings.
"Dollar Equivalent": with respect to an amount of C$ on any
date, the amount of Dollars that may be purchased with such amount of C$
at the Spot Exchange Rate on such date.
"Dollars" and "$": lawful currency of the United States of
America.
"Domestic Subsidiary": any Subsidiary of the Parent Borrower
organized under the laws of any jurisdiction within the United States of
America.
<PAGE> 17
12
"ECF Percentage": the percentage set forth below opposite the
Consolidated Leverage Ratio as of the last day of the most recent fiscal
year ending prior to the relevant Excess Cash Flow Application Date:
<TABLE>
<CAPTION>
Consolidated Leverage Ratio ECF Percentage
--------------------------- --------------
<S> <C>
Greater than 4.50 to 1.0 75%
Less than or equal to 4.50 to 1.0 and greater than 3.50 to 1.0 50%
Less than or equal to 3.50 to 1.0 and greater than 3.00 to 1.0 25%
Less than or equal to 3.00 to 1.0 0%
</TABLE>
"Environmental Laws": any and all foreign, Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of
human health or the environment, as now or may at any time hereafter be
in effect.
"Equity Financing Proceeds": any Contributed Equity used to
finance any Capital Expenditure made pursuant to Section 7.7(b) or any
investment made pursuant to Section 7.8(i).
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chase is offered Dollar deposits at or about
10:00 A.M., New York City time, two Business Days prior to the beginning
of such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of
its Eurodollar Loans are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of its Eurodollar Loans to be
outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
-----------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
Loans under a single Facility the then current Interest Periods with
respect to all of which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the
same day).
<PAGE> 18
13
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Parent Borrower,
the excess, if any, of (a) the sum, without duplication, of (i)
Consolidated EBITDA for such fiscal year, (ii) decreases in Consolidated
Working Capital for such fiscal year, (iii) the amount of any refund
received by the Parent Borrower and its Subsidiaries during such fiscal
year on taxes paid by the Parent Borrower and its Subsidiaries, (iv)
cash dividends, cash interest and other similar cash payments received
by the Parent Borrower during such fiscal year in respect of investments
to the extent not included in Consolidated Net Income to determine
Consolidated EBITDA for such fiscal year, (v) any purchase price
adjustments paid to the Parent Borrower or any of its Subsidiaries
during such fiscal year pursuant to the Acquisition Agreement or the
Bumble Bee Purchase Agreement, and (vi) extraordinary cash gains to the
extent subtracted or otherwise not included in Consolidated Net Income
to determine Consolidated EBITDA for such fiscal year over (b) the sum,
without duplication, of (i) the aggregate amount actually paid by the
Parent Borrower and its Subsidiaries in cash during such fiscal year on
account of Capital Expenditures or repurchases of the Senior
Subordinated Notes pursuant to Section 7.9 (excluding (x) the principal
amount of Indebtedness incurred in connection with such expenditures and
(y) any such expenditures made pursuant to Section 7.7(b) except, in the
case of this clause (y), to the extent that the amounts used to make
such expenditures were included in determining Consolidated EBITDA for
such fiscal year), (ii) the aggregate amount of all prepayments of
Revolving Credit Loans and Swing Line Loans during such fiscal year to
the extent accompanying permanent optional reductions of the Revolving
Credit Commitments and all optional prepayments of the Term Loans during
such fiscal year, (iii) the aggregate amount of all regularly scheduled
principal payments of Funded Debt (including, without limitation, the
Term Loans) of the Parent Borrower and its Subsidiaries made during such
fiscal year (other than in respect of any revolving credit facility to
the extent there is not an equivalent permanent reduction in commitments
thereunder), (iv) increases in Consolidated Working Capital for such
fiscal year, (v) cash interest expense of the Parent Borrower and its
Subsidiaries for such fiscal year, (vi) cash taxes actually paid in such
fiscal year or to be paid in the subsequent fiscal year on account of
such fiscal year to the extent added to Consolidated Net Income to
determine Consolidated EBITDA for such fiscal year, (vii) the amount of
all loans and advances made in such fiscal year pursuant to Section
7.8(d) (net of any repayments of such loans and advances made during
such fiscal year), (viii) the aggregate amount actually paid by the
Parent Borrower and its Subsidiaries in cash during such fiscal year on
account of investments made pursuant to Section 7.8(n), (p) or (q)
(excluding the principal amount of Indebtedness incurred in connection
with such investments), (ix) the amount of all deposits required to be
made by the Parent Borrower or any of its Subsidiaries during such
fiscal year in connection with investments made pursuant to Section
7.8(l) (net of any amounts returned in respect of such deposits during
such fiscal year), (x) dividends paid by the Parent Borrower during such
fiscal year in accordance with Section 7.6 to the extent not subtracted
in the determination of Consolidated Net Income of the Parent Borrower
for such fiscal year, (xi) previously expensed royalty payments made
during such fiscal year to the extent not subtracted in the
determination of Consolidated Net Income of the Parent Borrower for such
fiscal year, (xii) any purchase price adjustments paid by the Parent
Borrower or any of its Subsidiaries during such fiscal year pursuant to
the Acquisition Agreement or the Bumble Bee Purchase Agreement, and
(xiii) extraordinary cash losses to the extent added to Consolidated Net
Income to determine Consolidated EBITDA for such fiscal year.
"Excess Cash Flow Application Date": as defined in Section
2.11(c).
"Excluded Foreign Subsidiaries": any Foreign Subsidiary the
pledge of all of whose Capital Stock as Collateral would, in the good
faith judgment of the Parent Borrower, result in adverse tax
consequences to the Parent Borrower.
"Existing Credit Agreement": as defined in the recitals hereto.
<PAGE> 19
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"Facility": each of (a) the extensions of credit made hereunder
in the form of Tranche A Term Loans (the "Tranche A Term Loan
Facility"), (b) the extensions of credit made hereunder in the form of
Tranche B Term Loans (the "Tranche B Term Loan Facility"), (c) the
extensions of credit made hereunder in the form of Tranche B-1 Term
Loans (the "Tranche B-1 Term Loan Facility"), (d) the US$
Revolving Credit Commitments and the extensions of credit made
thereunder (the "US$ Revolving Credit Facility"), (e) the C$ Revolving
Credit Commitments and the extensions of credit made thereunder (the "C$
Revolving Credit Facility") and (f) the Additional US$ Revolving Credit
Commitments and the extensions of credit made thereunder (the
"Additional US$ Revolving Credit Facility").
"Federal Funds Effective Rate": as defined in the definition of
"ABR".
"Foreign Subsidiary": any Subsidiary of the Parent Borrower that
is not a Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such Person
that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year from such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date, including, without limitation, all current maturities
and current sinking fund payments in respect of such Indebtedness
whether or not required to be paid within one year from the date of its
creation and, in the case of the Borrowers, Indebtedness in respect of
the Loans.
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements
and pronouncements of the Financial Accounting Standards Board and the
rules and regulations of the Securities and Exchange Commission, or in
such other statements by such other entity as may be in general use by
significant segments of the accounting profession, which are applicable
to the circumstances of the Parent Borrower as of the date of
determination, except that for purposes of Section 7.1, GAAP shall be
determined on the basis of such principles in effect on the
Amendment/Restatement Closing Date and consistent with those used in the
preparation of the audited financial statements of the Parent Borrower,
as the case may be, in respect of the fiscal year ended December 31,
1997. In the event that any "Accounting Change" (as defined below)
shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this
Agreement, then the Parent Borrower and the Administrative Agent agree
to enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Parent Borrower's
financial condition shall be the same after such Accounting Changes as
if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Parent
Borrower, the Administrative Agent and the Required Lenders, all
financial covenants, standards and terms in this Agreement shall
continue to be calculated or construed as if such Accounting Changes had
not occurred. "Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of
the American Institute of Certified Public Accountants or, if
applicable, the Securities and Exchange Commission (or successors
thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
<PAGE> 20
15
"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by the Parent Borrower
and each Subsidiary Guarantor, substantially in the form of Exhibit A,
as the same may be amended, supplemented or otherwise modified from time
to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of
such Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Heritage": Heritage Brands Holdings, Inc., a Delaware
corporation.
"Heritage Acquisition": as defined in Section 5.1(b) of the
November 1997 Amendment/Restatement.
"Hicks Muse": Hicks, Muse, Tate & Furst Incorporated.
"Incur": as defined in Section 7.2; and the term "Incurrence"
shall have a correlative meaning.
"Indebtedness": of any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property
or services (other than current trade payables and accrued expenses
incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Capital Lease
Obligations of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter of
credit or similar facilities, (g) indebtedness incurred in connection
with any Receivables Facility, (h) all Guarantee Obligations of such
Person in respect of obligations of the kind referred to in clauses (a)
through (g) above and (i) all obligations of the kind referred to in
clauses (a) through (h) above secured by (or for which the holder of
such obligation has an existing right, contingent or otherwise, to be
secured by) any
<PAGE> 21
16
Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation.
"Initial Public Offering": an underwritten public offering by
the Parent Borrower of Capital Stock of the Parent Borrower pursuant to
a registration statement filed with the Securities and Exchange
Commission in accordance with the Securities Act of 1933, as amended.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA or Applicable Canadian Pension Legislation.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in Section 4.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, (c) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest
Period, (d) as to any Canadian Prime Rate Loan, the last day of each
March, June, September and December to occur while such Loan is
outstanding and (e) as to any Loan, the date of repayment thereof at
final stated maturity.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may
be, with respect to such Eurodollar Loan and ending one, two, three, six
or (if available to all Lenders under the relevant Facility) nine or
twelve months thereafter, as selected by the Parent Borrower in its
notice of borrowing or notice of conversion, as the case may be, given
with respect thereto; and (b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three, six or (if available to all
Lenders under the relevant Facility) nine or twelve months thereafter,
as selected by the Parent Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last
day of the then current Interest Period with respect thereto; provided
that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date or beyond the date
final payment is due on the Tranche A Term Loans or the Tranche B
Term Loans, as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month; and
(iv) the Parent Borrower shall select Interest Periods so
as not to require a payment or prepayment of any Eurodollar Loan
during an Interest Period for such Loan.
<PAGE> 22
17
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract, interest rate
option, interest rate cap or other interest rate hedge arrangement, to
or under which the Parent Borrower or any of its Subsidiaries is a party
or a beneficiary on the Closing Date or becomes a party or a beneficiary
after the Closing Date.
"Issuing Lender": Chase or any of its affiliates or, with the
approval of the Administrative Agent, any of the other Revolving Credit
Lenders which chooses to be an Issuing Lender, in its capacity as issuer
of any Letter of Credit.
"L/C Commitment": $30,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December and the last day of the Revolving Credit
Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.
"L/C Participants": with respect to any Letter of Credit, the
collective reference to all the US$ Revolving Credit Lenders other than
the Issuing Lender that issued such Letter of Credit.
"Lenders": as defined in the preamble.
"Letters of Credit": as defined in Section 3.1(a).
"Libby's": Nestle USA, Inc.
"Libby's Acquisition": the acquisition described in the Libby's
Purchase Agreement.
"Libby's Purchase Agreement": the Asset Purchase Agreement by
and between Nestle USA, Inc., IHF Acquisition Corp. and the Parent
Borrower dated July 17, 1998.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any capital lease having substantially the same
economic effect as any of the foregoing).
"Loan": any loan made or B/A accepted or purchased by any Lender
pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents and the
Notes.
"Loan Parties": the Borrowers and each Subsidiary of the Parent
Borrower which is a party to a Loan Document.
"Local Time": (a) in the case of each Facility other than the C$
Revolving Credit Facility, New York City time, and (b) in the case of
the C$ Revolving Credit Facility, Toronto time.
"Majority Additional US$ Revolving Credit Facility Lenders": the
Majority Facility Lenders in respect of the Additional US$ Revolving
Credit Facility.
<PAGE> 23
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"Majority C$ Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the C$ Revolving Credit Facility.
"Majority Facility Lenders": with respect to any Facility, the
holders of not less than 51% of the aggregate unpaid principal amount of
the Term Loans, the total US$ Revolving Extensions of Credit, the
Aggregate C$ Revolving Credit Exposure or the Additional US$ Revolving
Credit Loans, as the case may be, outstanding under such Facility (or,
in the case of (a) the US$ Revolving Credit Facility, prior to any
termination of the US$ Revolving Credit Commitments, the holders of not
less than 51% of the aggregate US$ Revolving Credit Commitments, (b) the
C$ Revolving Credit Facility, prior to any termination of the C$
Revolving Credit Commitments, the holders of not less than 51% of the
aggregate C$ Revolving Credit Commitments or (c) the Additional US$
Revolving Credit Facility, prior to any termination of the Additional
US$ Revolving Credit Commitments, the holders of not less than 51% of
the aggregate Additional US$ Revolving Credit Commitments).
"Majority US$ Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the US$ Revolving Credit Facility.
"Material Acquisition": any acquisition of Property or series of
related acquisitions of Property (including by way of merger) which (a)
constitutes assets comprising all or substantially all of a brand or an
operating unit of a business or constitutes all or substantially all of
the common stock of a Person and (b) involves the payment of
consideration by the Parent Borrower and its Subsidiaries (valued at the
initial principal amount thereof in the case of non-cash consideration
consisting of notes or other debt securities and valued at fair market
value in the case of other non-cash consideration) in excess of
$5,000,000.
"Material Adverse Effect": a material adverse effect on (a) the
business, assets, property, condition (financial or otherwise) or
prospects of the Parent Borrower and its Subsidiaries taken as a whole
or (b) the validity or enforceability of this Agreement or any of the
other Loan Documents or the rights or remedies of the Administrative
Agent or the Lenders hereunder or thereunder.
"Material Disposition": any Disposition of Property or series of
related Dispositions of Property which (a) constitutes assets comprising
all or substantially all of a brand or an operating unit of a business
or constitutes all or substantially all of the common stock of a Person
and (b) yields gross proceeds to the Parent Borrower or any of its
Subsidiaries (valued at the initial principal amount thereof in the case
of non-cash proceeds consisting of notes or other debt securities and
valued at fair market value in the case of other non-cash proceeds) in
excess of $5,000,000.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Merger": as defined in Section 5.1(b).
"Merger Sub": AHFP Acquisition Corporation, a Delaware
corporation.
"Mexican Subsidiary": any Subsidiary of the Parent Borrower
organized under the laws of Mexico (or any jurisdiction therein).
<PAGE> 24
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"Mortgaged Properties": the real properties listed on Schedule
1.1B or Schedule 1.1C, as to which the Administrative Agent for the
benefit of the Lenders shall be granted a Lien pursuant to the
Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by
any Loan Party in favor of, or for the benefit of, the Administrative
Agent for the benefit of the Lenders, substantially in the form of
Exhibit D-1 or D-2, as the case may be (with such changes thereto as
shall be advisable under the law of the jurisdiction in which such
mortgage or deed of trust is to be recorded), as the same may be
amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA or under Applicable Canadian
Pension Legislation.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, survey costs, title
insurance premiums, amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted hereunder on any
asset which is the subject of such Asset Sale or Recovery Event (other
than any Lien pursuant to a Security Document) and other customary fees
and expenses actually incurred in connection therewith, net of taxes
paid or reasonably estimated to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax
sharing arrangements) and net of purchase price adjustments reasonably
expected to be payable in connection therewith and (b) in connection
with any issuance or sale of equity securities or debt securities or
instruments or the incurrence of loans, the cash proceeds received from
such issuance or incurrence, net of attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and
other customary fees and expenses actually incurred in connection
therewith, provided that, with respect to any issuance or sale of debt
securities or instruments as described in this clause (b), to the extent
that such cash proceeds are used to refinance any Indebtedness permitted
by this Agreement, then such cash proceeds shall not constitute "Net
Cash Proceeds" for the purpose of this Agreement.
"Non-Excluded Taxes": as defined in Section 2.19(a).
"Non-U.S. Lender": as defined in Section 2.19(b).
"Notes": the collective reference to the Tranche A Term Notes,
the Tranche B Term Notes, the Revolving Credit Notes and the Swing Line
Note.
"November 1997 Amendment/Restatement": the amendment and
restatement of a predecessor of this Agreement, dated as of November 21,
1997.
"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of
the Loans and Reimbursement Obligations and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to either
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of each Borrower to the Administrative Agent
or to any Lender (or, in the case of Interest Rate Protection
Agreements, any affiliate of any Lender), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit,
any Interest Rate Protection Agreement entered into with any
<PAGE> 25
20
Lender or any affiliate of any Lender or any other document made,
delivered or given in connection herewith or therewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees,
charges and disbursements of counsel to the Administrative Agent or to
any Lender that are required to be paid by either Borrower pursuant
hereto) or otherwise.
"Parent Borrower": as defined in the preamble to this Agreement.
"Participant": as defined in Section 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor) or any
pension commission or similar body constituted under any Applicable
Canadian Pension Legislation.
"Permitted Investments": any of the investments identified on
Schedule 1.1D.
"Permitted Investors": the collective reference to Hicks Muse
and its Affiliates and principals.
"Permitted Issuance": (a) the issuance by the Parent Borrower of
shares of Capital Stock as dividends on issued and outstanding Capital
Stock of the same class of the Parent Borrower or pursuant to any
dividend reinvestment plan, (b) the issuance by the Parent Borrower of
options or other equity securities of the Parent Borrower to outside
directors, members of management or employees of the Parent Borrower or
any Subsidiary of the Parent Borrower, (c) the issuance of securities as
interest or dividends on pay-in-kind debt or preferred equity securities
permitted hereunder and under the Security Documents, (d) the issuance
to the Parent Borrower or any Subsidiary (or any director, with respect
to directors' qualifying shares) by any Subsidiary of the Parent
Borrower of any of its Capital Stock, in each case with respect to this
clause (d) to the extent such Capital Stock is pledged to the
Administrative Agent for the benefit of the Lenders pursuant to the
Guarantee and Collateral Agreement (provided, that only 65% of the
Capital Stock of an Excluded Foreign Subsidiary is required to be so
pledged) and (e) the issuance of Contributed Equity.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA or Applicable Canadian Pension Legislation and in
respect of which the Parent Borrower or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA or under Applicable Canadian Pension Legislation.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Prime Rate": as defined in the definition of "ABR".
"Projections": as defined in Section 6.2(c).
"Properties": as defined in Section 4.17.
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
<PAGE> 26
21
"Qualified Issuer": any commercial bank (a) which has capital
and surplus in excess of $250,000,000 and (b) the outstanding long-term
debt securities of which are rated at least A-2 by Standard & Poor's
Ratings Services or at least P-2 by Moody's Investors Service, Inc., or
carry an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of
investments.
"Reallocation Notice": as defined in Section 2.27(a).
"Receivables Facility": one or more non-recourse receivables
facilities providing for the sale, encumbrance or other Disposition, at
any time or from time to time, of all or a portion of the accounts
receivable of the Parent Borrower or any of its Subsidiaries.
"Receivables Facility Assets": accounts receivable and related
ancillary rights, including, without limitation, any security interests
or guarantees securing the payment of such receivables, of the Parent
Borrower or any of its Subsidiaries, that are sold, encumbered or
otherwise Disposed of at any time or from time to time in connection
with a Receivables Facility.
"Receivables SPV": a special purpose company established by the
Parent Borrower or any of its Subsidiaries and so existing solely for
purposes of a Receivables Facility.
"Recovery Event": any settlement of or payment in respect of any
property insurance or casualty insurance claim or any condemnation
proceeding relating to any Property of the Parent Borrower or any of its
Subsidiaries, excluding any such settlement or payment which, together
with any related settlement or payment, yields gross proceeds to the
Parent Borrower or any of its Subsidiaries of less than $1,000,000.
"Refunded Swing Line Loans": as defined in Section 2.7.
"Refunding Date": as defined in Section 2.7.
"Register": as defined in Section 10.6(d).
"Reimbursement Obligation": the obligation of the Parent
Borrower to reimburse each Issuing Lender pursuant to Section 3.5 for
amounts drawn under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Parent Borrower
or any of its Subsidiaries in connection therewith which are not applied
to prepay the Term Loans or reduce the Revolving Credit Commitments
pursuant to Section 2.11(b) as a result of the delivery of a
Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in
respect of which the Parent Borrower has delivered a Reinvestment
Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Event of Default has occurred and is
continuing and that the Parent Borrower (directly or indirectly through
a Subsidiary) intends and expects to use all or a specified portion of
the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire
assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto
less any amount expended prior to the relevant Reinvestment Prepayment
Date to acquire assets useful in the Parent Borrower's business.
<PAGE> 27
22
"Reinvestment Prepayment Date": with respect to any Reinvestment
Event, the earlier of (a) the date occurring six months after such
Reinvestment Event and (b) the date on which the Parent Borrower shall
have determined not to, or shall have otherwise ceased to, acquire
assets useful in the Parent Borrower's business with all or any portion
of the relevant Reinvestment Deferred Amount.
"Related US$ Lender": in the case of any C$ Revolving Credit
Lender that is a Schedule II chartered bank under the Bank Act (Canada),
an affiliate of such Lender that is, or is capable of becoming, an
Additional US$ Revolving Credit Lender.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA or under Applicable Canadian Pension Legislation.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under the regulations issued pursuant to Section
4043(b) of ERISA.
"Required Lenders": the holders of not less than 51% of the sum
of (a) the aggregate unpaid principal amount of the Term Loans,
Additional US$ Revolving Credit Loans, C$ Revolving Credit Loans and US$
Revolving Extensions of Credit and (b) the unutilized Additional US$
Revolving Credit Commitments, C$ Revolving Credit Commitments and US$
Revolving Credit Commitments.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation (including,
without limitation, Environmental Laws) or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Reset Date": as defined in Section 2.26(b).
"Responsible Officer": the chief executive officer, the
president, any senior vice president, the chief financial officer or the
treasurer of a Borrower (including, in any event, any person who is an
officer of such Borrower and is named on the closing certificate
delivered by such Borrower on the Closing Date pursuant to Section
5.1(g) whether or not such person holds any of the foregoing positions).
"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Commitments": the collective reference to the
US$ Revolving Credit Commitments, the Additional US$ Revolving Credit
Commitments and the C$ Revolving Credit Commitments. The original
aggregate amount of the Revolving Credit Commitments, as of the
Amendment/Restatement Closing Date, is $230,000,000.
"Revolving Credit Facility": the collective reference to the US$
Revolving Credit Facility, C$ Revolving Credit Facility and Additional
US$ Revolving Credit Facility.
"Revolving Credit Lender": each Lender which has a Revolving
Credit Commitment or which has made Revolving Credit Loans.
"Revolving Credit Loans": the collective reference to US$
Revolving Credit Loans, C$ Revolving Credit Loans and Additional US$
Revolving Credit Loans.
<PAGE> 28
23
"Revolving Credit Note": any promissory note of a Borrower
evidencing Revolving Credit Loans, including, without limitation,
Additional US$ Revolving Credit Loans.
"Revolving Credit Termination Date": the earlier of (a) the
Scheduled Revolving Credit Termination Date and (b) the date on which
the Tranche A Term Loans shall be paid in full.
"Schedule I Reference Banks": such Schedule I chartered banks
under the Bank Act (Canada) as are mutually agreed upon by the
Administrative Agent and the Canadian Borrower.
"Schedule II Reference Banks": The Chase Manhattan Bank of
Canada and one such other Schedule II chartered bank under the Bank Act
(Canada) as is mutually agreed upon by the Administrative Agent and the
Canadian Borrower.
"Scheduled Capital Expenditure Amount": in connection with the
calculation of the Consolidated Fixed Charge Coverage Ratio as at the
end of any period of four consecutive fiscal quarters of the Borrower
ending on the last day of any fiscal quarter set forth below, the amount
set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- ------
<S> <C>
December 31, 1997 to December 31, 1998 $38,000,000
March 31, 1999 $39,250,000
June 30, 1999 $40,500,000
September 30, 1999 $41,750,000
December 31, 1999 and thereafter $43,000,000
</TABLE>
"Scheduled Revolving Credit Termination Date": May 31, 2004.
"Security Documents": the collective reference to the Guarantee
and Collateral Agreement, the Canadian Guarantee, the Mortgages and all
other security documents hereafter delivered to the Administrative Agent
granting a Lien on any Property of any Person to secure the obligations
and liabilities of any Loan Party under any Loan Document.
"Sellers": the collective reference to AHP and AHP Holding.
"Senior Subordinated Note Indenture": the Indenture entered into
by the Parent Borrower and certain of its Subsidiaries in connection
with the issuance of the Senior Subordinated Notes, together with all
instruments and other agreements entered into by the Parent Borrower or
such Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 7.9.
"Senior Subordinated Notes": the subordinated notes of the
Parent Borrower issued on the Closing Date pursuant to the Senior
Subordinated Note Indenture.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA or Applicable Canadian Pension Legislation, but which is not a
Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as
of any date of determination, (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend
<PAGE> 29
24
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"Specified Change of Control": a "Change of Control" as defined
in the Senior Subordinated Note Indenture.
"Spot Exchange Rate": on any day, the spot rate at which Dollars
are offered on such day by the Administrative Agent in Toronto for C$ at
approximately 11:00 a.m. (Toronto time).
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than stock
or such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless otherwise qualified, all references to
a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Parent Borrower.
"Subsidiary Guarantor": each Subsidiary of the Parent Borrower
other than a Canadian Subsidiary, any Excluded Foreign Subsidiary and
any Receivables SPV.
"Swing Line Commitment": the obligation of the Swing Line Lender
to make Swing Line Loans pursuant to Section 2.6 in an aggregate
principal amount at any one time outstanding not to exceed $10,000,000.
"Swing Line Lender": as defined in Section 2.6.
"Swing Line Loans": as defined in Section 2.6.
"Swing Line Note": any promissory note of the Parent Borrower
evidencing Swing Line Loans.
"Swing Line Participation Amount": as defined in Section 2.7.
"Term Loan Facilities": the collective reference to the Tranche
A Term Loan Facility, the Tranche B Term Loan Facility and the Tranche
B-1 Term Loan Facility.
"Term Loan Lenders": the collective reference to the Tranche A
Term Loan Lenders, the Tranche B Term Loan Lenders and the Tranche B-1
Term Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term
Loans, the Tranche B Term Loans and the Tranche B-1 Term Loans.
"Test Period": any period of four consecutive fiscal quarters of
the Borrower.
"Total C$ Revolving Credit Commitments": at any time, the
aggregate amount of the C$ Revolving Credit Commitments, as in effect at
such time. The Total C$ Revolving Commitments on the
Amendment/Restatement Closing Date is $30,000,000.
<PAGE> 30
25
"Total US$ Revolving Credit Commitments": at any time, the
aggregate amount of the US$ Revolving Credit Commitments, as in effect
at such time. The Total US$ Revolving Credit Commitments on the
Amendment/Restatement Closing Date is $180,000,000.
"Trade Acceptances": any trade acceptance accepted by the Parent
Borrower or any of its Subsidiaries in connection with purchases from
suppliers made in the ordinary course of business.
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Facility": as defined in the definition of
"Facility".
"Tranche A Term Loan Lender": each Lender which has made a
Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to any Tranche A Term Loan
Lender, the percentage which the principal amount of such Lender's
Tranche A Term Loan then outstanding constitutes of the aggregate
principal amount of the Tranche A Term Loans then outstanding.
"Tranche A Term Note": any promissory note of the Parent
Borrower evidencing Tranche A Term Loans.
"Tranche B Term Loan": as defined in Section 2.1.
"Tranche B Term Loan Facility": as defined in the definition of
"Facility".
"Tranche B Term Loan Lender": each Lender which has made a
Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Lender at any time,
the percentage which the principal amount of such Lender's Tranche B
Term Loan then outstanding constitutes of the aggregate principal amount
of the Tranche B Term Loans then outstanding.
"Tranche B Term Note": any promissory note of the Parent
Borrower evidencing Tranche B Term Loans.
"Tranche B-1 Term Loan": as defined in Section 2.1.
"Tranche B-1 Term Loan Facility": as defined in the definition
of "Facility".
"Tranche B-1 Term Loan Lender": each Lender which has made a
Tranche B-1 Term Loan.
"Tranche B-1 Term Loan Percentage": as to any Tranche B-1 Term
Loan Lender, the percentage which the principal amount of such Lender's
Tranche B-1 Term Loan then outstanding constitutes of the aggregate
principal amount of the Tranche B-1 Term Loans then outstanding.
"Tranche B-1 Term Note": any promissory note of the Parent
Borrower evidencing Tranche B-1 Term Loans.
"Transferee": as defined in Section 10.6(g).
"Type": as to any Loan, its nature as an ABR Loan, a Eurodollar
Loan, a B/A or a Canadian Prime Rate Loan.
<PAGE> 31
26
"Unapplied Excess Cash Flow": any Excess Cash Flow that is not
required to be applied toward the prepayment of the Term Loans and the
reduction of the Revolving Credit Commitments pursuant to Section
2.11(c), as determined on each Excess Cash Flow Application Date in
respect of the immediately preceding fiscal year of the Parent Borrower.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be revised from time to time.
"US$ Revolving Credit Borrowing": a Borrowing comprised of US$
Revolving Credit Loans.
"US$ Revolving Credit Commitment": with respect to any Lender,
the commitment (if any) of such Lender to make US$ Revolving Credit
Loans pursuant to Section 2.4, and to acquire participations in Letters
of Credit pursuant to Section 3.1 and Swing Line Loans pursuant to
Section 2.6. The amount of each Lender's US$ Revolving Credit
Commitment is the amount set forth opposite such Lender's name in
Schedule 1.1A under the caption "US$ Revolving Credit Commitment", as
such amount may be changed from time to time pursuant to this Agreement.
"US$ Revolving Credit Facility": as defined in the definition of
"Facility".
"US$ Revolving Credit Lender": a Lender with a US$ Revolving
Credit Commitment or holding US$ Revolving Credit Loans or participating
interests in Letters of Credit or Swing Line Loans.
"US$ Revolving Credit Loan": as defined in Section 2.4(a).
"US$ Revolving Credit Percentage": as to any US$ Revolving
Credit Lender at any time, the percentage which such Lender's US$
Revolving Credit Commitment then constitutes of the Total US$ Revolving
Credit Commitments (or, at any time after the US$ Revolving Credit
Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's US$ Revolving Credit Loans
then outstanding constitutes of the aggregate principal amount of the
US$ Revolving Credit Loans then outstanding).
"US$ Revolving Extensions of Credit": as to any US$ Revolving
Credit Lender at any time, an amount equal to the sum of (a) the
aggregate principal amount of all US$ Revolving Credit Loans made by
such Lender then outstanding, (b) such Lender's US$ Revolving Credit
Percentage of the L/C Obligations then outstanding and (c) such Lender's
US$ Revolving Credit Percentage of the aggregate principal amount of
Swing Line Loans then outstanding.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or through
other Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Parent Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Parent Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have
<PAGE> 32
27
the respective meanings given to them under GAAP; provided that, if the Parent
Borrower notifies the Administrative Agent that the Parent Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the Closing Date in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Parent
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Certain Pro Forma Calculations. (a) For the purposes of
calculating Consolidated EBITDA for any Test Period pursuant to any
determination of the Consolidated Leverage Ratio or the Consolidated Senior
Leverage Ratio, (i) if at any time during such Test Period the Parent Borrower
or any Subsidiary shall have made any Material Disposition, the Consolidated
EBITDA for such Test Period shall be reduced by an amount equal to the
Consolidated EBITDA (if positive) attributable to the Property which is the
subject of such Material Disposition for such Test Period or increased by an
amount equal to the Consolidated EBITDA (if negative) attributable thereto for
such Test Period; (ii) if during such Test Period the Parent Borrower or any
Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such
Test Period shall be calculated after giving pro forma effect thereto as if
such Material Acquisition occurred on the first day of such Test Period; and
(iii) if during such Test Period any Person that subsequently became a
Subsidiary or was merged with or into the Parent Borrower or any Subsidiary
since the beginning of such Test Period shall have entered into any disposition
or acquisition transaction that would have required an adjustment pursuant to
clause (i) or (ii) above if made by the Parent Borrower or a Subsidiary during
such Test Period, Consolidated EBITDA for such Test Period shall be calculated
after giving pro forma effect thereto as if such transaction occurred on the
first day of such Test Period.
(b) Pro forma calculations of Consolidated EBITDA, whether
pursuant to this Section 1.3 or otherwise, shall not give effect to anticipated
cost savings, except, in the case of Section 7.8(p), to the extent permitted by
Regulation S-X under the Securities Act of 1933 (in which case Consolidated
EBITDA shall be determined as if the relevant cost savings had been implemented
at the beginning of the relevant Test Period).
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Term Loans. Subject to the terms and conditions hereof, (a)
each Tranche A Term Loan Lender severally agrees, on the Amendment/Restatement
Closing Date, to maintain outstanding, a term loan (a "Tranche A Term Loan") to
the Parent Borrower, (b) each Tranche B Term Loan Lender severally agrees, on
the Amendment/Restatement Closing Date, to maintain outstanding a term loan (a
"Tranche B Term Loan") to the Parent Borrower, and (c) each Tranche B-1 Term
Loan Lender severally agrees, on the Amendment/Restatement Closing Date, to
make a term loan (a "Tranche B-1 Term Loan") to the Parent Borrower, in each
case in the respective amounts specified on Schedule 1.1A. The aggregate
outstanding principal amount of the Tranche A Term Loans, the Tranche B Term
Loans and the Tranche B-1 Term Loans on the Amendment/Restatement Closing Date
shall be $516,500,000, $149,800,000 and $100,000,000 respectively. The Term
Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by
the Parent Borrower and notified to the Administrative Agent in accordance with
Sections 2.2 and 2.12.
<PAGE> 33
28
2.2 Procedure for Term Loan Borrowing on the
Amendment/Restatement Closing Date. The Parent Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, three Business
Days prior to the anticipated Amendment/Restatement Closing Date) requesting
that the Tranche B-1 Term Loan Lenders make the Tranche B-1 Term Loans on the
Amendment/Restatement Closing Date and specifying the amount to be borrowed.
Upon receipt of such notice the Administrative Agent shall promptly notify each
relevant Term Loan Lender thereof. Not later than 12:00 Noon, New York City
time, on the Amendment/Restatement Closing Date each relevant Term Loan Lender
shall make available to the Administrative Agent at its office specified in
Section 10.2 an amount in immediately available funds equal to the Tranche B-1
Term Loan to be made by such Lender. The Administrative Agent shall credit the
account of the Parent Borrower on the books of such office of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the relevant Term Loan Lenders in immediately available
funds.
2.3 Repayment of Term Loans. (a) The Tranche A Term Loan of
each Tranche A Lender shall mature in semi-annual installments, each of which
shall be in an amount equal to such Lender's Tranche A Term Loan Percentage
multiplied by the amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 1998 $17,153,137
March 31, 1999 25,412,054
September 30, 1999 25,412,054
March 31, 2000 36,212,177
September 30, 2000 36,212,177
March 31, 2001 46,376,999
September 30, 2001 46,376,999
March 31, 2002 52,094,711
September 30, 2002 52,094,711
March 31, 2003 57,812,423
September 30, 2003 57,812,423
May 31, 2004 63,530,135
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall
mature in semi-annual installments, each of which shall be in an amount equal
to such Lender's Tranche B Term Loan Percentage multiplied by the amount set
forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 1998 $200,000
March 31, 1999 200,000
September 30, 1999 200,000
March 31, 2000 200,000
September 30, 2000 200,000
March 31, 2001 200,000
September 30, 2001 200,000
March 31, 2002 200,000
September 30, 2002 200,000
March 31, 2003 200,000
September 30, 2003 200,000
March 31, 2004 200,000
September 30, 2004 20,000,000
March 31, 2005 63,700,000
October 31, 2005 63,700,000
</TABLE>
<PAGE> 34
29
(c) The Tranche B-1 Term Loan of each Tranche B-1 Term Loan Lender shall
mature in semi-annual installments, each of which shall be in an amount equal
to such Lender's Tranche B-1 Term Loan Percentage multiplied by the amount set
forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 1999 $130,000
September 30, 1999 130,000
March 31, 2000 130,000
September 30, 2000 130,000
March 31, 2001 130,000
September 30, 2001 130,000
March 31, 2002 130,000
September 30, 2002 130,000
March 31, 2003 130,000
September 30, 2003 130,000
March 31, 2004 130,000
September 30, 2004 130,000
March 31, 2005 130,000
September 30, 2005 130,000
March 31, 2006 49,090,000
September 30, 2006 49,090,000
</TABLE>
2.4 US$ Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each US$ Revolving Credit Lender severally agrees to
make Dollar-denominated revolving credit loans ("US$ Revolving Credit Loans")
to the Parent Borrower from time to time during the Revolving Credit Commitment
Period in an aggregate principal amount at any one time outstanding which, when
added to such Lender's US$ Revolving Credit Percentage of the sum of (i) the
L/C Obligations then outstanding and (ii) the aggregate principal amount of the
Swing Line Loans then outstanding, does not exceed the amount of such Lender's
US$ Revolving Credit Commitment. During the Revolving Credit Commitment Period
the Parent Borrower may use the US$ Revolving Credit Commitments by borrowing,
prepaying the US$ Revolving Credit Loans in whole or in part, and reborrowing,
all in accordance with the terms and conditions hereof. The US$ Revolving
Credit Loans may from time to time be Eurodollar Loans or ABR Loans, as
determined by the Parent Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.12, provided that no US$ Revolving Credit
Loan shall be made as a Eurodollar Loan after the day that is one month prior
to the Scheduled Revolving Credit Termination Date.
(b) The Parent Borrower shall repay all outstanding US$
Revolving Credit Loans on the Revolving Credit Termination Date.
2.5 Procedure for US$ Revolving Credit Borrowing. The Parent
Borrower may borrow under the US$ Revolving Credit Commitments during the
Revolving Credit Commitment Period on any Business Day, provided that the
Parent Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 12:00 Noon, New
York City time, (a) three Business Days prior to the requested Borrowing Date,
in the case of Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type
of US$ Revolving Credit Loans to be borrowed, (ii) the requested Borrowing Date
and (iii) in the case of Eurodollar Loans, the respective amounts of each such
Type of Loan and the respective lengths of the initial Interest Period
therefor. Each borrowing under the US$ Revolving
<PAGE> 35
30
Credit Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the then
aggregate Available US$ Revolving Credit Commitments are less than $1,000,000,
such lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a
whole multiple of $1,000,000 in excess thereof; provided, that the Swing Line
Lender may request, on behalf of the Parent Borrower, borrowings under the US$
Revolving Credit Commitments which are ABR Loans in other amounts pursuant to
Section 2.7. Upon receipt of any such notice from the Parent Borrower, the
Administrative Agent shall promptly notify each US$ Revolving Credit Lender
thereof. Each US$ Revolving Credit Lender will make the amount of its pro rata
share of each borrowing available to the Administrative Agent for the account
of the Parent Borrower at the office of the Administrative Agent specified in
Section 10.2 prior to 12:00 Noon, New York City time, on the Borrowing Date
requested by the Parent Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Parent
Borrower by the Administrative Agent crediting the account of the Parent
Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the US$ Revolving Credit Lenders and
in like funds as received by the Administrative Agent.
2.6 Swing Line Commitment. (a) Subject to the terms and
conditions hereof, Chase (in such capacity, the "Swing Line Lender") agrees to
make a portion of the credit otherwise available to the Parent Borrower under
the US$ Revolving Credit Commitments from time to time during the Revolving
Credit Commitment Period by making swing line loans ("Swing Line Loans") to the
Parent Borrower; provided that (i) the aggregate principal amount of Swing Line
Loans outstanding at any time shall not exceed the Swing Line Commitment then
in effect (notwithstanding that the Swing Line Loans outstanding at any time,
when aggregated with the Swing Line Lender's other outstanding Revolving Credit
Loans hereunder, may exceed the Swing Line Commitment then in effect) and (ii)
the Parent Borrower shall not request, and the Swing Line Lender shall not
make, any Swing Line Loan if, after giving effect to the making of such Swing
Line Loan, the aggregate amount of the Available US$ Revolving Credit
Commitments would be less than zero. During the Revolving Credit Commitment
Period, the Parent Borrower may use the Swing Line Commitment by borrowing,
repaying and reborrowing, all in accordance with the terms and conditions
hereof. Swing Line Loans shall be ABR Loans only.
(b) The Parent Borrower shall repay all outstanding Swing Line
Loans on the Revolving Credit Termination Date.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line
Loans. (a) Whenever the Parent Borrower desires that the Swing Line Lender
make Swing Line Loans it shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must
be received by the Swing Line Lender not later than 1:00 P.M., New York City
time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed
and (ii) the requested Borrowing Date (which shall be a Business Day during the
Revolving Credit Commitment Period). Each borrowing under the Swing Line
Commitment shall be in an amount equal to $250,000 or a whole multiple of
$200,000 in excess thereof. Not later than 3:00 P.M., New York City time, on
the Borrowing Date specified in a notice in respect of Swing Line Loans, the
Swing Line Lender shall make available to the Administrative Agent at its
office specified in Section 10.2 an amount in immediately available funds equal
to the amount of the Swing Line Loan to be made by the Swing Line Lender. The
Administrative Agent shall make the proceeds of such Swing Line Loan available
to the Parent Borrower on such Borrowing Date by depositing such proceeds in
the account of the Parent Borrower with the Administrative Agent on such
Borrowing Date in immediately available funds.
(b) The Swing Line Lender, at any time and from time to time in
its sole and absolute discretion may, on behalf of the Parent Borrower (which
hereby irrevocably directs the Swing Line Lender to act on its behalf), on one
Business Day's notice given by the Swing Line Lender no later than 12:00 Noon,
New York City time, request each US$ Revolving Credit Lender to make, and each
US$ Revolving Credit Lender hereby agrees to make, a US$ Revolving Credit Loan,
in an amount equal to such Lender's US$ Revolving Credit Percentage of the
aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date of such notice, to repay the Swing Line Lender. Each
US$ Revolving Credit Lender shall make the amount of such US$ Revolving Credit
Loan
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available to the Administrative Agent at its office set forth in Section 10.2
in immediately available funds, not later than 10:00 A.M., New York City time,
one Business Day after the date of such notice. The proceeds of such US$
Revolving Credit Loans shall be immediately applied by the Swing Line Lender to
repay the Refunded Swing Line Loans. The Parent Borrower irrevocably
authorizes the Swing Line Lender to charge the Parent Borrower's accounts with
the Administrative Agent (up to the amount available in each such account) in
order to immediately pay the amount of such Refunded Swing Line Loans to the
extent amounts received from the US$ Revolving Credit Lenders are not
sufficient to repay in full such Refunded Swing Line Loans.
(c) If prior to the time a US$ Revolving Credit Loan would have
otherwise been made pursuant to Section 2.7(b), one of the events described in
Section 8(f) shall have occurred and be continuing with respect to the Parent
Borrower or if for any other reason, as determined by the Swing Line Lender in
its sole discretion, US$ Revolving Credit Loans may not be made as contemplated
by Section 2.7(b), each US$ Revolving Credit Lender shall, on the date such US$
Revolving Credit Loan was to have been made pursuant to the notice referred to
in Section 2.7(b) (the "Refunding Date"), purchase for cash an undivided
participating interest in an amount equal to (i) its US$ Revolving Credit
Percentage times (ii) the aggregate principal amount of Swing Line Loans then
outstanding which were to have been repaid with such US$ Revolving Credit Loans
(the "Swing Line Participation Amount").
(d) Whenever, at any time after the Swing Line Lender has
received from any US$ Revolving Credit Lender such Lender's Swing Line
Participation Amount, the Swing Line Lender receives any payment on account of
the Swing Line Loans, the Swing Line Lender will distribute to such Lender its
Swing Line Participation Amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded and, in the case of principal
and interest payments, to reflect such Lender's pro rata portion of such
payment if such payment is not sufficient to pay the principal of and interest
on all Swing Line Loans then due); provided, however, that in the event that
such payment received by the Swing Line Lender is required to be returned, such
US$ Revolving Credit Lender will return to the Swing Line Lender any portion
thereof previously distributed to it by the Swing Line Lender.
(e) Each US$ Revolving Credit Lender's obligation to make the
Loans referred to in Section 2.7(b) and to purchase participating interests
pursuant to Section 2.7(c) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such US$ Revolving
Credit Lender or the Parent Borrower may have against the Swing Line Lender,
the Parent Borrower or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of Default or the failure to
satisfy any of the other conditions specified in Section 5; (iii) any adverse
change in the condition (financial or otherwise) of the Parent Borrower; (iv)
any breach of this Agreement or any other Loan Document by the Parent Borrower,
any other Loan Party or any other Revolving Credit Lender; or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
2.8 Commitment Fees, etc. (a) The Parent Borrower agrees to
pay to the Administrative Agent for the account of each US$ Revolving Credit
Lender or Additional US$ Revolving Credit Lender, as the case may be, a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available US$ Revolving Credit
Commitment or unutilized Additional US$ Revolving Credit Commitment, as the
case may be, of such Lender during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September and
December and on the Revolving Credit Termination Date, commencing on the first
of such dates to occur after the Closing Date.
(b) The Canadian Borrower agrees to pay to the Administrative
Agent for the account of each C$ Revolving Credit Lender a commitment fee in C$
for the period from and including the Amendment/Restatement Closing Date to the
last day of the Revolving Credit Commitment Period, computed at the Commitment
Fee Rate on the average daily amount of the Available C$ Revolving Credit
Commitment of such Lender during the period for which payment is
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made, payable quarterly in arrears on the last day of each March, June,
September and December and on the Revolving Credit Termination Date, commencing
on the first of such dates to occur after the Amendment/Restatement Closing
Date.
(c) The Parent Borrower agrees to pay to the Administrative
Agent the fees in the amounts and on the dates previously agreed to in writing
by the Parent Borrower and the Administrative Agent.
2.9 Termination or Reduction of Revolving Credit Commitments.
The relevant Borrower shall have the right, upon not less than three Business
Days' notice to the Administrative Agent, to terminate the US$ Revolving Credit
Commitments or the C$ Revolving Credit Commitments or, from time to time, to
reduce the amount of such Revolving Credit Commitments; provided that no such
termination or reduction of such Revolving Credit Commitments shall be
permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, (i) the aggregate US$ Revolving Extensions
of Credit would exceed the Total US$ Revolving Credit Commitments then in
effect or (ii) the Aggregate C$ Revolving Credit Exposure would exceed the
Total C$ Revolving Credit Commitments then in effect. Any such reduction shall
be in an amount equal to $1,000,000, or a whole multiple thereof, and shall
reduce permanently the relevant Revolving Credit Commitments then in effect.
Upon receipt of any notice pursuant to this Section 2.9, the Administrative
Agent shall promptly notify each US$ Revolving Credit Lender or C$ Revolving
Credit Lender, as the case may be, of the contents thereof.
2.10 Optional Prepayments. The relevant Borrower may at any
time and from time to time prepay the Loans, in whole or in part, without
premium or penalty, upon irrevocable notice delivered to the Administrative
Agent at least three Business Days prior thereto in the case of Eurodollar
Loans and at least one Business Day prior thereto in the case of ABR Loans or
Canadian Prime Rate Loans, which notice shall specify the date and amount of
prepayment and the respective Types and amounts of Loans being prepaid;
provided, however, that B/A Borrowings may not be prepaid, except as provided
in Section 8; and provided, further, that if a Eurodollar Loan is prepaid on
any day other than the last day of the Interest Period applicable thereto, the
Parent Borrower shall also pay any amounts owing pursuant to Section 2.20.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each relevant Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein. Amounts prepaid on account of the Term Loans may not be reborrowed.
Partial prepayments of Eurodollar Loans shall be in an aggregate principal
amount of $1,000,000 or a whole multiple thereof. Partial prepayments of ABR
Loans (other than Swing Line Loans) shall be in an aggregate principal amount
of $500,000 or a whole multiple thereof. Partial prepayments of Swing Line
Loans shall be in an aggregate principal amount of $100,000 or a whole multiple
thereof. Partial prepayments of Canadian Prime Rate Loans shall be in an
aggregate principal amount of C$500,000 or a whole multiple thereof.
2.11 Mandatory Prepayments and Commitment Reductions. (a) If
any Capital Stock shall be issued by the Parent Borrower or any of its
Subsidiaries (excluding any Permitted Issuance and any Capital Stock issued to
finance acquisitions pursuant to Section 7.8(p)), an amount equal to 50% of the
Net Cash Proceeds thereof (excluding any Equity Financing Proceeds) shall be
applied on the date of such issuance toward the prepayment of the Term Loans
and the reduction of the Revolving Credit Commitments as set forth in Section
2.11(e); provided that no such Net Cash Proceeds shall be required to be so
applied if the Consolidated Leverage Ratio is less than or equal to 3.50 to 1.0
as of the last day of the most recent Test Period ending prior to the receipt
of such Net Cash Proceeds for which the relevant financial information is
available.
(b) If any Indebtedness shall be Incurred by the Parent Borrower
or any of its Subsidiaries (excluding any Incurrence of Indebtedness in
accordance with Section 7.2 (other than Section 7.2(i)) as in effect on the
Amendment/Restatement Closing Date), an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied on the date of such Incurrence toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.11(e).
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(c) If on any date the Parent Borrower or any of its
Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery
Event then, unless a Reinvestment Notice shall be delivered in respect thereof,
such Net Cash Proceeds shall be applied, within five Business Days after such
date, toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.11(e); provided, that,
notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset
Sales that may be excluded from the foregoing requirement in any fiscal year of
the Parent Borrower pursuant to a Reinvestment Notice, when added to the
aggregate fair market value of Property Disposed of in connection with Asset
Swaps during such fiscal year, shall not exceed $45,000,000 and (ii) on each
Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment
Amount with respect to the relevant Reinvestment Event shall be applied toward
the prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.11(e).
(d) If, for any fiscal year of the Parent Borrower commencing
with the fiscal year ending December 31, 1998, there shall be Excess Cash Flow,
the Parent Borrower shall, on the relevant Excess Cash Flow Application Date,
apply the ECF Percentage of such Excess Cash Flow toward the prepayment of the
Term Loans and the reduction of the Revolving Credit Commitments as set forth
in Section 2.11(e). Each such prepayment and commitment reduction shall be
made on a date (an "Excess Cash Flow Application Date") no later than five days
after the earlier of (i) the date on which the financial statements of the
Parent Borrower referred to in Section 6.1(a), for the fiscal year with respect
to which such prepayment is made, are required to be delivered to the Lenders
and (ii) the date such financial statements are actually delivered.
(e) Amounts to be applied in connection with prepayments and
Revolving Credit Commitment reductions made pursuant to this Section 2.11 shall
be applied, first, to the prepayment of the Term Loans and, second, to reduce
permanently the US$ Revolving Credit Commitments, Additional US$ Revolving
Credit Commitments and C$ Revolving Credit Commitments on a pro rata basis.
Any such reduction of the US$ Revolving Credit Commitments shall be accompanied
by prepayment of the US$ Revolving Credit Loans and/or Swing Line Loans to the
extent, if any, that the total US$ Revolving Extensions of Credit exceed the
amount of the Total US$ Revolving Credit Commitments as so reduced, provided
that if the aggregate principal amount of US$ Revolving Credit Loans and Swing
Line Loans then outstanding is less than the amount of such excess (because L/C
Obligations constitute a portion thereof), the Parent Borrower shall, to the
extent of the balance of such excess, replace outstanding Letters of Credit
and/or deposit an amount in cash in a cash collateral account established with
the Administrative Agent for the benefit of the Lenders on terms and conditions
satisfactory to the Administrative Agent. Any such reduction of the Additional
US$ Revolving Credit Commitments shall be accompanied by prepayment of
Additional US$ Revolving Credit Loans to the extent, if any, that the aggregate
outstanding principal amount thereof exceeds the amount of the aggregate
Additional US$ Revolving Credit Commitments as so reduced. The application of
any prepayment pursuant to this Section 2.11 (other than under the C$ Revolving
Credit Facility) shall be made first to ABR Loans and second to Eurodollar
Loans. Any such reduction of the C$ Revolving Credit Commitments shall be
accompanied by a prepayment or cash collateralization of C$ Revolving Credit
Loans in accordance with Section 2.11(g) to the extent, if any, that the
Aggregate C$ Revolving Credit Exposure exceeds the amount of the Total C$
Revolving Credit Commitments as so reduced. Amounts prepaid on account of the
Term Loans may not be reborrowed.
(f) If, on any Reset Date, the Aggregate C$ Revolving Credit
Exposure (expressed in Dollars) exceeds an amount equal to 105% of the Total C$
Revolving Credit Commitment, then (i) the Administrative Agent shall give
notice thereof to each C$ Revolving Credit Lender and each Borrower and (ii)
the Parent Borrower shall, or shall cause the Canadian Borrower to, on the next
succeeding Business Day, apply an amount equal to such excess to prepay
outstanding C$ Revolving Credit Loans (or cash collateralize B/As in accordance
with paragraph (g) below).
(g) All prepayments of C$ Revolving Credit Loans under this
Section 2.11 shall be applied first, to prepay outstanding Canadian Prime Rate
Loans and second, to cash collateralize outstanding B/As, on terms and
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subject to documentation satisfactory to the Administrative Agent as security
for the Canadian Borrower's obligations under such B/As until the maturity and
repayment of such B/As.
2.12 Conversion and Continuation Options. (a) The Parent
Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans
by giving the Administrative Agent at least one Business Day's prior
irrevocable notice of such election, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Parent Borrower may elect from time to time to convert
ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable notice of such election (which notice shall
specify the length of the initial Interest Period therefor), provided that no
ABR Loan under a particular Facility may be converted into a Eurodollar Loan
(i) when any Event of Default has occurred and is continuing and the
Administrative Agent or the Majority Facility Lenders in respect of such
Facility have determined in its or their sole discretion not to permit such
conversions or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of such Facility. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Parent Borrower giving irrevocable notice to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be
applicable to such Loans, provided that no Eurodollar Loan under a particular
Facility may be continued as such (i) when any Event of Default has occurred
and is continuing and the Administrative Agent has or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such continuations or (ii) after the date that is one
month prior to the final scheduled termination or maturity date of such
Facility, and provided, further, that if the Parent Borrower shall fail to give
any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans
shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof.
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (a) the aggregate principal amount of the Eurodollar Loans comprising
each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof, (b) no more than six Eurodollar Tranches under a
particular Facility shall be outstanding at any one time and (c) no more than
sixteen Eurodollar Tranches in the aggregate shall be outstanding at any one
time.
2.14 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal
to the ABR plus the Applicable Margin.
(c) The Loans comprising any Canadian Prime Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed over a
year of 365 or 366 days, as the case may be) at a rate per annum equal to the
Canadian Prime Rate plus the Applicable Margin applicable to ABR Loans under
the US$ Revolving Credit Facility.
(d) The Loans comprising each B/A Borrowing shall be subject to
an Acceptance Fee calculated and payable at a rate per annum equal to the
applicable B/A Spread from time to time in effect and payable as set forth in
Section 2.25.
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(e) For the purposes of the Interest Act (Canada) and disclosure
thereunder, whenever interest to be paid hereunder or in connection herewith is
to be calculated on the basis of a year of 360 days or any other number of days
that is less than a calendar year, the yearly rate of interest to which the
rate determined pursuant to such calculation is equivalent is the rate so
determined multiplied by the actual number of days in the calendar year in
which the same is to be ascertained and divided by either 360 or such other
number of days, as the case may be. The rates of interest under this Agreement
are nominal rates, and not effective rates or yields. The principle of deemed
reinvestment of interest does not apply to any interest calculation under this
Agreement.
(f) If any provision of this Agreement would oblige any Borrower
to make any payment of interest or other amount payable to any C$ Revolving
Credit Lender in respect of any C$ Revolving Credit Loan made by such Lender in
an amount or calculated at a rate which would be prohibited by law or would
result in a receipt by such Lender of "interest" at a "criminal rate" (as such
terms are construed under the Criminal Code (Canada)), then notwithstanding
such provision, such amount or rate shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by law or so result in a receipt by such
Lender of "interest" at a "criminal rate", such adjustment to be effected, to
the extent necessary, as follows:
(i) first, by reducing the amount or rate of interest or the
amount or rate of any Acceptance Fee required to be paid to the affected
Lender under this Section 2.14; and
(ii) thereafter, by reducing any fees, commissions, premiums
and other amounts required to be paid to the affected Lender which would
constitute interest for purposes of Section 347 of the Criminal Code
(Canada).
(g) (i) If all or a portion of the principal amount of any Loan
or Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and
Reimbursement Obligations (whether or not overdue) shall bear interest at a
rate per annum which is equal to (x) in the case of the Loans, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this Section 2.14 plus 2% or (y) in the case of Reimbursement Obligations, the
rate applicable to ABR Loans under the US$ Revolving Credit Facility plus 2%,
and (ii) if all or a portion of any interest payable on any Loan or
Reimbursement Obligation or any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate applicable to ABR Loans under the relevant Facility
(or Canadian Prime Rate Loans, in the case of the C$ Revolving Credit Facility)
plus 2% (or, in the case of any such other amounts that do not relate to a
particular Facility, the rate applicable to ABR Loans under the US$ Revolving
Credit Facility plus 2%), in each case, with respect to clauses (i) and (ii)
above, from the date of such non-payment until such amount is paid in full (as
well after as before judgment).
(h) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (g) of this
Section 2.14 shall be payable from time to time on demand.
2.15 Computation of Interest and Fees. (a) Except as otherwise
expressly provided herein, interest, fees and commissions payable pursuant
hereto shall be calculated on the basis of a 360-day year for the actual days
elapsed, except that, with respect to ABR Loans the rate of interest on which
is calculated on the basis of the Prime Rate, the interest thereon shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed. In the case of any continuation or rollover of
Eurodollar Loans or B/As, no interest shall accrue on the last day of the then
outstanding Interest Period or Contract Period, as the case may be. The
Administrative Agent shall as soon as practicable notify the Parent Borrower
and the relevant Lenders of each determination of a Eurodollar Rate. Any
change in the interest rate on a Loan resulting from a change in the ABR, the
Canadian Prime Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as
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practicable notify the relevant Borrower and the relevant Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Parent Borrower, deliver to
the Parent Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate applicable to any
Eurodollar Loan.
2.16 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Parent Borrower)
that, by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Parent Borrower and the relevant Lenders as soon as practicable thereafter.
If such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made as
ABR Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans under the
relevant Facility shall be converted to ABR Loans on the last day of the
Interest Period applicable thereto. Until such notice has been withdrawn by
the Administrative Agent, no further Eurodollar Loans under the relevant
Facility shall be made or continued as such, nor shall the Parent Borrower have
the right to convert Loans under the relevant Facility to Eurodollar Loans.
2.17 Pro Rata Treatment and Payments. (a) Each borrowing by a
Borrower from the Lenders hereunder, each payment by a Borrower on account of
any commitment fee and any reduction of the US$ Revolving Credit Commitments or
the C$ Revolving Credit Commitments shall be made, with regard to the
applicable Facility, pro rata according to the respective Tranche A Term Loan
Percentages, Tranche B Term Loan Percentages, Tranche B-1 Term Loan
Percentages, US$ Revolving Credit Percentages or C$ Revolving Credit
Percentages, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Parent
Borrower on account of principal of and interest on the Term Loans shall be
made pro rata according to the respective outstanding principal amounts of the
Term Loans then held by the Term Loan Lenders (or, in the case of scheduled
repayments, the Term Loan Lenders under the relevant Facility). The amount of
each principal payment of the Term Loans (other than scheduled repayments of
installments of principal) shall be applied to reduce the then remaining
installments of the Tranche A Term Loans, the Tranche B Term Loans and the
Tranche B-1 Term Loans, pro rata based upon the then remaining number of
installments thereof, after giving effect to all prior reductions thereto
(i.e., each then remaining installment of the Tranche A Term Loans, Tranche B
Term Loans or the Tranche B-1 Term Loans, as the case may be, shall be reduced
by an amount equal to the aggregate amount to be applied to the Tranche A Term
Loans, Tranche B Term Loans or the Tranche B-1 Term Loans, as the case may be,
divided by the number of the then remaining installments for such Tranche A
Term Loans, Tranche B Term Loans or the Tranche B-1 Term Loans); provided, that
if the amount to be so applied to any installment would exceed the then
remaining amount of such installment, then an amount equal to such excess shall
be applied to the next succeeding installment after giving effect to all prior
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reductions thereto (including the amount of prepayments theretofore allocated
pursuant to the preceding portion of this sentence). Notwithstanding the
foregoing, the first $40,000,000 of optional prepayments of the Term Loans
shall be applied to such installments of the Term Loans as the Parent Borrower
shall elect (other than scheduled installments of the Tranche B Term Loans
prior to September 30, 2004 or Tranche B-1 Term Loans prior to March 31, 2006).
(c) Each payment (including each prepayment) on account of
principal of and interest on the US$ Revolving Credit Loans shall be made pro
rata according to the respective outstanding principal amounts of the US$
Revolving Credit Loans then held by the US$ Revolving Credit Lenders. Each
payment (including each prepayment) on account of principal of and interest on
the C$ Revolving Credit Loans shall be made pro rata according to the
respective outstanding principal amounts of the C$ Revolving Loans then held by
the C$ Revolving Credit Lenders.
(d) All payments (including prepayments) to be made by the
Borrowers hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, Local Time, on the due date thereof to the Administrative Agent,
for the account of the Lenders, at the Administrative Agent's office specified
in Section 10.2, in Dollars or C$, as the case may be, and in immediately
available funds. The Administrative Agent shall distribute such payments to
the Lenders promptly upon receipt in like funds as received. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day (except, in the
case of Eurodollar Loans, as otherwise provided in clause (i) of the definition
of "Interest Period"). In the case of any extension of any payment of
principal pursuant to the preceding sentence, interest thereon shall be payable
at the then applicable rate during such extension.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the relevant Borrower a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Administrative Agent, on demand,
such amount with interest thereon at a rate equal to the daily average Federal
Funds Effective Rate (or in the case of C$ Revolving Credit Loans, a rate
determined by the Administrative Agent to represent its cost of overnight or
short-term funds in the relevant currency (which determination shall be
conclusive absent manifest error) for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this Section 2.17(e) shall be conclusive in the absence of manifest
error. If such Lender's share of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to ABR Loans
under the relevant Facility (or at the Canadian Prime Rate if such failure to
fund is under the C$ Revolving Credit Facility), on demand, from the relevant
Borrower.
2.18 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the Closing Date:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan or B/A made or accepted by it, or
change the basis of taxation of payments to such Lender in respect
thereof (except for Non-Excluded Taxes covered by Section 2.19, the
establishment of a tax based on the overall net income of such Lender
and changes in the rate of tax on the overall net income of such
Lender);
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(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate or the
Discount Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing, creating or maintaining Eurodollar Loans or B/As or issuing
or participating in Letters of Credit, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the relevant Borrower
shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.18, it shall promptly (and in any event no later
than 90 days after such Lender becomes entitled to make such claim) notify the
relevant Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled. If the Parent Borrower notifies the
Administrative Agent within five Business Days after any Lender notifies such
Borrower of any increased cost pursuant to the foregoing provisions of this
Section 2.18(a), such Borrower may convert all Eurodollar Loans of such Lender
then outstanding into ABR Loans in accordance with Section 2.12 and shall,
additionally, reimburse such Lender for any cost in accordance with Section
2.20.
(b) If any Lender shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the Closing Date shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter
of Credit to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the relevant Borrower (with a
copy to the Administrative Agent) of a written request therefor, such Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or such corporation for such reduction; provided that such Borrower
shall not be required to compensate a Lender pursuant to this paragraph for any
amounts incurred more than six months prior to the date that such Lender
notifies such Borrower of such Lender's intention to claim compensation
therefor; and provided further that, if the circumstances giving rise to such
claim have a retroactive effect, then such six-month period shall be extended
to include the period of such retroactive effect.
(c) A certificate as to any additional amounts payable pursuant
to this Section 2.18, showing in reasonable detail the calculation thereof and
certifying that it is generally charging such costs to other similarly situated
borrowers under similar credit facilities, submitted by any Lender to the
relevant Borrower (with a copy to the Administrative Agent), shall be
conclusive in the absence of manifest error, provided that the determination of
such amounts shall be made in good faith in a manner generally consistent with
such Lender's standard practices. The obligations of each Borrower pursuant to
this Section 2.18 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder for a period of
nine months thereafter.
2.19 Taxes. (a) All payments made by each Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or
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39
former connection between the Administrative Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Administrative Agent or such Lender having
executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement or any other Loan Document). If any such non-
excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any
amounts payable to the Administrative Agent or any Lender hereunder, the
amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Parent Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof to the extent such
Lender's compliance with the requirements of Section 2.19(b) at the time such
Lender becomes a party to this Agreement fails to establish a complete
exemption from such withholding. Whenever any Non-Excluded Taxes are payable
by a Borrower, as promptly as possible thereafter such Borrower shall send to
the Administrative Agent for its own account or for the account of such Lender,
as the case may be, a certified copy of an original official receipt received
by such Borrower showing payment thereof. If such Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, such Borrower shall indemnify the Administrative Agent
and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any
such failure. The agreements in this Section 2.19 shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder for a period of nine months thereafter.
(b) Each Lender (or Transferee) other than any Lender that is
solely a C$ Revolving Credit Lender that is not (i) a citizen or resident of
the United States of America, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States of America (or
any jurisdiction thereof), or (iii) an estate or trust that is subject to
federal income taxation regardless of the source of its income (each, a
"Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent
(or, in the case of a Participant, to the Lender from which the related
participation shall have been purchased) two copies of either U.S. Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-
8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, an annual certificate representing, under
penalty of perjury, that such Non-U.S. Lender is not a "bank" for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of the Parent Borrower and is not a
controlled foreign corporation related to the Parent Borrower (within the
meaning of Section 864(d)(4) of the Code)), properly completed and duly
executed by such Non-U.S. Lender claiming complete exemption from, or a reduced
rate of, U.S. federal withholding tax on all payments by the Parent Borrower
under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms on or before the expiration or obsolescence and
promptly upon the invalidity of any form previously delivered by such Non-U.S.
Lender and after the occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any extensions of time
reasonably requested by the Parent Borrower of the Administrative Agent for
filing and completing such forms. Each Non-U.S. Lender agrees, to the extent
legally entitled to do so, upon reasonable request by the Parent Borrower, to
provide to the Parent Borrower (for the benefit of the Parent Borrower and the
Administrative Agent) such other forms as may be reasonably required in order
to establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments of interest under this Agreement or the
other Loan Documents, provided that in determining the reasonableness of such a
request, such Lender shall be entitled to consider the cost of complying with
such request (to the extent unreimbursed by the Parent Borrower) that would be
imposed on such Lender. Each Non-U.S. Lender shall promptly notify the Parent
Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Parent Borrower (or any
other form of
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40
certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 2.19(b), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(b) that
such Non-U.S. Lender is not legally able to deliver.
2.20 Indemnity. Each Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss (excluding loss of profit) or
expense which such Lender may sustain or incur as a consequence of (a) default
by such Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans or obtaining a B/A Borrowing after such Borrower has given a
notice requesting the same in accordance with the provisions of this Agreement,
(b) default by such Borrower in making any prepayment after the relevant
Borrower has given a notice thereof in accordance with the provisions of this
Agreement, (c) the making of a payment or prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto
(whether optional, mandatory, by acceleration or otherwise) or (d) the making
of any prepayment of a B/A on a day which is not the last day of a Contract
Period with respect thereto. Such loss or reasonable expense shall exclude
loss of margin hereunder but shall include an amount equal to the excess, if
any, as reasonably determined by such Lender, of (i) its cost of obtaining the
funds for the Loan being paid, prepaid, converted or not borrowed, converted or
continued (assumed to be the Eurodollar Rate or the Discount Rate, as
applicable, applicable thereto) for the period from the date of such payment,
prepayment, conversion or failure to borrow, convert or continue to the last
day of the Interest Period for such Loan or the maturity date of such B/A, as
applicable (or, in the case of a failure to borrow, convert or continue, the
Interest Period or Contract Period for such Loan which would have commenced on
the date of such failure) over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid, converted or not borrowed, converted or continued
for such period or Interest Period or Contract Period, as the case may be. A
certificate as to any amounts payable pursuant to this Section 2.20, showing in
reasonable detail the calculation thereof, submitted to the relevant Borrower
by any Lender shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder for a period of nine months
thereafter.
2.21 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 2.18 or
2.19(a) with respect to such Lender, it will, if requested by the relevant
Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Loans affected by such
event with the object of avoiding the consequences of such event; provided,
that such designation is made on terms that, in the sole judgment of such
Lender, cause such Lender and its lending office(s) to suffer no economic,
legal or regulatory disadvantage, and provided, further, that nothing in this
Section 2.21 shall affect or postpone any of the obligations of any Borrower or
the rights of any Lender pursuant to Section 2.18 or 2.19(a).
2.22 Replacement of Lenders under Certain Circumstances. The
Parent Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to Section 2.18 or 2.19 or (b)
defaults in its obligation to make Loans hereunder, with a replacement
financial institution; provided that (i) such replacement does not conflict
with any Requirement of Law, (ii) no Event of Default shall have occurred and
be continuing at the time of such replacement, (iii) prior to any such
replacement, such Lender shall have taken no action under Section 2.21 so as to
eliminate the continued need for payment of amounts owing pursuant to Section
2.18 or 2.19, (iv) the relevant Borrower shall repay (or the replacement
financial institution shall purchase, at par) all Loans and other amounts
(including accrued interest and fees) owing to such replaced Lender on or prior
to the date of replacement (with such repayment to be effected by cash
collateralization on terms acceptable to the replaced Lender in the case of
B/As), (v) the Parent Borrower or the Canadian Borrower, as the case may be,
shall be liable to such replaced Lender under Section 2.20 if any Eurodollar
Loan or B/A owing to such replaced Lender shall be prepaid (or purchased) other
than on the last day of the Interest Period or Contract Period, as the case may
be, relating thereto, (vi) the replacement financial institution, if not
already a Lender, shall be reasonably satisfactory to the Administrative Agent,
(vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 10.6, (viii) until such time as such
replacement
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41
shall be consummated, the relevant Borrower shall pay all additional amounts
(if any) required pursuant to Section 2.18 or 2.19, as the case may be, and
(ix) any such replacement shall not be deemed to be a waiver of any rights
which the relevant Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.
2.23 C$ Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each C$ Revolving Credit Lender severally agrees to make
C$ Revolving Credit Loans, including by means of a B/A, to the Canadian
Borrower, at any time and from time to time on and after the date hereof and
until the earlier of the Revolving Credit Termination Date and the termination
of the C$ Revolving Credit Commitment of such Lender in accordance with the
terms hereof, in C$ in an aggregate principal amount at any time outstanding
that will not result in such Lender's C$ Revolving Credit Exposure at such time
exceeding its C$ Revolving Credit Commitment.
(b) Each C$ Revolving Credit Lender shall make each C$ Revolving
Credit Loan to be made by it hereunder on the proposed date thereof by wire
transfer to such account as the Administrative Agent may designate in
immediately available funds not later than 11:00 a.m., Toronto time, and the
Administrative Agent shall credit the amounts so received to an account
designated by the Canadian Borrower in the applicable Borrowing Request.
(c) Notwithstanding any other provision of this Agreement, the
Canadian Borrower shall not be entitled to request any B/A Borrowing if the
Contract Period requested with respect thereto would end after the Revolving
Credit Termination Date.
(d) The Administrative Agent shall notify the Borrowers and the
C$ Revolving Credit Lenders of the amount of the Aggregate C$ Revolving Credit
Exposure, promptly following the last day of each March, June, September and
December.
(e) The Canadian Borrower shall repay all outstanding C$
Revolving Credit Loans on the Revolving Credit Termination Date.
2.24 Procedure for C$ Revolving Credit Borrowing. (a) Subject
to Section 2.25, in order to request a C$ Revolving Credit Loan, the Canadian
Borrower shall hand deliver or telecopy to the Administrative Agent a duly
completed Borrowing Request, (i) in the case of a B/A Borrowing, not later than
10:00 a.m., Toronto time, two Business Days before such proposed Borrowing and
(ii) in the case of a Canadian Prime Borrowing, not later than 12:00 (noon),
Toronto time, one Business Day before such proposed Borrowing. Each Borrowing
Request shall be irrevocable. If no election as to Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be a Canadian
Prime Borrowing. If no maturity date or Contract Period with respect to a B/A
Borrowing is specified in any such notice, then the Canadian Borrower shall be
deemed to have selected a maturity date which is 30 days following the date of
such B/A Borrowing. The Administrative Agent shall promptly (and in any event
on the same day that the Administrative Agent receives such notice, if received
by 1:00 p.m., Local Time, on such day) advise the applicable Lenders of any
notice given pursuant to this Section 2.24 and of each Lender's portion of the
requested Borrowing and the Spot Exchange Rate utilized. Each Borrowing under
the C$ Revolving Credit Commitments shall be in a minimum amount of C$500,000
or a whole multiple of C$100,000 in excess thereof (or, if the then aggregate
Available C$ Revolving Credit Commitments are less than C$500,000, such lesser
amount), in the case of Borrowings other than B/A Borrowings, and in a minimum
amount of C$1,000,000 or a whole multiple of C$100,000 in excess thereof, in
the case of B/A Borrowings.
(b) Subject to the provisions of this Agreement, the Canadian
Borrower may, prior to the Revolving Credit Termination Date, effective on any
Business Day, convert in whole or part, Canadian Prime Rate Loans into B/As or
vice versa (but only on the last day of a Contract Period in the case of
conversions of B/As) upon giving to the Administrative Agent prior irrevocable
telephone or written notice within the notice period and in the form which
would be required to be given to the Administrative Agent in respect of the
category of C$ Revolving Credit Loan into which the outstanding C$ Revolving
Credit Loans are to be converted in accordance with
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42
the provisions of Section 2.24 or 2.25, as applicable, followed by written
confirmation of the same, provided that:
(A) no Canadian Prime Rate Loan may be converted into a B/A
when any Default or Event of Default has occurred and is
continuing and the Administrative Agent has or the
Majority C$ Revolving Credit Facility Lenders have
determined in its or their sole discretion that such
conversion is not appropriate; and
(B) each conversion pursuant to this paragraph shall be for a
minimum aggregate amount of C$1,000,000 (and whole
multiples of C$100,000 in excess thereof).
In the case of conversions of Canadian Prime Rate Loans into B/As, the Canadian
Borrower shall pay to the Administrative Agent, for the account of the Lender
accepting such B/A, on the date of such conversion an amount equal to (i) the
difference between the principal amount of the converted Canadian Prime Rate
Loan less the Discount Proceeds plus (ii) the Acceptance Fee to which such
Lender is entitled upon acceptance of such B/A.
(c) If the Canadian Borrower shall not have delivered a
Borrowing Request in accordance with this Section 2.24 prior to the maturity
date then in effect for any B/A Borrowing requesting that such Borrowing be
refinanced with another B/A Borrowing or converted to a Canadian Prime
Borrowing, then the Canadian Borrower shall (unless the Canadian Borrower has
notified the Administrative Agent, before 10:00 a.m., Toronto time, not less
than two Business Days prior to such maturity date, that such Borrowing is to
be repaid on such maturity date) be deemed to have delivered a Borrowing
Request requesting that such Borrowing be refinanced with a new Borrowing of
equivalent amount in the same currency, and such new Borrowing shall be a
Canadian Prime Borrowing.
2.25 Bankers' Acceptances. (a) Subject to the terms and
conditions of this Agreement, the Canadian Borrower may request a C$ Revolving
Credit Borrowing by presenting drafts for acceptance and purchase as B/As by
the C$ Revolving Credit Lenders.
(b) To facilitate availment of B/A Borrowings, the Canadian
Borrower hereby appoints each C$ Revolving Credit Lender as its attorney to
sign and endorse on its behalf, in handwriting or by facsimile or mechanical
signature as and when deemed necessary by such Lender, blank forms of B/As in
the form requested by such Lender. In this respect, it is each C$ Revolving
Credit Lender's responsibility to maintain an adequate supply of blank forms of
B/As for acceptance under this Agreement. The Canadian Borrower recognizes and
agrees that all B/As signed and/or endorsed on its behalf by a C$ Revolving
Credit Lender shall bind the Canadian Borrower as fully and effectually as if
signed in the handwriting of and duly issued by the proper signing officers of
the Canadian Borrower. Each C$ Revolving Credit Lender is hereby authorized to
issue such B/As endorsed in blank in such face amounts as may be determined by
such Lender, provided that the aggregate amount thereof is equal to the
aggregate amount of B/As required to be accepted and purchased by such Lender.
No C$ Revolving Credit Lender or any Affiliate thereof shall be liable for any
damage, loss or other claim arising by reason of any loss or improper use of
any such instrument except the gross negligence or wilful misconduct of such
Lender or Affiliate, as applicable, or its officers, employees, agents or
representatives. Each C$ Revolving Credit Lender shall maintain a record with
respect to B/As (i) received by it in blank hereunder, (ii) voided by it for
any reason, (iii) accepted and purchased by it hereunder and (iv) canceled at
their respective maturities. Each C$ Revolving Credit Lender further agrees to
retain such records in the manner and for the statutory periods provided in the
various provincial or federal statutes and regulations which apply to such
Lender. Each C$ Revolving Credit Lender agrees to provide a copy of such
records to the Canadian Borrower at the Canadian Borrower's expense upon
request. On request by or on behalf of the Canadian Borrower, a C$ Revolving
Credit Lender shall cancel all forms of B/A which have been pre-signed or
pre-endorsed on behalf of the Canadian Borrower and which are held by such
Lender and are not required to be issued in accordance with the Canadian
Borrower's irrevocable notice.
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(c) Drafts of the Canadian Borrower to be accepted as B/As
hereunder shall be signed as set forth in this Section 2.25. Notwithstanding
that any person whose signature appears on any B/A may no longer be an
authorized signatory for any C$ Revolving Credit Lender or the Canadian
Borrower at the date of issuance of a B/A, such signature shall nevertheless be
valid and sufficient for all purposes as if such authority had remained in
force at the time of such issuance and any such B/A so signed shall be binding
on the Canadian Borrower.
(d) Promptly following receipt of a Borrowing Request or notice
of rollover pursuant to Section 2.24 by way of B/As, the Administrative Agent
shall so advise the C$ Revolving Credit Lenders and shall advise each C$
Revolving Credit Lender of the aggregate face amount of the B/As to be accepted
by it and the applicable Contract Period (which shall be identical for all C$
Revolving Credit Lenders). The aggregate face amount of the B/As to be
accepted by a C$ Revolving Credit Lender shall be a whole multiple of
C$100,000, and such face amount shall be in the C$ Revolving Credit Lenders'
pro rata portions of such C$ Revolving Credit Borrowing, provided that the
Administrative Agent may in its sole discretion increase or reduce any C$
Revolving Credit Lender's portion of such B/A Borrowing to the nearest
C$100,000.
(e) Upon acceptance of a B/A by a C$ Revolving Credit Lender,
such Lender shall purchase, or arrange the purchase of, such B/A from the
Canadian Borrower at the Discount Rate for such Lender applicable to such B/A
accepted by it and provide to the Administrative Agent the Discount Proceeds
for the account of the Canadian Borrower. The Acceptance Fee payable by the
Canadian Borrower to a C$ Revolving Credit Lender under Section 2.24 in respect
of each B/A accepted by such Lender shall be set off against the Discount
Proceeds payable by such Lender under this Section 2.25(e).
(f) Each C$ Revolving Credit Lender may at any time and from
time to time hold, sell, rediscount or otherwise dispose of any or all B/As
accepted and purchased by it.
(g) If a C$ Revolving Credit Lender is not a chartered bank
under the Bank Act (Canada) or if a C$ Revolving Credit Lender notifies the
Administrative Agent in writing that it is otherwise unable to accept B/As,
such Lender will, instead of accepting and purchasing B/As, purchase from the
Canadian Borrower a non-interest bearing note denominated in C$ (a "B/A
Equivalent Note"), in the form of Exhibit G-4, issued by the Canadian Borrower
in the amount and for the same term as the draft which such Lender would
otherwise have been required to accept and purchase hereunder, at a purchase
price calculated on the same basis as B/As are discounted pursuant to this
Agreement. Each such Lender will provide to the Administrative Agent the
proceeds of such purchase for the account of the Canadian Borrower. The
Canadian Borrower will, upon purchase of a B/A Equivalent Note, pay to the
Administrative Agent on behalf of the C$ Revolving Credit Lender which
purchased from the Canadian Borrower the B/A Equivalent Note an Acceptance Fee
in respect of such B/A Equivalent Note. The Acceptance Fee payable by the
Canadian Borrower to a C$ Revolving Credit Lender under this Section 2.25(g) in
respect of each B/A Equivalent Note purchased by such Lender shall be set off
against the Discount Proceeds payable by such Lender under this Section
2.25(g).
(h) With respect to each B/A Borrowing, at or before 10:00 a.m.,
Toronto time, two Business Days before the maturity date of such B/As, the
Canadian Borrower shall notify the Administrative Agent at the Administrative
Agent's address set forth in Section 10.2 by irrevocable telephone notice,
followed by a notice of rollover on the same day, if the Canadian Borrower
intends to issue B/As on such maturity date to provide for the payment of such
maturing B/As. If the Canadian Borrower fails to notify the Administrative
Agent of its intention to issue B/As on such maturity date, the Canadian
Borrower shall provide payment to the Administrative Agent for the account of
the C$ Revolving Credit Lenders of an amount equal to the aggregate face amount
of such B/As on the maturity date of such B/As. If the Canadian Borrower fails
to make such payment, such maturing B/As shall be deemed to have been converted
on their maturity date into a Canadian Prime Rate Borrowing in an aggregate
principal amount equal to the aggregate face amounts of such B/As and the
Canadian Borrower shall on demand pay any losses, costs or penalties that may
have been incurred by the Administrative Agent or any C$ Revolving Credit
Lender due to the failure of the Canadian Borrower to make such payment. No
B/A may be rolled over when any Default
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44
or Event of Default has occurred and is continuing and the Administrative Agent
has or the Majority C$ Revolving Credit Facility Lenders have determined in its
or their sole discretion that such conversion is not appropriate.
(i) The Canadian Borrower waives presentment for payment and any
other defense to payment of any amounts due to a C$ Revolving Credit Lender in
respect of a B/A accepted and purchased by it pursuant to this Agreement which
might exist solely by reason of such B/A being held, at the maturity thereof,
by such Lender in its own right and the Canadian Borrower agrees not to claim
any days of grace if such Lender as holder sues the Canadian Borrower on the
B/A for payment of the amount payable by the Canadian Borrower thereunder. On
the specified maturity date of a B/A, or such earlier date as may be required
or permitted pursuant to the provisions of this Agreement, the Canadian
Borrower shall pay, through the Administrative Agent, the C$ Revolving Credit
Lender that has accepted and purchased such B/A the full face amount of such
B/A and after such payment, the Canadian Borrower shall have no further
liability in respect of such B/A and such Lender shall be entitled to all
benefits of, and be responsible for all payments due to third parties under,
such B/A.
(j) If a C$ Revolving Credit Lender grants a participation in a
portion of its rights under this Agreement to a participant under Section 10.6,
then in respect of any B/A Borrowing, a portion thereof may, at the option of
such Lender, be by way of B/A accepted by such participant. In such event, the
Canadian Borrower shall upon request of the Administrative Agent or the C$
Revolving Credit Lender granting the participation execute and deliver a form
of B/A indemnity in favor of such participant for delivery to such participant.
(k) Notwithstanding anything herein to the contrary, no B/A may
be prepaid prior to the maturity date thereof, except as provided in Section 8.
2.26 Spot Exchange Rate Calculations. (a) Not later than 2:00
p.m., Toronto time, on each Calculation Date, the Administrative Agent shall
(A) determine the Spot Exchange Rate as of such Calculation Date with respect
to C$ if at such time C$ Revolving Credit Loans are then outstanding and (B)
give notice thereof to the Parent Borrower, the Canadian Borrower and the C$
Revolving Credit Lenders.
(b) The Spot Exchange Rates determined pursuant to Section
2.26(a) shall become effective on the second Business Day immediately following
the relevant Calculation Date (a "Reset Date") and shall remain effective until
the next succeeding Reset Date.
(c) Not later than 2:00 p.m., Toronto time, on the Business Day
immediately following the delivery of any notice in connection with the
repayment of C$ Revolving Credit Loans, the Administrative Agent shall (A)
determine as of such date the Assigned Dollar Value, based on the Spot Exchange
Rate then in effect, of each C$ Revolving Credit Loan then outstanding (after
giving effect to any C$ Revolving Credit Loan repaid in connection therewith)
and (B) notify the Parent Borrower, the Canadian Borrower and the C$ Revolving
Credit Lenders of the results of such determination.
2.27 Commitment Reallocations. (a) The Borrowers may, from time
to time, but not more than once per calendar quarter (unless otherwise agreed
by each C$ Revolving Credit Lender), from and after the Amendment/Restatement
Closing Date until the earlier of the Revolving Credit Termination Date and the
termination of the C$ Revolving Credit Commitments, upon giving an irrevocable
joint written notice (each, a "Reallocation Notice") to the Administrative
Agent at least ten Business Days prior to the beginning of the next following
calendar quarter, temporarily reduce, in whole or in part, or increase, the C$
Revolving Credit Commitments. Any reductions or increases in the C$ Revolving
Credit Commitments or the Additional US$ Revolving Credit Commitments (as
defined below) shall take effect on the first day of the next following
calendar quarter. Each reduction or increase in the C$ Revolving Credit
Commitments shall result in an automatic corresponding increase or reduction in
the Additional US$ Revolving Credit Commitments; provided that the Total C$
Revolving Credit Commitments shall not, at any time, (i) be reduced to an
amount that is less than the Dollar Equivalent of the aggregate C$ Revolving
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Credit Loans outstanding at such time or (ii) exceed $50,000,000. The
Revolving Credit Commitments from time to time resulting from a reallocation of
C$ Revolving Credit Commitments pursuant to this Section 2.27 at any time are
the "Additional US$ Revolving Credit Commitments". Notwithstanding anything to
the contrary herein, the aggregate amount of the Additional US$ Revolving
Credit Commitments on the Amendment/Restatement Closing Date is $20,000,000.
Any amount of the C$ Revolving Credit Commitments reallocated under this
Section 2.27 as Additional US$ Revolving Credit Commitments will not be
available to the Canadian Borrower, and any amount of the Additional US$
Revolving Credit Commitments reallocated under this Section 2.27 as C$
Revolving Credit Commitments will not be available to the Parent Borrower,
until and only if such amounts are reallocated back to the C$ Revolving Credit
Commitments or the Additional US$ Revolving Credit Commitments in accordance
with the terms and conditions of this Section 2.27.
The ability of the Borrowers to reallocate the relevant Revolving
Credit Commitments in accordance with this Section 2.27 shall be subject to the
conditions that (A) the representations and warranties set forth in each Loan
Document shall be true and correct in all material respects on and as of the
date of such reallocation with the same effect as though made on and as of such
date, except to the extent that such representations and warranties expressly
relate to an earlier date and (B) at the time of and immediately following such
reallocation, no Event of Default or Default shall have occurred and be
continuing. Each Reallocation Notice shall specify the amount (expressed in
Dollars) of any reduction or increase in the C$ Revolving Credit Commitments
and the corresponding increase or reduction in the Additional US$ Revolving
Credit Commitments. Each reallocation requested under this Section 2.27 shall
be in a minimum aggregate principal amount of $5,000,000 (or, if less, the
remaining amount of the relevant Revolving Credit Commitments) and in integral
multiples of $1,000,000 in excess thereof. Each reduction or increase in the
C$ Revolving Credit Commitments under this Section 2.27 shall be made ratably
among the C$ Revolving Credit Lenders based on their respective C$ Revolving
Credit Commitments. Each reduction or increase in the Additional US$ Revolving
Credit Commitments under this Section 2.27 shall be made ratably among the C$
Revolving Credit Lenders (or, if a C$ Revolving Credit Lender is a Schedule II
chartered bank under the Bank Act (Canada), the relevant Related US$ Lender)
based on their respective C$ Revolving Credit Commitments. The Administrative
Agent shall promptly after receiving a Reallocation Notice notify each C$
Revolving Credit Lender or Additional US$ Revolving Credit Lender, as the case
may be, of the amount of its C$ Revolving Credit Commitment or Additional US$
Revolving Credit Commitment, as the case may be, to be reallocated and the date
of such reallocation.
(b) The Additional US$ Revolving Credit Commitments shall be
available to the Parent Borrower on the same terms (except as provided in this
paragraph (b)), mutatis mutandis, as the US$ Revolving Credit Commitments.
Without limiting the generality of the foregoing, (i) the Parent Borrower may
borrow for its account under the Additional US$ Revolving Credit Commitments to
the same extent as it may utilize the US$ Revolving Credit Commitments (subject
to the same interest rate options, minimum borrowing and repayment amounts and
maturities), provided that the aggregate principal amount of Additional US$
Revolving Credit Loans shall not exceed the aggregate Additional US$ Revolving
Credit Commitments, (ii) only the Additional US$ Revolving Credit Lenders shall
have Additional US$ Revolving Credit Commitments, (iii) Letters of Credit and
Swing Line Loans are not available under the Additional US$ Revolving Credit
Commitments, and (iv) the Additional US$ Revolving Credit Lenders shall be
entitled to the same rights (including acceleration rights) and subject to the
same obligations with respect to the Additional US$ Revolving Credit
Commitments as are the US$ Revolving Credit Lenders with respect to the US$
Revolving Credit Commitments.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, each Issuing Lender, in reliance on the agreements of the other US$
Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters
of credit ("Letters of Credit") for the account of the Parent Borrower on any
Business Day during the Revolving Credit Commitment Period in such form as may
be approved from time to time by such Issuing
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Lender; provided that no Issuing Lender shall have any obligation to issue any
Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the
Available US$ Revolving Credit Commitments would be less than zero. Each
Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later
than the earlier of (x) the first anniversary of its date of issuance and (y)
the date which is five Business Days prior to the Scheduled Revolving Credit
Termination Date, provided that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (y) above).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) No Issuing Lender shall at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
such Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Parent
Borrower may from time to time request that an Issuing Lender issue a Letter of
Credit by delivering to such Issuing Lender at its address for notices
specified herein an Application therefor, completed to the satisfaction of such
Issuing Lender, and such other certificates, documents and other papers and
information as such Issuing Lender may reasonably request. Upon receipt of any
Application, the relevant Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall
any Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed to by the relevant Issuing Lender and the Parent
Borrower. The relevant Issuing Lender shall furnish a copy of such Letter of
Credit to the Parent Borrower promptly following the issuance thereof. The
relevant Issuing Lender shall promptly furnish to the Administrative Agent
notice of the issuance of each Letter of Credit (including the amount thereof).
The Administrative Agent will furnish to the US$ Revolving Credit Lenders (a)
prompt notice of the issuance of each standby Letter of Credit and (b) a
monthly report setting forth for the relevant month the total aggregate daily
amount available to be drawn under commercial Letters of Credit that were
outstanding during such month.
3.3 Commissions, Fees and Other Charges. (a) The Parent
Borrower will pay to the Administrative Agent, for the account of each US$
Revolving Credit Lender, a commission on all outstanding Letters of Credit at a
per annum rate equal to the Applicable Margin then in effect with respect to
Eurodollar Loans under the US$ Revolving Credit Facility minus the fronting fee
referred to below, shared ratably among the US$ Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee Payment Date after the issuance
date. In addition, the Parent Borrower shall pay to each Issuing Lender for
its own account a fronting fee of 1/4 of 1% per annum in respect of each Letter
of Credit issued by such Issuing Lender, payable quarterly in arrears on each
L/C Fee Payment Date after the Issuance Date.
(b) In addition to the foregoing fees and commissions, the
Parent Borrower shall pay or reimburse the relevant Issuing Lender for such
normal and customary costs and expenses as are incurred or charged by such
Issuing Lender in issuing, negotiating, effecting payment under, amending or
otherwise administering any Letter of Credit.
3.4 L/C Participations. (a) Each Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce each
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the relevant Issuing Lender, on the terms and conditions hereinafter stated,
for such L/C Participant's own account and risk an
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47
undivided interest equal to such L/C Participant's US$ Revolving Credit
Percentage in such Issuing Lender's obligations and rights under each Letter of
Credit issued by such Issuing Lender and the amount of each draft paid by such
Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with each Issuing Lender that, if a draft is paid under any
Letter of Credit issued by such Issuing Lender for which such Issuing Lender is
not reimbursed in full by the Parent Borrower in accordance with the terms of
this Agreement, such L/C Participant shall pay to such Issuing Lender upon
demand an amount equal to such L/C Participant's US$ Revolving Credit
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed.
(b) If any amount required to be paid by any L/C Participant to
any Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by such Issuing Lender under any Letter of Credit
is paid to such Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to such Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to such Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to such Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, such
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans under the US$ Revolving Credit Facility.
A certificate of the relevant Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after an Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with Section 3.4(a), such
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Parent Borrower or otherwise, including proceeds of
collateral applied thereto by such Issuing Lender), or any payment of interest
on account thereof, such Issuing Lender will distribute to such L/C Participant
its pro rata share thereof; provided, however, that in the event that any such
payment received by such Issuing Lender shall be required to be returned by
such Issuing Lender, such L/C Participant shall return to such Issuing Lender
the portion thereof previously distributed by such Issuing Lender to it.
3.5 Reimbursement Obligation of the Parent Borrower. The Parent
Borrower agrees to reimburse each Issuing Lender on each date on which such
Issuing Lender notifies the Parent Borrower of the date and amount of a draft
presented under any Letter of Credit and paid by such Issuing Lender for the
amount of (a) such draft so paid and (b) any taxes, fees, charges or other
costs or expenses incurred by such Issuing Lender in connection with such
payment. Each such payment shall be made to such Issuing Lender in Dollars and
in immediately available funds. Interest shall be payable on any and all
amounts remaining unpaid by the Parent Borrower under this Section from the
date such amounts become payable (whether at stated maturity, by acceleration
or otherwise) until payment in full at the rate set forth in Section 2.14(b).
Each drawing under any Letter of Credit shall (unless an event of the type
described in clause (i) or (ii) of Section 8(f) shall have occurred and be
continuing with respect to the Parent Borrower, in which case the procedures
specified in Section 3.4 for funding by L/C Participants shall apply)
constitute a request by the Parent Borrower to the Administrative Agent for a
borrowing pursuant to Section 2.5 of ABR Loans (or, at the option of the
Administrative Agent and the Swing Line Lender in their sole discretion, a
borrowing pursuant to Section 2.7 of Swing Line Loans) in the amount of such
drawing. The Borrowing Date with respect to such borrowing shall be the date
of payment of the relevant draft.
3.6 Obligations Absolute. The Parent Borrower's obligations
under this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Parent Borrower may have or have had against any Issuing
Lender (except to the extent resulting from the gross negligence or willful
misconduct of such Issuing Lender), any beneficiary of a Letter of Credit or
any other Person. The Parent Borrower also agrees with each Issuing Lender
that, subject to the last
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sentence of this Section 3.6, no Issuing Lender shall be responsible for, and
the Parent Borrower's Reimbursement Obligations under Section 3.5 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Parent
Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims whatsoever of the
Parent Borrower against any beneficiary of such Letter of Credit or any such
transferee. No Issuing Lender shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except
for errors, omissions or delays in transmission found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Issuing Lender that
issued such Letter of Credit. The Parent Borrower agrees that any action taken
or omitted by any Issuing Lender under or in connection with any Letter of
Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on the Parent Borrower and shall not result in any liability of any
Issuing Lender to the Parent Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the relevant Issuing Lender shall
promptly notify the Parent Borrower of the date and amount thereof. The
responsibility of each Issuing Lender to the Parent Borrower in connection with
any draft presented for payment under any Letter of Credit issued by it shall,
in addition to any payment obligation expressly provided for in such Letter of
Credit, be limited to determining that the documents (including each draft)
delivered under such Letter of Credit in connection with such presentment are
substantially in conformity with such Letter of Credit.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans and issue or participate in the Letters of
Credit, each Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:
4.1 Financial Condition. The audited consolidated balance sheet
of the Parent Borrower and its consolidated Subsidiaries as at December 31,
1997, and the related consolidated statements of income and cash flows for the
fiscal year ended on such date, reported on and accompanied by an unqualified
report from Coopers & Lybrand LLP, present fairly the consolidated financial
condition of the Parent Borrower and its consolidated Subsidiaries at such
date, and the consolidated results of their operations and their consolidated
cash flows for the respective fiscal years then ended. The unaudited
consolidated balance sheet of the Parent Borrower and its consolidated
Subsidiaries as at June 30, 1998, and the related unaudited consolidated
statements of income and cash flows for the six-month period ended on such
date, present fairly the consolidated financial condition of the Parent
Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the six-month period then ended (subject to normal year-end audit adjustments).
All such financial statements have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants disclosed therein). The Parent Borrower and
its consolidated Subsidiaries do not have any material Guarantee Obligations,
contingent liabilities or liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any interest rate or
foreign currency swap or exchange transaction or other obligation in respect of
derivatives, that are not reflected in the most recent financial statements
referred to in this Section. During the period from December 31, 1997 to and
including the date hereof there has been no
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Disposition by the Parent Borrower or any of its consolidated Subsidiaries of
any material part of its business or property.
The unaudited pro forma consolidated balance sheet and statement of
EBITDA of the Parent Borrower and its consolidated Subsidiaries as at, or for
the fiscal year ended, December 31, 1997 (including the notes thereto) (the
"Libby's Pro Forma Financial Statements"), copies of which have heretofore been
furnished to each Lender, has been prepared giving effect to (i) the
consummation of the Libby's Acquisition and all other acquisitions completed by
the Parent Borrower and its Subsidiaries subsequent to December 31, 1997, (ii)
the Loans to be made on the Amendment/Restatement Closing Date and the use of
the proceeds thereof and (iii) the payment of fees and expenses in connection
with the foregoing. The Libby's Pro Forma Financial Statements present fairly
on a pro forma basis the financial position of the Parent Borrower and its
consolidated Subsidiaries as at December 31, 1997 and is based upon good faith
estimates and assumptions believed by management of the Parent Borrower to be
reasonable at the time made.
4.2 No Change. Since December 31, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the
Parent Borrower and each of its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right,
to own and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of each Borrower, to borrow and obtain other extensions of credit
hereunder. Each Loan Party has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents to
which it is a party and, in the case of each Borrower, to authorize the
borrowings and other extensions of credit on the terms and conditions of this
Agreement. No consent or authorization of, filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the Acquisitions, the Bumble Bee Acquisition and the
borrowings and other extensions of credit hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement or any of
the other Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect, (ii)
consents under immaterial Contractual Obligations relating to limitations on
the assignability thereof and (iii) the filings referred to in Section 4.19.
Each Loan Document has been duly executed and delivered on behalf of each Loan
Party party thereto. This Agreement constitutes, and each other Loan Document
upon execution will constitute, a legal, valid and binding obligation of each
Loan Party party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any material Contractual Obligation of the Parent
Borrower or any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such Contractual Obligation
(other
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than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Parent Borrower or any of its
Subsidiaries could reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of either Borrower, threatened by or against the Parent
Borrower or any of its Subsidiaries or against any of their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect.
4.7 No Default. Neither the Parent Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
4.8 Ownership of Property; Liens. Each of the Parent Borrower
and each of its Subsidiaries has title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid leasehold
interest in, all its other property, and none of such property is subject to
any Lien except as permitted by Section 7.3.
4.9 Intellectual Property. Each of the Parent Borrower and each
of its Subsidiaries owns (subject only to the recording of conveyance and
assignment documentation in the U.S. Patent and Trademark Office and other
applicable jurisdictions, which recording shall be completed promptly after the
Closing Date), or is licensed to use, all trademarks, tradenames, service
marks, copyrights, technology, know-how and processes ("Intellectual Property")
necessary for the conduct of its business as currently conducted. Except as,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect, (a) no claim has been asserted and is pending by any Person challenging
or questioning the use of any Intellectual Property or the validity of any
Intellectual Property (nor does any Borrower know of any valid basis for any
such claim) and (b) the use of Intellectual Property by the Parent Borrower and
its Subsidiaries does not infringe on the rights of, and no Intellectual
Property of the Parent Borrower or any of its Subsidiaries is being infringed
upon by, any Person.
4.10 Taxes. Each of the Parent Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal and all material state
and other material tax returns which are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any taxes, fees or other charges the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of the
Parent Borrower or its Subsidiaries, as the case may be); and no tax Lien has
been filed, and, to the knowledge of each Borrower, no material claim is being
asserted, with respect to any such tax, fee or other charge.
4.11 Federal Regulations. No Letters of Credit and no part of
the proceeds of any Loans will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board as now and from time to time hereafter in effect or
for any purpose which violates the provisions of the Regulations of the Board.
If requested by any Lender or the Administrative Agent, the Parent Borrower
will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-3 or FR Form
U-1, as applicable, referred to in said Regulation U.
4.12 Labor Matters. There are no strikes or other labor
disputes against the Parent Borrower or any of its Subsidiaries pending or, to
the knowledge of each Borrower, threatened that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect.
Hours worked by and payment made to employees of the Parent Borrower and its
Subsidiaries have not been in violation of the Fair Labor
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Standards Act or any other applicable Requirement of Law dealing with such
matters that (individually or in the aggregate) could reasonably be expected to
have a Material Adverse Effect. All payments due from the Parent Borrower or
any of its Subsidiaries on account of employee health and welfare insurance
that (individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect if not paid have been paid or accrued as a liability on
the books of the Parent Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA, the Code and Applicable Canadian Pension Legislation. No termination
of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period. The present value of all
accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits by a material
amount. Neither the Parent Borrower nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan or under
Applicable Canadian Pension Legislation that could reasonably be expected to
have a Material Adverse Effect, and neither the Parent Borrower nor any
Commonly Controlled Entity would become subject to any liability under ERISA or
under Applicable Canadian Pension Legislation that could reasonably be expected
to have a Material Adverse Effect if the Parent Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as
of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15
constitute all the Subsidiaries of the Parent Borrower at the
Amendment/Restatement Closing Date.
4.16 Use of Proceeds. The proceeds of the Term Loans (other
than the Tranche B-1 Term Loans) when initially made were used to finance a
portion of the Acquisitions and the Bumble Bee Acquisition and to pay related
fees and expenses. The Proceeds of the Tranche B-1 Term Loans made on the
Amendment/Restatement Closing Date shall be used to prepay "Revolving Credit
Loans" under and as defined in the Existing Credit Agreement. The proceeds of
the Revolving Credit Loans and the Swing Line Loans shall be used for general
corporate purposes. The Letters of Credit shall be used for general corporate
purposes.
4.17 Environmental Matters. Except as, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
the Parent Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under
circumstances which (i) constitute or constituted a violation of, or
(ii) could give rise to liability under, any Environmental Law;
(b) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under
or about the Properties or violation of any Environmental Law with
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respect to the Properties or the business operated by the Parent
Borrower or any of its Subsidiaries (the "Business");
(c) neither the Parent Borrower nor any of its Subsidiaries has
assumed any liability of any other Person under Environmental Laws;
(d) neither the Parent Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Properties or the Business, nor does the Parent Borrower have knowledge
or reason to believe that any such notice will be received or is being
threatened;
(e) Materials of Environmental Concern have not been transported
or disposed of from the Properties in violation of, or in a manner or to
a location which could give rise to liability under, any Environmental
Law, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Properties in
violation of, or in a manner that could give rise to liability under,
any applicable Environmental Law;
(f) no judicial proceeding or governmental or administrative
action is pending or, to the knowledge of either Borrower, threatened,
under any Environmental Law to which the Parent Borrower or any
Subsidiary is or will be named as a party with respect to the Properties
or the Business, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business; and
(g) there has been no release or threat of release of Materials
of Environmental Concern at or from the Properties, or arising from or
related to the operations of the Parent Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document, the August 1998
Confidential Information Memorandum or any other document, certificate or
statement furnished to the Administrative Agent or the Lenders, or any of them,
by or on behalf of any Loan Party for use in connection with the transactions
contemplated by this Agreement or the other Loan Documents, contained as of the
date such statement, information, document or certificate was so furnished (or
in the case of the August 1998 Confidential Information Memorandum, as of the
Amendment/Restatement Closing Date), any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The projections and pro forma
financial information and other estimates and opinions contained in the
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Parent Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial information as it
relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount. There is no
fact known to any Loan Party that could reasonably be expected to have a
Material Adverse Effect that has not been expressly disclosed herein, in the
other Loan Documents, in the August 1998 Confidential Information Memorandum or
in any other documents, certificates and statements furnished to the
Administrative Agent and the Lenders for use in connection with the
transactions contemplated hereby and by the other Loan Documents.
4.19 Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable
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security interest in the Collateral described therein and proceeds thereof. In
the case of the Pledged Stock described in the Guarantee and Collateral
Agreement, when stock certificates representing such Pledged Stock are
delivered to the Administrative Agent, and in the case of the other Collateral
described in the Guarantee and Collateral Agreement, when financing statements
in appropriate form are filed in the offices specified on Schedule 4.19(a) (or,
in the case of Collateral granted by Bumble Bee and its Subsidiaries, Schedule
4.19(a)-A, in the case of Collateral granted by DM US Holding, Corp. or
Creative Products, Inc. of Rossville, Schedule 4.19(a)-B and, in the case of
Collateral acquired in connection with the Libby's Acquisition, Schedule
4.19(a)-C), the Guarantee and Collateral Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral and the proceeds thereof, as security for
the Obligations (as defined in the Guarantee and Collateral Agreement), in each
case prior and superior in right to any other Person subject, except in the
case of such Pledged Stock, to Liens permitted by paragraphs (a) through (f) of
Section 7.3.
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b) (or, in the case of Mortgages granted by Bumble Bee and its
Subsidiaries, Schedule 4.19(b)-A, or, in the case of Mortgages to be granted by
IHF Acquisition Corp., Schedule 4.19(b)-B), each Mortgage shall constitute a
fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in the Mortgaged Properties and the proceeds
thereof, as security for the Obligations (as defined in the relevant Mortgage),
in each case prior and superior in right to any other Person, subject to Liens
permitted by paragraphs (a) through (f) of Section 7.3.
4.20 Solvency. After giving effect to any Loans made on the
Amendment/Restatement Closing Date, each Loan Party will be Solvent.
4.21 Senior Indebtedness. The Obligations of the Parent
Borrower constitute "Senior Indebtedness" of the Parent Borrower under and as
defined in the Senior Subordinated Note Indenture. The obligations of each
Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute
"Guarantor Senior Indebtedness" of such Subsidiary Guarantor under and as
defined in the Senior Subordinated Note Indenture.
4.22 Regulation H. No Mortgage encumbers improved real property
which is located in an area that has been identified by the Secretary of
Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968.
4.23 Year 2000 Matters. On or before June 30, 1999, the Parent
Borrower will complete any reprogramming and testing of major computer systems
and other major equipment containing embedded microchips, in either case owned
or operated by the Parent Borrower or any of its Subsidiaries or used or relied
upon in the conduct of their business, in order to enable their computer
systems and equipment in the aggregate to be year 2000 compliant in all
material respects. The costs of the Parent Borrower and its Subsidiaries that
have not been incurred as of the date hereof for such reprogramming and testing
and for the other reasonably foreseeable consequences to them of any improper
functioning of other computer systems and equipment containing embedded
microchips due to the occurrence of the year 2000 could not reasonably be
expected to result in a Default or Event of Default or to have a Material
Adverse Effect.
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SECTION 5. CONDITIONS PRECEDENT
5.1 [Intentionally Omitted].
5.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as
of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of any Borrower
hereunder shall constitute a representation and warranty by such Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
5.3 Conditions to Amendment/Restatement Closing Date. The
effectiveness of the amendment and restatement of the Existing Credit Agreement
pursuant to this Agreement, and the agreement of each Lender to make any
extension of credit requested to be made by it on the Amendment/Restatement
Closing Date, is subject to the satisfaction, prior to or concurrently with the
making of any such extension of credit on the Amendment/Restatement Closing
Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly authorized
officer of each Borrower, (ii) a confirmation of the Guarantee and
Collateral Agreement, executed and delivered by a duly authorized
officer of the Parent Borrower and each Subsidiary Guarantor, in form
and substance satisfactory to the Administrative Agent, (iii) any
amendments to the Security Documents necessary to reflect the
consummation of the Libby's Acquisition, (iv) a confirmation of the
Canadian Guarantee, executed and delivered by a duly authorized officer
of each Canadian Subsidiary Guarantor, (v) for the account of each
relevant Lender, to the extent necessary, Notes conforming to the
requirements hereof and executed and delivered by a duly authorized
officer of the relevant Borrower and (vi) an Addendum, substantially in
the form of Exhibit J, executed and delivered by the Tranche B-1 Term
Loan Lenders and by those Lenders required by the Existing Credit
Agreement to approve the amendment and restatement thereof pursuant
hereto.
(b) Lien Searches. The Administrative Agent shall have received
the results of a recent lien search in each of the jurisdictions where
assets of Libby's acquired pursuant to the Libby's Purchase Agreement
are located, and such search shall reveal no liens on any of such assets
except for liens permitted by Section 7.3.
(c) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Administrative Agent, for
the benefit of the Lenders, a perfected Lien on the Collateral granted
by Libby's or any of its Subsidiaries, prior and superior in right to
any other Person (other than with respect to Liens expressly permitted
by Section 7.3), shall be in proper form for filing, registration or
recordation.
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(d) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of the Guarantee and
Collateral Agreement and the relevant Mortgages, after giving effect to
the Libby's Acquisition.
(e) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each
Borrower, dated the Amendment/Restatement Closing Date, substantially in
the form of Exhibit C, with appropriate insertions and attachments.
(f) Legal Opinion. The Administrative Agent shall have received
the executed legal opinion of Vinson & Elkins, counsel to the Parent
Borrower and the Subsidiary Guarantors, substantially in the form of
Exhibit F. Such legal opinion shall cover such other matters incident
to the transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.
SECTION 6. AFFIRMATIVE COVENANTS
The Parent Borrower hereby agrees that, so long as the Revolving
Credit Commitments remain in effect, any Letter of Credit remains outstanding
or any Loan or other amount is owing to any Lender or the Administrative Agent
hereunder, the Parent Borrower shall and shall cause each of its Subsidiaries
to:
6.1 Financial Statements. Furnish to the Administrative Agent
(with sufficient copies for each Lender, which shall in turn be promptly
distributed by the Administrative Agent to the Lenders):
(a) as soon as available, but in any event within 95 days after
the end of each fiscal year of the Parent Borrower, a copy of the
audited consolidated balance sheet of the Parent Borrower and its
consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such
year, setting forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Parent Borrower, the unaudited consolidated balance
sheet of the Parent Borrower and its consolidated Subsidiaries as at the
end of such quarter and the related unaudited consolidated statements of
income and of cash flows for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 30
days after the end of each month occurring during each fiscal year of
the Parent Borrower (other than the third, sixth, ninth and twelfth such
month), the unaudited consolidated balance sheet of the Parent Borrower
and its Subsidiaries as at the end of such month and the related
unaudited consolidated statements of income and of cash flows for such
month and the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated
in all material respects (subject to normal year-end audit adjustments).
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All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein); provided, that financial statements delivered pursuant
to paragraphs (b) and (c) above shall not be required to contain footnote
disclosure.
6.2 Certificates; Other Information. Furnish to the
Administrative Agent (with sufficient copies for each Lender, which shall in
turn be promptly distributed by the Administrative Agent to the Lenders) or, in
the case of clause (f), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer of
the Parent Borrower stating that, to the best of such Responsible
Officer's knowledge, each Loan Party during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
which it is a party to be observed, performed or satisfied by it, and
that such Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate and (ii) in
the case of quarterly or annual financial statements, (x) a Compliance
Certificate containing all information necessary for determining
compliance by the Parent Borrower and its Subsidiaries with the
provisions of this Agreement referred to therein as of the last day of
the relevant fiscal quarter or fiscal year and (y) to the extent not
previously disclosed to the Administrative Agent, a listing of any state
or province within the United States or Canada where any Loan Party
keeps inventory or equipment and of any Intellectual Property arising
under the laws of the United States or Canada (or any jurisdiction
therein) acquired by any Loan Party since the date of the most recent
list delivered pursuant to this clause (y) (or, in the case of the first
such list so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Parent Borrower, a detailed
consolidated budget for the following fiscal year (including a projected
consolidated balance sheet of the Parent Borrower and its Subsidiaries
as of the end of the following fiscal year, and the related consolidated
statements of projected cash flow, projected changes in financial
position and projected income), and, as soon as available, significant
revisions, if any, of such budget and projections with respect to such
fiscal year (collectively, the "Projections"), which Projections shall
in each case be accompanied by a certificate of a Responsible Officer
stating that such Projections are based upon good faith estimates and
assumptions believed by management of the Parent Borrower to be
reasonable at the time made, it being recognized by the Lenders that
such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods
covered by such financial information may differ from the projected
results set forth therein by a material amount;
(d) within 45 days after the end of each fiscal quarter of the
Parent Borrower, a narrative discussion and analysis of the financial
condition and results of operations of the Parent Borrower and its
Subsidiaries for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter, as compared to
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the portion of the Projections covering such periods and to the
comparable periods of the previous year;
(e) within five days after the same are sent, copies of all
financial statements and reports which the Parent Borrower sends to the
holders of any class of its debt securities or public equity securities
and within five days after the same are filed, copies of all financial
statements and reports which the Parent Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and
(f) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be, all
its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Parent Borrower or its Subsidiaries, as the case
may be.
6.4 Conduct of Business and Maintenance of Existence, etc. (a)
(i) Continue to engage in business of the same general type as now conducted by
it, (ii) preserve, renew and keep in full force and effect its corporate
existence and (iii) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except, in each case, as otherwise permitted by Section 7.4 and
except, in the case of clause (iii) above, to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (b)
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities and
(b) upon reasonable prior notice and at any reasonable time, permit
representatives of the Administrative Agent or any Lender to visit and inspect
any of its properties and examine and, if reasonably requested, make copies of
its contracts, books and records and to discuss the business, operations,
properties and financial and other condition of the Parent Borrower and its
Subsidiaries with officers and employees of the Parent Borrower and its
Subsidiaries and with its independent certified public accountants; provided
that the Administrative Agent or such Lender shall notify the Parent Borrower
prior to any contact with such accountants and give the Parent Borrower the
opportunity to participate in such discussions.
6.7 Notices. Promptly give notice to the Administrative Agent
and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Parent Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may
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exist at any time between the Parent Borrower or any of its Subsidiaries
and any Governmental Authority and which has a reasonable likelihood of
being adversely determined, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected
to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Parent Borrower
or any of its Subsidiaries in which the amount involved is $10,000,000
or more and not covered by insurance or in which injunctive or similar
relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Parent Borrower knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or the Parent Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of,
any Plan; and
(e) any development or event which has had or could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer of the Parent Borrower setting forth details of the
occurrence referred to therein and stating what action the Parent Borrower or
the relevant Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Except as could not reasonably be
expected to have a Material Adverse Effect, comply with, and ensure compliance
by all tenants and subtenants, if any, with, all applicable Environmental Laws,
and obtain and comply with and maintain, and ensure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by applicable
Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Interest Rate Protection. In the case of the Parent
Borrower, within 90 days after the Amendment/Restatement Closing Date, enter
into additional Interest Rate Protection Agreements to the extent necessary to
provide that at least 50% of the aggregate principal amount of the Senior
Subordinated Notes and the Term Loans outstanding on the Amendment/Restatement
Closing Date is subject to either a fixed interest rate or interest rate
protection, with any additional Interest Rate Protection Agreements required by
this Section, having a term of not less than one year (provided, that, in each
case, in the event that the term thereof shall be less than two years, such
Interest Rate Protection Agreements shall be extended or replaced no later than
the expiration of such term, with the term of such extended or replacement
Interest Rate Protection Agreements ending no earlier than the second
anniversary of the date on which the original Interest Rate Protection
Agreements were entered into), which Interest Rate Protection Agreements shall
in each case have terms and conditions reasonably satisfactory to the
Administrative Agent.
6.10 Additional Collateral, etc. (a) With respect to any
Property acquired after the Closing Date by the Parent Borrower or any of its
Subsidiaries (other than (i) any Property described in paragraph (b), (c) or
(d) below, (ii) any Property subject to a Lien expressly permitted by Section
7.3(g), (iii) Receivables Facility Assets and (iv) Property owned by Excluded
Foreign Subsidiaries) as to which the
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Administrative Agent, for the benefit of the Lenders, does not have a perfected
Lien, promptly (v) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement or such other documents as
the Administrative Agent deems necessary or advisable in order to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in
such Property and (vi) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first
priority security interest in such Property, including without limitation, the
filing of Uniform Commercial Code financing statements in such jurisdictions as
may be required by the Guarantee and Collateral Agreement or by law or as may
be reasonably requested by the Administrative Agent.
(b) With respect to any fee interest in any real estate which,
together with any related parcel of real estate not yet subject to a Mortgage,
has a value (determined inclusive of any improvements thereof) of at least
$5,000,000 acquired after the Closing Date by the Parent Borrower or any of its
Subsidiaries (other than any such real estate owned by an Excluded Foreign
Subsidiary or subject to a Lien expressly permitted by Section 7.3(g)),
promptly (i) execute and deliver a first priority mortgage or deed of trust
(subject only to Liens permitted by Section 7.3) in favor of the Administrative
Agent, for the benefit of the Lenders, covering such real estate, in form and
substance reasonably satisfactory to the Administrative Agent, (ii) if
reasonably requested by the Administrative Agent, provide the Lenders with (x)
title and extended coverage insurance covering such real estate in an amount at
least equal to the purchase price of such real estate (or such other amount as
shall be reasonably specified by the Administrative Agent) as well as a current
ALTA survey thereof, together with a surveyor's certificate and (y) any
consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably satisfactory to the
Administrative Agent and (iii) if reasonably requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary or any Receivables SPV) created or acquired after the
Closing Date (which, for the purposes of this paragraph (c), shall include any
existing Subsidiary that ceases to be an Excluded Foreign Subsidiary) by the
Parent Borrower or any of the Subsidiary Guarantors, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable
in order to grant to the Administrative Agent, for the benefit of the Lenders,
a perfected first priority security interest in the Capital Stock of such new
Subsidiary which is owned by the Parent Borrower or any of its Subsidiaries,
(ii) deliver to the Administrative Agent the certificates representing such
Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Parent Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement and (B) to take such actions
necessary or advisable to grant to the Administrative Agent for the benefit of
the Lenders a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement with respect to such new
Subsidiary, including, without limitation, the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be reasonably requested
by the Administrative Agent, and (iv) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Excluded Foreign Subsidiary created
or acquired after the Closing Date by the Parent Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in the Capital Stock of such new Subsidiary which is owned by the
Parent Borrower or any of its Subsidiaries (provided that in no event shall
more than 65% of the total outstanding Capital Stock of
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any such new Subsidiary be required to be so pledged), (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers, in blank, executed and delivered by a duly
authorized officer of the Parent Borrower or such Subsidiary, as the case may
be, (iii) in the case of any new Canadian Subsidiary, cause such new Subsidiary
to become a party to the Canadian Guarantee and (iv) if reasonably requested by
the Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
SECTION 7. NEGATIVE COVENANTS
The Parent Borrower hereby agrees that, so long as the Revolving
Credit Commitments remain in effect, any Letter of Credit remains outstanding
or any Loan or other amount is owing to any Lender or the Administrative Agent
hereunder, the Parent Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio as at the last day of any Test Period ending with any fiscal
quarter set forth below to exceed the ratio set forth below opposite such
fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Consolidated Leverage Ratio
--------------------- ---------------------------
<S> <C>
12/31/97-3/31/99 5.50 to 1.0
6/30/99-9/30/99 5.25 to 1.0
12/31/99-3/31/00 5.00 to 1.0
6/30/00-9/30/00 4.75 to 1.0
12/31/00-3/31/01 4.50 to 1.0
6/30/01-9/30/01 4.25 to 1.0
12/31/01-3/31/02 4.00 to 1.0
6/30/02-9/30/02 3.75 to 1.0
12/31/02-3/31/03 3.50 to 1.0
6/30/03-9/30/03 3.25 to 1.0
12/31/03-3/31/04 3.00 to 1.0
6/30/04-9/30/04 2.75 to 1.0
12/31/04-3/31/05 2.50 to 1.0
6/30/05-9/30/05 2.25 to 1.0
12/31/05 and thereafter 2.00 to 1.0
</TABLE>
(b) Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any Test Period ending with any fiscal
quarter set forth below to be less than the ratio set forth below opposite such
fiscal quarter:
<PAGE> 66
61
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Interest
Ending Coverage Ratio
-------------- ---------------------
<S> <C>
12/31/97-3/31/99 2.00 to 1.0
6/30/99-9/30/99 2.10 to 1.0
12/31/99-9/30/00 2.15 to 1.0
12/31/00-9/30/01 2.20 to 1.0
12/31/01-9/30/02 2.25 to 1.0
12/31/02-9/30/03 2.50 to 1.0
12/31/03-9/30/04 3.00 to 1.0
12/31/04-9/30/05 3.50 to 1.0
12/31/05 and 4.00 to 1.0
thereafter
</TABLE>
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any Test Period ending with any
fiscal quarter set forth below to be less than the ratio set forth below
opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Fixed
Ending Charge Coverage Ratio
--------------- ---------------------
<S> <C>
12/31/97-3/31/01 1.00 to 1.0
6/30/01-3/31/04 1.05 to 1.0
6/30/04 and thereafter 1.10 to 1.0
</TABLE>
Notwithstanding anything to the contrary herein, for the purposes of
determining the Consolidated Interest Coverage Ratio and the Consolidated Fixed
Charge Coverage Ratio pursuant to this Section 7.1 for the Test Periods ending
December 31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998, (i)
interest expense in the definition of Consolidated EBITDA and Consolidated
Interest Expense in each such ratio shall be determined on a pro forma basis as
if the Initial Public Offering and the application of the proceeds thereof
occurred at the beginning of the Test Period and (ii) each such ratio shall be
calculated as if the Bumble Bee Acquisition and the Permitted Investments
occurred at the beginning of the Test Period.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer
to exist (in each case, to "Incur") any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) (i) Indebtedness of the Parent Borrower to any Subsidiary
and of any Wholly Owned Subsidiary Guarantor to the Parent Borrower or
any other Subsidiary and (ii) Indebtedness of the Canadian Borrower to
any Canadian Subsidiary Guarantor and of any Canadian Subsidiary
Guarantor to the Canadian Borrower or to any other Canadian Subsidiary
Guarantor;
(c) purchase money Indebtedness and Indebtedness secured by
Liens permitted by Section 7.3(g), provided that the aggregate amount of
Indebtedness incurred pursuant to this Section 7.2(c) shall not exceed
$35,000,000 at any one time outstanding;
(d) Capital Lease Obligations, provided that the aggregate
principal amount of Capital Lease Obligations incurred pursuant to this
Section 7.2(d) in any fiscal year of the Parent Borrower, when added to
the aggregate amount of other Capital Expenditures made during such
fiscal year pursuant to Section 7.7(a), shall not exceed the amount
permitted to be expended during such fiscal year pursuant to Section
7.7(a);
<PAGE> 67
62
(e) Indebtedness outstanding on the Amendment/Restatement
Closing Date and listed on Schedule 7.2(e) and any refinancings,
refundings, renewals or extensions thereof (without any increase in the
principal amount thereof);
(f) (i) guarantees made in the ordinary course of business by
the Parent Borrower or any of its Subsidiaries of obligations of any
Wholly Owned Subsidiary Guarantor and (ii) guarantees made in the
ordinary course of business by the Canadian Borrower or any Canadian
Subsidiary Guarantor of obligations of any Canadian Subsidiary
Guarantor;
(g) (i) Indebtedness of the Parent Borrower in respect of the
Senior Subordinated Notes in an aggregate principal amount not to exceed
$400,000,000 and (ii) subordinated Guarantee Obligations of any
Subsidiary Guarantor in respect of such Indebtedness;
(h) Indebtedness of any Mexican Subsidiary incurred for working
capital purposes in the ordinary course of business, provided that the
US$ equivalent (determined in good faith by the Parent Borrower) of the
aggregate outstanding principal amount thereof shall not exceed
$10,000,000 at any one time;
(i) Indebtedness of any Receivables SPV pursuant to a
Receivables Facility on terms and conditions reasonably satisfactory to
the Required Lenders;
(j) Trade Acceptances in an aggregate face amount not to exceed
$10,000,000 at any one time outstanding;
(k) at any time after the Revolving Credit Commitments shall
have been terminated (other than pursuant to Section 8), Indebtedness in
respect of unsecured revolving lines of credit in an aggregate
outstanding principal amount not exceeding $100,000,000 at any one time;
(l) up to $4,500,000 of Indebtedness constituting deferred
purchase price obligations relating to the Permitted Investment
described in paragraph 2 of Schedule 1.1D;
(m) Indebtedness assumed in connection with any acquisition of
the Capital Stock of another Person or of assets constituting a business
unit of another Person; provided that (i) such Indebtedness exists at
the time of such acquisition and is not created in contemplation of or
in connection with such acquisition, and (ii) the aggregate principal
amount of Indebtedness permitted by this clause (m) shall not exceed
$20,000,000 at any one time outstanding; and
(n) additional Indebtedness of the Parent Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Parent Borrower
and all Subsidiaries) not to exceed $30,000,000 at any one time
outstanding.
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Parent Borrower
or its Subsidiaries, as the case may be, in conformity with GAAP (or, in
the case of Foreign Subsidiaries, generally accepted accounting
principles in effect from time to time in their respective jurisdictions
of INCORPORATION);
<PAGE> 68
63
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations,
insurance contracts, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions, covenants, minor
exceptions to title and other similar encumbrances (i) incurred in the
ordinary course of business which, in the aggregate, are not substantial
in amount and which do not in any case materially detract from the value
of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Parent Borrower or any of its
Subsidiaries or (ii) which are set forth in the "marked up" commitments
for title insurance delivered to the Administrative Agent on the Closing
Date;
(f) Liens in existence on the Amendment/Restatement Closing Date
listed on Schedule 7.3(f), securing Indebtedness permitted by Section
7.2(e), provided that no such Lien is spread to cover any additional
property after the Amendment/Restatement Closing Date and that the
amount of Indebtedness secured thereby is not increased;
(g) (i) Liens securing Indebtedness of the Parent Borrower or
any of its Subsidiaries incurred to finance the acquisition of fixed or
capital assets (provided that (x) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or
capital assets, (y) such Liens do not at any time encumber any property
other than the property financed by such Indebtedness and (z) the amount
of Indebtedness secured thereby is not increased) and (ii) Liens
existing on any property or asset at the time of acquisition thereof by
the Parent Borrower or any Subsidiary or existing on any property or
asset of any Person that becomes a Subsidiary after the Closing Date at
the time such Person becomes a Subsidiary (provided that (x) such Lien
is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be,
(y) such Lien shall not apply to any other property or assets of the
Parent Borrower or any of its Subsidiaries and (z) such Lien shall
secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case
may be);
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered
into by the Parent Borrower or any of its Subsidiaries in the ordinary
course of its business and covering only the assets so leased;
(j) any obligations or duties affecting any of the Property of
the Parent Borrower or its Subsidiaries to any municipality or public
authority with respect to any franchise, grant, license or permit which
do not materially impair the use of such Property for the purposes for
which it is held;
<PAGE> 69
64
(k) with respect to Property located in Canada, reservations,
limitations, provisos and conditions in any original grant from the
Crown or any freehold lessor of any Property of the Parent Borrower or
any of its Subsidiaries;
(l) Liens encumbering inventory and accounts receivable of a
Mexican Subsidiary securing Indebtedness of such Mexican Subsidiary
incurred pursuant to Section 7.2(h);
(m) Liens imposed by operation of law with respect to any
judgments or orders not constituting an Event of Default;
(n) Liens on any Receivables Facility Assets to secure the
repayment of any Indebtedness incurred under any Receivables Facility
permitted by Section 7.2(i); and
(o) any Lien existing on any fixed asset prior to the
acquisition thereof by the Parent Borrower or any Subsidiary, provided
that (i) such Lien is not created in contemplation of or in connection
with such acquisition, (ii) such Lien shall not apply to any other
Property of the Parent Borrower or any Subsidiary, (iii) such Lien shall
secure only those obligations which it secures on the date of such
acquisition and (iv) the aggregate amount of obligations so secured
shall not exceed $20,000,000 at any one time outstanding; and
(p) Liens not otherwise permitted by this Section 7.3 so long as
neither (i) the aggregate outstanding principal amount of the
obligations secured thereby nor (ii) the aggregate fair market value
(determined as of the date such Lien is incurred) of the assets subject
thereto exceeds (as to the Parent Borrower and all Subsidiaries)
$5,000,000 at any one time.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its property, business or assets, or make any material change in its present
method of conducting business, except:
(a) any Subsidiary of the Parent Borrower other than the
Canadian Borrower may be merged or consolidated with or into the Parent
Borrower (provided that the Parent Borrower shall be the continuing or
surviving corporation) or with or into any Wholly Owned Subsidiary
Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be
the continuing or surviving corporation);
(b) any Subsidiary of the Parent Borrower may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Parent Borrower or any Wholly
Owned Subsidiary Guarantor;
(c) any Canadian Subsidiary Guarantor may be merged, amalgamated
or consolidated with the Canadian Borrower or with any other Canadian
Subsidiary Guarantor (provided that the Administrative Agent and the
Lenders shall have received such guarantees, assumption agreements and
other assurances as they may require); and
(d) any Canadian Subsidiary Guarantor may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Canadian Borrower or to any other
Canadian Subsidiary Guarantor.
<PAGE> 70
65
7.5 Limitation on Sale of Assets. Dispose of any of its
property, business or assets (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired, or, in the case
of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock
to any Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the Disposition of inventory in the ordinary course of
business;
(c) Dispositions permitted by Sections 7.4(b) and (d);
(d) (i) the sale or issuance of any Subsidiary's Capital Stock
to the Parent Borrower or any Wholly Owned Subsidiary Guarantor and (ii)
the sale or issuance of any Canadian Subsidiary Guarantor's Capital
Stock to the Canadian Borrower or to any other Canadian Subsidiary
Guarantor;
(e) transfers resulting from any casualty or condemnation of
property or assets;
(f) licenses or sublicenses of intellectual property and general
intangibles and licenses, leases or subleases of other property in the
ordinary course of business and which do not materially interfere with
the business of the Parent Borrower and its Subsidiaries;
(g) any consignment arrangements or similar arrangements for the
sale of assets in the ordinary course of business;
(h) (i) the sale or discount of overdue accounts receivable
arising in the ordinary course of business, but only in connection with
the compromise or collection thereof and (ii) the Disposition at any
time or from time to time for fair market value of Receivables Facility
Assets; and
(i) the Disposition of other assets having a fair market value
not to exceed $45,000,000 in the aggregate for any fiscal year of the
Parent Borrower, provided, that (i) except in the case of an Asset Swap,
at least 75% of the consideration received by the Parent Borrower and
its Subsidiaries in connection with each such Disposition shall be in
the form of cash or Cash Equivalents and (ii) the aggregate fair market
value of Property Disposed of in connection with Asset Swaps during any
fiscal year of the Parent Borrower, when added to the aggregate Net Cash
Proceeds of Asset Sales excluded from the requirements of Section
2.11(b) during such fiscal year pursuant to a Reinvestment Notice, shall
not exceed $45,000,000.
7.6 Limitation on Dividends. Declare or pay any dividend (other
than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Parent Borrower or any Subsidiary or any warrants or options to purchase
any such Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Parent Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that:
(a) (i) any Subsidiary may make Restricted Payments to the
Parent Borrower or any Wholly Owned Subsidiary Guarantor and (ii) any
Canadian Subsidiary Guarantor may make Restricted Payments to the
Canadian Borrower or to any other Canadian Subsidiary Guarantor;
<PAGE> 71
66
(b) Permitted Issuances may be made;
(c) so long as no Default or Event of Default shall have
occurred and be continuing, the Parent Borrower may (i) purchase the
Parent Borrower's common stock or common stock options from present or
former officers or employees of the Parent Borrower or any Subsidiary
upon the death, disability or termination of employment of such officer
or employee, provided, that the aggregate amount of payments under this
clause (i) during the term of this Agreement shall not exceed
$15,000,000 net of any proceeds received by the Parent Borrower in
connection with resales of any common stock or common stock options so
purchased and (ii) pay management fees to Hicks Muse and its Affiliates
expressly permitted by Section 7.10; and
(d) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, the Parent
Borrower may pay dividends to the holders of its common stock, provided
that (i) at the time any such dividend is made, either (x) the
Consolidated Senior Leverage Ratio as at the end of the most recent
period of four consecutive fiscal quarters for which the relevant
financial information is available is less than or equal to 2.00 to 1.0,
determined on a pro forma basis after giving effect to the making of
such dividend and any financing thereof as if such events occurred on
the first day of such period or (y) the Parent Borrower has a long-term
senior secured debt rating of at least BBB- from Standard & Poor's
Ratings Services and at least Baa3 from Moody's Investors Service, Inc
and (ii) the aggregate amount of dividends made pursuant to this
paragraph (d) shall not, at any time, exceed an amount equal to 50% of
cumulative Consolidated Net Income during the period (taken as a single
accounting period) from the fiscal quarter commencing on January 1, 1998
through the most recent full fiscal quarter for which the relevant
financial information is available.
7.7 Limitation on Capital Expenditures. Make or commit to make
(by way of the acquisition of securities of a Person or otherwise) any Capital
Expenditure, except (a) Capital Expenditures of the Parent Borrower and its
Subsidiaries in the ordinary course of business not exceeding $45,000,000 in
any fiscal year of the Parent Borrower; provided, that (i) up to 50% of any
such amount referred to above, if not so expended in the fiscal year for which
it is permitted, may be carried over for expenditure in the next succeeding
fiscal year and (ii) Capital Expenditures made pursuant to this clause (a)
during any fiscal year shall be deemed made, first, in respect of amounts
carried over from the prior fiscal year pursuant to subclause (i) above and,
second, in respect of amounts permitted for such fiscal year as provided above;
(b) Capital Expenditures made pursuant to an Asset Swap or with the proceeds of
any Reinvestment Deferred Amount, any Unapplied Excess Cash Flow or any
Contributed Equity; and (c) Permitted Investments and investments made pursuant
to Section 7.8(p) to the extent constituting Capital Expenditures.
7.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of, or make any other
investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Parent Borrower or
its Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and
<PAGE> 72
67
relocation expenses) in an aggregate amount for the Parent Borrower and
its Subsidiaries not to exceed $5,000,000 at any one time outstanding;
(e) the Acquisitions and the Bumble Bee Acquisition;
(f) (i) investments by the Parent Borrower or any of its
Subsidiaries in the Parent Borrower or any Wholly Owned Subsidiary
Guarantor and (ii) investments by the Canadian Borrower or any of its
Subsidiaries in the Canadian Borrower or any Canadian Subsidiary
Guarantor;
(g) loans, advances or investments in existence on the
Amendment/Restatement Closing Date and listed on Schedule 7.8(g), and
extensions, renewals, modifications or restatements or replacements
thereof, provided that no such extension, renewal, modification or
restatement shall (i) increase the amount of the original loan, advance
or investment, or (ii) adversely affect the interests of the Lenders
with respect to such original loan, advance or investment or the
interests of the Lenders under this Agreement or any other Loan Document
in any respect;
(h) investments made by the Parent Borrower or any of its
Subsidiaries with the proceeds of any Reinvestment Deferred Amount or
any Unapplied Excess Cash Flow;
(i) investments made by the Parent Borrower or any of its
Subsidiaries pursuant to an Asset Swap or with the proceeds of any
Contributed Equity, so long as, after giving pro forma effect thereto
(as certified to the Administrative Agent by a Responsible Officer prior
to consummation of such investment), no Default or Event of Default
shall have occurred and be continuing (including, without limitation,
pursuant to Section 7.1);
(j) Investments constituting Capital Expenditures permitted by
Section 7.7;
(k) promissory notes and other similar non-cash consideration
received by the Parent Borrower and its Subsidiaries in connection with
the Dispositions permitted by Section 7.5;
(l) Investments consisting of Interest Rate Protection
Agreements and commodity and currency hedging arrangements entered into
in the ordinary course of business of the Parent Borrower or any of its
Subsidiaries and not for purposes of speculation;
(m) Investments (including debt obligations and Capital Stock)
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the ordinary
course of business;
(n) Investments on customary terms required to create and
capitalize a Receivables SPV;
(o) Permitted Investments, so long as, after giving pro forma
effect thereto (as certified to the Administrative Agent by a
Responsible Officer of the Parent Borrower prior to consummation of such
investment), no Default or Event of Default shall have occurred and be
continuing (including, without limitation, pursuant to Section 7.1);
(p) any acquisition of 80% or more of the Capital Stock of
another Person or of assets constituting a business unit of another
Person, so long as (i) after giving effect pro forma thereto (as
certified to the Administrative Agent by a Responsible Officer of the
Parent
<PAGE> 73
68
Borrower prior to consummation of such acquisition), no Default or Event
of Default shall have occurred and be continuing or would result
therefrom (including, without limitation, pursuant to Section 7.1), (ii)
after giving effect thereto and to the financing thereof, (x) the
Consolidated Senior Leverage Ratio as at the end of the most recent
period of four consecutive fiscal quarters for which the relevant
financial information is available shall not exceed 3.75 to 1.0 and (y)
the aggregate Available Revolving Credit Commitments shall equal at
least $40,000,000, (iii) such acquisition shall have been approved by
the Board of Directors of the Person being acquired or the relevant
seller, as the case may be, and (iv) such acquisition shall involve
businesses of the type in which the Borrower is already engaged in
accordance with Section 7.14; and
(q) in addition to investments otherwise expressly permitted by
this Section 7.8, investments by the Parent Borrower or any of its
Subsidiaries in an aggregate amount (valued at cost) not to exceed
$40,000,000 at any one time outstanding, so long as, after giving pro
forma effect thereto (as certified to the Administrative Agent by a
Responsible Officer of the Parent Borrower prior to consummation of such
investment, in the case of any single investment in excess of
$15,000,000), no Default or Event of Default shall have occurred and be
continuing (including, without limitation, pursuant to Section 7.1).
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any optional payment, prepayment,
repurchase or redemption of or otherwise defease or segregate funds with
respect to the Senior Subordinated Notes, provided, that the Parent Borrower
may repurchase its Senior Subordinated Notes, so long as (i) after giving pro
forma effect thereto (as certified to the Administrative Agent by a Responsible
Officer of the Parent Borrower prior to consummation of such acquisition), no
Default or Event of Default shall have occurred and be continuing or would
result therefrom (including, without limitation, pursuant to Section 7.1), (ii)
after giving effect thereto and to the financing thereof, (x) the Consolidated
Senior Leverage Ratio as at the end of the most recent period of four
consecutive fiscal quarters for which the relevant financial information is
available shall not exceed 3.75 to 1.0 and (y) the aggregate Available
Revolving Credit Commitments shall equal at least $40,000,000 and (iii) no more
than $75,000,000 may be expended in connection therewith during the term of
this Agreement, (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of the Senior Subordinated Notes or the Senior Subordinated Note
Indenture (other than any such amendment, modification, waiver or other change
which (i) would extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon and (ii) does not involve the payment of a consent fee) or
(c) designate any Indebtedness as "Designated Senior Indebtedness" for the
purposes of the Senior Subordinated Note Indenture.
7.10 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate (other
than between the Parent Borrower and any Wholly Owned Subsidiary Guarantor,
between Subsidiary Guarantors, between the Canadian Borrower and any Canadian
Subsidiary Guarantor and between Canadian Subsidiary Guarantors) unless such
transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of business of the Parent Borrower or such Subsidiary, as the
case may be, and (c) upon fair and reasonable terms no less favorable to the
Parent Borrower or such Subsidiary, as the case may be, than it would obtain in
a comparable arm's length transaction with a Person which is not an Affiliate.
Notwithstanding the foregoing, (i) the Parent Borrower and its Subsidiaries may
pay to Hicks Muse and its Affiliates fees and expenses, as set forth on
Schedule 7.10, pursuant to a monitoring and oversight agreement and a financial
advisory agreement, in each case approved by the board of directors of the
Parent Borrower, and (ii) the Permitted Investment described in paragraph 3 of
Schedule 1.1D may be consummated.
<PAGE> 74
69
7.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Parent Borrower or
any Subsidiary of real or personal property which has been or is to be sold or
transferred by the Parent Borrower or such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of the Parent Borrower or
such Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal
year of the Parent Borrower to end on a day other than December 31 or change
the Parent Borrower's method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into with any
Person, or suffer to exist, any agreement, other than (a) this Agreement and
the other Loan Documents, (b) the Senior Subordinated Note Indenture and (c) in
the case of clause (i) below only, any agreements governing any purchase money
Liens or Capital Lease Obligations otherwise permitted hereby (in which case,
any prohibition or limitation shall only be effective against the assets
financed thereby), which prohibits or limits the ability of the Parent Borrower
or any of its Subsidiaries to (i) create, incur, assume or suffer to exist any
Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, or (ii) pay dividends or make other distributions, or pay any
Indebtedness owed, to the Parent Borrower or any of its Subsidiaries.
7.14 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Parent Borrower and its Subsidiaries are engaged on the
Amendment/Restatement Closing Date or which are reasonably related thereto.
7.15 Limitation on Amendments to Acquisition Documents. (a)
Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the
terms and conditions of the indemnities furnished to the Parent Borrower or any
of its Subsidiaries pursuant to the Acquisition Agreement, the Bumble Bee
Purchase Agreement or any other document delivered by the relevant sellers or
any of their affiliates in connection therewith such that after giving effect
thereto such indemnities shall be materially less favorable to the interests of
the Loan Parties or the Lenders with respect thereto or (b) otherwise amend,
supplement or otherwise modify the terms and conditions of the Acquisition
Agreement, the Bumble Bee Purchase Agreement, the Libby's Purchase Agreement or
any such other documents except to the extent that any such amendment,
supplement or modification could not reasonably be expected to have a Material
Adverse Effect.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof;
or any Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or under
any other Loan Document, within five days after any such interest or
other amount becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained in
any certificate, document or financial or other statement furnished by
it at any time under or in connection with this Agreement or any such
other Loan Document shall prove to have been inaccurate in any material
respect on or as of the date made or deemed made; or
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(c) (i) any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to the Borrowers only), Section 6.7(a) or Section 7
of this Agreement or Section 5.5 or 5.7(b) of the Guarantee and
Collateral Agreement or (ii) an "Event of Default" under and as defined
in any Mortgage shall have occurred and be continuing; or
(d) any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a) through
(c) of this Section), and such default shall continue unremedied for a
period of 30 days after notice from the Administrative Agent or the
Required Lenders; or
(e) The Parent Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of or interest on any
Indebtedness (including, without limitation, any Guarantee Obligation,
but excluding the Loans, Reimbursement Obligations and Guarantee
Obligations pursuant to the Guarantee and Collateral Agreement or the
Canadian Guarantee) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of
such holder or beneficiary) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or
condition described in clause (i) or (ii) of this paragraph (e) shall
not at any time constitute an Event of Default under this Agreement
unless, at such time, one or more defaults, events or conditions
(without duplication as to the same item of Indebtedness) of the type
described in clauses (i) and (ii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the outstanding
principal amount of which exceeds in the aggregate $10,000,000; or
(f) (i) The Parent Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for
all or any substantial part of its assets, or the Parent Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the Parent
Borrower or any of its Subsidiaries any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Parent Borrower or
any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Parent Borrower or any of its
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Parent Borrower or any
of its
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71
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code or under
Applicable Canadian Pension Legislation) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA or
under Applicable Canadian Pension Legislation), whether or not waived,
shall exist with respect to any Plan or any Lien in favor of the PBGC or
a Plan shall arise on the assets of the Parent Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed (or a trustee
shall be appointed) to administer, or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA or under Applicable Canadian Pension Legislation,
(iv) any Single Employer Plan shall terminate for purposes of Title IV
of ERISA or under Applicable Canadian Pension Legislation, (v) the
Parent Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together
with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Parent Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance as to
which the relevant insurance company has acknowledged coverage) of
$10,000,000 or more, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 30 days
from the entry thereof; or
(i) Any Loan Document shall, at any time, cease to be in full
force and effect (unless released by the Administrative Agent at the
direction of the Required Lenders or all Lenders (to the extent required
by Section 10.1) or as otherwise permitted under this Agreement or the
other Loan Documents) or shall be declared null and void (and, if such
invalidity is such so as to be amenable to cure without materially
disadvantaging the position of the Administrative Agent and the Lenders
thereunder, the relevant Loan Party shall have failed to cure such
invalidity within 30 days after notice from the Administrative Agent or
such shorter time period as is specified by the Administrative Agent in
such notice and is reasonable in the circumstances), or the validity or
enforceability thereof shall be contested by any Loan Party, or any of
the Liens intended to be created by any Security Document shall cease to
be or shall not be a valid and perfected Lien having the priority
contemplated thereby (and, if such invalidity is such so as to be
amenable to cure without materially disadvantaging the position of the
Administrative Agent and the Lenders as secured parties thereunder, the
relevant Loan Party shall have failed to cure such invalidity within 30
days after notice from the Administrative Agent or such shorter time
period as specified by the Administrative Agent in such notice and is
reasonable in the circumstances); or
(j) (i) The Permitted Investors shall cease to have the power,
directly or indirectly, to vote or direct the voting of securities
having a majority of the ordinary voting power for the election of
directors of the Parent Borrower, provided that the occurrence of the
foregoing event shall not be deemed an Event of Default if (A) at any
time prior to the consummation of
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an Initial Public Offering, (1) the Permitted Investors otherwise have
the right to designate (and do so designate) a majority of the board of
directors of the Parent Borrower or (2) the Permitted Investors and
their employees, directors and officers (the "HM Group") own of record
and beneficially an amount of common stock of the Parent Borrower equal
to at least 50% of the amount of common stock of the Parent Borrower
(adjusted for stock splits, stock dividends and other similar events on
an equitable basis) owned by the HM Group of record and beneficially as
of the Closing Date and such ownership by the HM Group represents the
largest single block of voting securities of the Parent Borrower held by
any "person" or "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or (B) at any
time after the consummation of an Initial Public Offering, (1) no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), excluding the Permitted Investors, shall become
the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under
the Exchange Act), directly or indirectly, of more than the greater of
(x) 15% of the then outstanding voting stock of the Parent Borrower and
(y) the percentage of the then outstanding voting stock of the Parent
Borrower owned by the Permitted Investors and (2) the board of directors
of the Borrower shall consist of a majority of Continuing Directors; or
(ii) a Specified Change of Control shall occur; or
(k) The Senior Subordinated Notes or the guarantees thereof
shall cease, for any reason, to be validly subordinated to the
Obligations of the Parent Borrower or the obligations of the Subsidiary
Guarantors under the Guarantee and Collateral Agreement, as the case may
be, as provided in the Senior Subordinated Note Indenture, or any Loan
Party, any Affiliate of any Loan Party, the trustee in respect of the
Senior Subordinated Notes or the holders of at least 25% in aggregate
principal amount of the Senior Subordinated Notes shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any Borrower,
automatically the US$ Revolving Credit Commitments and Additional US$ Revolving
Credit Commitments (in the case of the Parent Borrower) or the C$ Revolving
Credit Commitments (in the case of the Canadian Borrower) shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) shall immediately become due and payable,
and (B) if such event is any other Event of Default, either or both of the
following actions may be taken: (i) with the consent of the Majority C$
Revolving Credit Facility Lenders, Majority US$ Revolving Credit Facility
Lenders or Majority Additional US$ Revolving Credit Facility Lenders, as the
case may be, the Administrative Agent may, or upon the request of such Lenders,
the Administrative Agent shall, by notice to the Parent Borrower, declare the
C$ Revolving Credit Commitments, the US$ Revolving Credit Commitments or the
Additional US$ Revolving Credit Commitments, as the case may be, to be
terminated forthwith, whereupon such Revolving Credit Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Parent Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of
an acceleration pursuant to this Section 8, the Parent Borrower shall at such
time deposit in a cash collateral account opened by the Administrative Agent an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit. Amounts held in such cash collateral account shall be applied by
the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Parent Borrower hereunder and under the other Loan
Documents. With respect to all B/As with respect to which the Contract Period
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shall not have expired at the time of an acceleration pursuant to this Section
8, the Canadian Borrower shall at such time deposit in a cash collateral
account opened by the Administrative Agent an amount equal to the aggregate
face amount of all outstanding B/As. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of
outstanding B/As upon the expiry of their respective Contract Periods and the
maturity of such B/As. After all such Letters of Credit shall have expired or
been fully drawn upon, all outstanding B/As have matured, all Reimbursement
Obligations shall have been satisfied and all other obligations of the
Borrowers hereunder and under the other Loan Documents shall have been paid in
full, the balance, if any, in such cash collateral accounts shall be returned
to the Parent Borrower (or such other Person as may be lawfully entitled
thereto). Except as otherwise expressly provided above in this Section 8, each
Borrower waives presentment, demand, protest or other notice of any kind.
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agents under or in connection with, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Agents shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to any
Borrower),
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independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders (or, if so
specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense (other than any liability described in the proviso to the
first sentence of Section 9.7) which may be incurred by it by reason of taking
or continuing to take any such action. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or either Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default". In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the requisite Lenders (or,
if so specified by this Agreement, all Lenders); provided that unless and until
the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and
their affiliates and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon any Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, the Administrative Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of any Loan Party or any affiliate
of a Loan Party which may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent
in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of each Borrower to do so), ratably according
to their respective US$ Revolving Credit Percentages, Additional US$ Revolving
Credit Percentages, C$ Revolving Credit Percentages, Tranche A Term Loan
Percentages, Tranche B Term Loan Percentages and Tranche B-1 Term Loan
Percentages in effect on the date on which indemnification is sought under this
Section 9.7 (or, if indemnification is sought after the date upon which the US$
Revolving Credit Commitments, the Additional US$ Revolving Credit Commitments
and the C$ Revolving Credit Commitments shall have terminated and the
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Loans shall have been paid in full, ratably in accordance with such percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating
to or arising out of, the Loans, the US$ Revolving Credit Commitments, C$
Revolving Credit Commitments, the Additional US$ Revolving Credit Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements which
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from such Agent's gross negligence or willful
misconduct. The agreements in this Section 9.7 shall survive the payment of
the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan Party as though such Agent were not an Agent.
With respect to its Loans made or renewed by it and with respect to any Letter
of Credit issued or participated in by it, each Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall include each Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders, which successor agent
shall be approved by the Parent Borrower (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents. Any successor Administrative Agent shall have the
capability to administer each Facility through both U.S. and Canadian offices.
9.10 Authorization to Release Liens. The Administrative Agent
is hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Parent Borrower or any of its Subsidiaries that is
the subject of a Disposition which is permitted by this Agreement or which has
been consented to in accordance with Section 10.1.
9.11 Documentation Agent and Syndication Agent. Neither the
Documentation Agent nor the Syndication Agent shall have any duties or
responsibilities hereunder in its capacity as such.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Documents may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party to the relevant Loan Document may, from time to time, (a)
enter into written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or
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changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Administrative Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) forgive the principal amount or extend the final scheduled date of
maturity of any Loan, extend the scheduled date of any amortization payment in
respect of any Term Loan, reduce the stated rate of any interest, fee or letter
of credit commission payable hereunder or extend the scheduled date of any
payment thereof, or increase the amount (except as provided in Section 2.27) or
extend the expiration date of any Lender's Revolving Credit Commitments, in
each case without the written consent of each Lender directly affected thereby;
(ii) amend, modify or waive any provision of this Section 10.1 or reduce any
percentage specified in the definition of Required Lenders, consent to the
assignment or transfer by any Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or substantially
all of the Collateral or release all or substantially all of the Subsidiary
Guarantors from their obligations under the Guarantee and Collateral Agreement,
in each case without the written consent of all Lenders; (iii) release all or
substantially all of the Canadian Subsidiary Guarantors from their obligations
under the Canadian Guarantee without the written consent of all C$ Revolving
Credit Lenders; (iv) amend, modify or waive any condition precedent to any
extension of credit under the US$ Revolving Credit Facility or C$ Revolving
Credit Facility set forth in Section 5.2 without the written consent of the
Majority US$ Revolving Credit Facility Lenders or the Majority C$ Revolving
Credit Facility Lenders, as applicable; (v) change the allocation of payments
among the Term Loan Facilities specified in Section 2.17(b) or the allocation
of payments between the Term Loan Facilities and the Revolving Credit
Facilities pursuant to Section 2.11(e), in each case without the written
consent of the Majority Facility Lenders in respect of each Facility adversely
affected thereby; (vi) reduce the percentage specified in the definition of
Majority Facility Lenders without the written consent of all Lenders under each
affected Facility; (vii) amend, modify or waive any provision of Section 9
without the written consent of the Administrative Agent; (viii) amend, modify
or waive any provision of Section 2.6 or 2.7 without the written consent of the
Swing Line Lender; or (ix) amend, modify or waive any provision of Section 3
without the written consent of each affected Issuing Lender. Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Loan Parties, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Loan Parties, the Lenders and the Administrative Agent shall be
restored to their former position and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice,
when received, addressed as follows in the case of the Borrowers and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
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The Parent Borrower:
International Home Foods, Inc.
1633 Littleton Road
Parsippany, New Jersey 07054
Attention: Lynne Misericordia
Telecopy: 201-254-5460
The Canadian Borrower:
International Home Foods (Canada) Inc.
Suite 600, 80 Tiverton Court
Markham, Ontario
L3R 0G4
Attention: President
Telecopy: 905-470-2595
with copies to:
International Home Foods, Inc.
1633 Littleton Road
Parsippany, New Jersey 07054
Attention: Lynne Misericordia
Telecopy: 201-254-5460
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telecopy: 214-740-7313
Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas, 25th Floor
New York, New York 10019
Attention: Alan B. Menkes/ Andrew S. Rosen
Telecopy: 212-424-1450
The Administrative Agent:
The Chase Manhattan Bank Loan
and Agency Services Group
One Chase Manhattan Plaza
New York, New York 10081
Attention: Patricia Ciocco
Telecopy: 212-552-5662
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Karen Sharf
Telecopy: 212-270-5120
<PAGE> 83
78
The Canadian Administrative Agent:
The Chase Manhattan Bank of Canada
100 King Street West, Suite 6900
P.O. Box 106
Toronto, Ontario
M5X 1A4
Attention: Funding Officer
Telecopy: 416-216-4162
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes. The Borrowers agree jointly
and severally (a) to pay or reimburse the Administrative Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation
and administration of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent, (b) to pay or reimburse each Lender and the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the reasonable fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Administrative Agent, (c) to pay, indemnify, and hold harmless
each Lender and the Administrative Agent from and against any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify and hold harmless each
Lender and the Administrative Agent and their respective officers, directors,
trustees, professional advisors, employees, affiliates, agents and controlling
persons (each, an "indemnitee") from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or
<PAGE> 84
79
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
other Loan Documents and any such other documents, including, without
limitation, any of the foregoing relating to the use of proceeds of the Loans
or the violation of, noncompliance with or liability under, any Environmental
Law applicable to the operations of the Parent Borrower, any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided, that the Borrowers
shall have no obligation hereunder to any indemnitee with respect to
indemnified liabilities to the extent such indemnified liabilities are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such indemnitee.
The agreements in this Section 10.5 shall survive repayment of the Loans and
all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of each
Borrower, the Lenders, the Administrative Agent, all future holders of the
Loans and their respective successors and assigns, except that no Borrower may
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, without the consent of the Borrowers, in
accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Loan owing to such Lender, any Revolving Credit Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrowers and the Administrative Agent shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. In
no event shall any Participant under any such participation have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest
on, the Loans or any fees payable hereunder, or postpone the date of the final
maturity of the Loans, in each case to the extent subject to such
participation. Each Borrower agrees that if amounts outstanding under this
Agreement and the Loans are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender
hereunder. Each Borrower also agrees that each Participant shall be entitled
to the benefits of Sections 2.18, 2.19 and 2.20 with respect to its
participation in the Revolving Credit Commitments and the Loans outstanding
from time to time as if it were a Lender; provided that, in the case of Section
2.19, such Participant shall have complied with the requirements of said
Section and provided, further, that no Participant shall be entitled to receive
any greater amount pursuant to any such Section than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time assign to any Lender or any
affiliate thereof or Approved Fund or, with the consent of the Parent Borrower
and the Administrative Agent (which, in each case, shall not be unreasonably
withheld or delayed), to an additional bank, financial institution or other
entity (an "Assignee") all or any part of its rights and obligations under this
Agreement pursuant to an Assignment and Acceptance, substantially in the form
of Exhibit E, executed by such Assignee and such Assignor (and, in the case of
an Assignee that is not then a Lender or an affiliate thereof or Approved Fund,
by the Parent Borrower and the Administrative Agent) and delivered to the
<PAGE> 85
80
Administrative Agent for its acceptance and recording in the Register; provided
that no such assignment to an Assignee (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount of less than $5,000,000
(other than in the case of an assignment of all of a Lender's interests under
this Agreement), unless otherwise agreed by the Parent Borrower and the
Administrative Agent. Any such assignment need not be ratable as among the
Facilities. Any such assignment of an Additional US$ Revolving Credit
Commitment shall be to a Person that is, or has an Affiliate that is, a
Schedule I or Schedule II chartered bank under the Bank Act (Canada). Upon
such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have (in addition to any rights and obligations
theretofore held by it) the rights and obligations of a Lender hereunder with
Revolving Credit Commitments and/or Loans as set forth therein, and (y) the
Assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of an Assignor's rights and
obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this Section 10.6, the consent
of the Parent Borrower shall not be required, and, unless requested by the
Assignee and/or the Assignor, new Notes shall not be required to be executed
and delivered by the applicable Borrower, for any assignment which occurs at
any time when any of the events described in Section 8(f) shall have occurred
and be continuing.
(d) The Administrative Agent shall maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the names and
addresses of the Lenders and the Revolving Credit Commitments of, and the
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and each Borrower, each other Loan Party, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loan recorded therein for all purposes of this Agreement. Any
assignment of any Loan or other obligation hereunder (whether or not evidenced
by a Note) shall be effective only upon appropriate entries with respect
thereto being made in the Register.
(e) Upon its receipt of an Assignment and Acceptance executed by
an Assignor and an Assignee (and, in the case of an Assignee that is not then a
Lender or an affiliate thereof, by the Parent Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $4,000, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) record the information contained
therein in the Register on the effective date determined pursuant thereto.
(f) The Loans made by each Lender shall be evidenced by a Note
issued by the applicable Borrower, substantially in the form of Exhibit G-1, G-
2 (with appropriate modifications in the case of Additional US$ Revolving
Credit Loans and C$ Revolving Credit Loans), G-3 or G-4, as the case may be,
payable to the order of such Lender. Each Lender is hereby authorized to
record, on the schedule annexed to and constituting a part of the relevant
Note, information regarding the relevant Loans made by such Lender, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure to make any such recordation
or any error in such recordation shall not affect such Borrower's obligations
hereunder or under any Note. On or prior to the effective date of an
Assignment and Acceptance, the applicable Borrower, at its own expense, shall
execute and deliver to the Administrative Agent, in exchange for the relevant
Notes, new Notes to the order of the Assignee and, if applicable, the Assignor.
Such new Notes shall be dated the Closing Date and shall otherwise be in the
form of the Notes replaced thereby.
(g) Each Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
any and all financial information concerning the Loan Parties and their
respective affiliates which has been delivered to such Lender by or on behalf
of any Loan Party pursuant to this Agreement or any other Loan Document or
which has been delivered to such Lender by or on behalf any Loan Party in
connection with such Lender's credit evaluation of the Loan Parties and their
respective
<PAGE> 86
81
affiliates, under the condition that such Transferee or prospective Transferee
shall previously have agreed to be bound by the provisions of Section 10.16.
(h) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 8(f), or otherwise),
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Loans or the
Reimbursement Obligations owing to such other Lender, or interest thereon, such
Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loans and/or
of the Reimbursement Obligations owing to each such other Lender, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrowers, any such notice being expressly waived by the Borrowers to the
extent permitted by applicable law, upon any amount becoming due and payable by
any Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of such Borrower. Each Lender
agrees promptly to notify the applicable Borrower and the Administrative Agent
after any such setoff and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such setoff and
application.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Parent Borrower
and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of each Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof or thereof
not expressly set forth or referred to herein or in the other Loan Documents.
<PAGE> 87
82
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in Section 10.2 or at
such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 10.12 any special, exemplary, punitive or
consequential damages.
10.13 Judgment Currency. (a) The Borrowers' obligations
hereunder and the Borrowers' and the other Loan Parties' obligations under the
other Loan Documents to make payments in Dollars or C$ (the "Obligation
Currency") shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any currency other than
the Obligation Currency, except to the extent that such tender or recovery
results in the effective receipt by the Administrative Agent or a Lender of the
full amount of the Obligation Currency expressed to be payable to the
Administrative Agent or such Lender under this Agreement or the other Loan
Documents. If, for the purpose of obtaining or enforcing judgment against any
Borrower or any other Loan Party in any court or in any jurisdiction, it
becomes necessary to convert into or from any currency other than the
Obligation Currency (such other currency being hereinafter referred to as the
"Judgment Currency") an amount due in the Obligation Currency, the conversion
shall be made, at the Dollar Equivalent of such amount, in the case of C$ or
Dollars, and, in the case of other currencies, the rate of exchange (as quoted
by the Administrative Agent or if the Administrative Agent does not quote a
rate of exchange on such currency, by a known dealer in such currency
designated by the Administrative Agent) determined, in each case, as of the
date immediately preceding the day on which the judgment is given (such
Business Day being hereinafter referred to as the "Judgment Currency Conversion
Date").
(b) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, the relevant Borrower covenants and agrees to pay, or cause to
be paid, such additional amounts, if any (but in any event not a lesser
amount), as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of
payment, will produce the amount of the Obligation Currency which could have
been
<PAGE> 88
83
purchased with the amount of Judgment Currency stipulated in the judgment or
judicial award at the rate of exchange prevailing on the Judgment Currency
Conversion Date.
(c) For purposes of determining the Dollar Equivalent or rate of
exchange for this Section, such amounts shall include any premium and costs
payable in connection with the purchase of the Obligation Currency.
10.14 Acknowledgements. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand,
and the Borrowers, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrowers and the Lenders.
10.15 WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.16 Confidentiality. Each Lender agrees to keep information
obtained by it pursuant hereto and the other Loan Documents identified as
confidential in writing at the time of delivery confidential in accordance with
such Lender's customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (a) to such Lender's
employees, representatives, directors, attorneys, auditors, agents,
professional advisors, trustees or affiliates who are advised of the
confidential nature of such information, (b) to the extent such information
presently is or hereafter becomes available to such Lender on a non-
confidential basis from any source or such information that is in the public
domain at the time of disclosure, (c) to the extent disclosure is required by
law (including applicable securities laws), regulation, subpoena or judicial
order or process (provided that notice of such requirement or order shall be
promptly furnished to the Parent Borrower unless such notice is legally
prohibited) or requested or required by bank, securities, insurance or
investment company regulations or auditors or any administrative body or
commission to whose jurisdiction such Lender may be subject, (d) to any rating
agency to the extent required in connection with any rating to be assigned to
such Lender, (e) to Transferees or prospective Transferees or to any direct or
indirect contractual counterparties in swap agreements or to the professional
advisors of such swap counterparties who agree to be bound by the provisions of
this Section 10.15, (f) to the extent required in connection with any
litigation between any Loan Party and any Lender with respect to the Loans or
this Agreement and the other Loan Documents or (g) with the Parent Borrower's
prior written consent. The agreements in this Section 10.16 shall survive
repayment of the Loans and all other amounts payable hereunder.
<PAGE> 89
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
INTERNATIONAL HOME FOODS, INC.
By:
------------------------------------------
Name:
Title:
INTERNATIONAL HOME FOODS (CANADA) INC.
By:
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Administrative
Agent
By:
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK OF CANADA, as
Canadian Administrative Agent
By:
------------------------------------------
Name:
Title:
<PAGE> 90
Annex A
PRICING GRID
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Applicable Margin for Applicable Margin
Eurodollar Loans for ABR Loans
Consolidated Leverage ----------------------------------------------------------------- Commitment
Ratio A/RC B B1 A/RC B B1 Fee Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Greater than or equal to 1.75% 2.00% 2.25% 0.75% 1.00% 1.25% 0.500%
5.00 to 1.0
- --------------------------------------------------------------------------------------------------------------
Greater than or equal to 1.50% 1.75% 2.00% 0.50% 0.75% 1.00% 0.375%
4.25 to 1.0
and less than 5.00 to 1.0
- --------------------------------------------------------------------------------------------------------------
Greater than or equal to 1.25% 1.50% 1.75% 0.25% 0.50% 0.75% 0.375%
3.75 to 1.0
and less than 4.25 to 1.0
- --------------------------------------------------------------------------------------------------------------
Greater than or equal to 1.00% 1.50% 1.75% 0% 0.50% 0.75% 0.300%
3.25 to 1.0
and less than 3.75 to 1.0
- --------------------------------------------------------------------------------------------------------------
Less than 3.25 to 1.0 0.875% 1.50% 1.75% 0% 0.50% 0.75% 0.300%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
As used above, "A/RC" refers to Tranche A Term Loans, Revolving Credit Loans
and Swing Line Loans, "B" refers to Tranche B Term Loans, and "B1" refers to
Tranche B-1 Term Loans.
Changes in the Applicable Margin or the Commitment Fee Rate resulting from
changes in the Consolidated Leverage Ratio shall become effective on the date
(the "Adjustment Date") on which financial statements are delivered to the
Lenders pursuant to Section 6.1 (but in any event not later than the 45th day
after the end of each of the first three quarterly periods of each fiscal year
or the 95th day after the end of each fiscal year, as the case may be) and
shall remain in effect until the next change to be effected pursuant to this
paragraph. If any financial statements referred to above are not delivered
within the time periods specified above, then, until such financial statements
are delivered, the Consolidated Leverage Ratio as at the end of the fiscal
period that would have been covered thereby shall for the purposes of this
definition be deemed to be greater than 5.00 to 1. During the period from the
Amendment/Restatement Closing Date to the first Adjustment Date occurring after
December 31, 1998, pricing shall not be lower than the rates specified above
with respect to a Consolidated Leverage Ratio of greater than or equal to 4.25
to 1.00 and less than 5.00 to 1.00. Each determination of the Consolidated
Leverage Ratio pursuant to this paragraph shall be made with respect to the
Test Period ending at the end of the period covered by the relevant financial
statements and, to the extent applicable, in accordance with the last paragraph
of Section 7.1.
<PAGE> 1
INTERNATIONAL HOME FOODS, INC.
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
EXHIBIT 12.1 COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
(Loss)/income before provision for income
taxes $ (8,735) $ 10,324
Add:
Interest on term loans and notes 68,413 75,488
Amortization of debt cost 2,377 3,747
Interest portion of rentals 1,729 489
------------ ------------
Income as adjusted $ 63,784 $ 90,048
Fixed Charges
Interest on term loans and notes $ 68,413 $ 75,488
Amortization of debt costs 2,377 3,747
Interest portion of rentals 1,729 489
------------ ------------
Total fixed charges $ 72,519 $ 79,724
Ratio of Earnings to Fixed Charges 0.88 1.13
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 156
<ALLOWANCES> (6)
<INVENTORY> 264
<CURRENT-ASSETS> 468
<PP&E> 493
<DEPRECIATION> (244)
<TOTAL-ASSETS> 1,494
<CURRENT-LIABILITIES> 307
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 59
<TOTAL-LIABILITY-AND-EQUITY> 1,494
<SALES> 1,231
<TOTAL-REVENUES> 1,231
<CGS> 642
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> (9)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
